<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 June 30, 1998
<TABLE>
<CAPTION>
Commission file number 0-10619 Commission file number 333-34471-02
<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 or Organization) Incorporation or 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 August 10, 1998: 26,255,941.
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Hollywood Park, Inc.
Table of Contents
Part I
Item 1. Financial Information
Hollywood Park, Inc.
--------------------
<TABLE>
<S> <C> <C>
Consolidated Balance Sheets as of June 30, 1998 and December 31, 1997...... 1
Consolidated Statements of Operations for the three and six months ended
June 30, 1998 and 1997................................................... 2
Consolidated Statements of Cash Flows for the six months ended
June 30, 1998 and 1997................................................... 3
Notes to Consolidated Financial Statements................................. 4
Mississippi - I Gaming, L.P
----------------------------
Balance Sheets as of June 30, 1998 and December 31, 1997................... 13
Statements of Operations for the three and six months ended
June 30, 1998 and 1997................................................... 14
Statements of Cash Flows for the six months ended
June 30, 1998 and 1997................................................... 15
Notes to Financial Statements.............................................. 16
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General.................................................................... 19
Results of Operations...................................................... 23
Liquidity and Capital Resources............................................ 25
Item 3. Quantitative and Qualitative Disclosure About Market Risk.................. 28
Part II
Item 4. Submission of Matters to a Vote of Security Holders....................... 28
Item 5. Other information......................................................... 29
Item 6.a Exhibits.................................................................. 29
Other Financial Information............................................... 31
Signatures................................................................ 33
</TABLE>
<PAGE>
ITEM 1. FINANCIAL INFORMATION
- -----------------------------
Hollywood Park, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
As of
-----------------------------
June 30, December 31,
1998 1997
----------- ------------
ASSETS (unaudited)
(in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 40,079 $ 23,749
Restricted cash 6,178 407
Short term investments 3,514 0
Other receivables, net 11,621 9,417
Prepaid expenses and other assets 15,581 13,772
Deferred tax assets 12,202 8,118
Current portion of notes receivable 2,386 42
-------- --------
Total current assets 91,561 55,505
Notes receivable 15,640 9,548
Property, plant and equipment, net 299,452 300,666
Goodwill, net 50,777 33,017
Other assets 19,757 20,293
-------- --------
$477,187 $419,029
======== ========
- -----------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 12,013 $ 11,277
Accrued lawsuit settlement 0 2,750
Accrued compensation 8,930 7,627
Accrued liabilities 31,660 19,105
Accrued interest 5,396 5,175
Gaming liabilities 3,497 3,853
Racing liabilities 15,640 4,093
Current portion of notes payable 2,085 3,437
-------- --------
Total current liabilities 79,221 57,317
Notes payable 159,819 132,102
Deferred tax liabilities 8,769 6,310
-------- --------
Total liabilities 247,809 195,729
Minority interests 0 1,946
Stockholders' Equity:
Capital stock --
Preferred - $1.00 par value, authorized 250,000 shares;
none issued and outstanding 0 0
Common - $.10 par value, authorized 40,000,000 shares;
26,287,569 issued and outstanding in 1998, and 2,629 2,622
26,220,528 in 1997
Capital in excess of par value 223,389 222,350
Retained earnings (accumulated deficit) 3,358 (3,532)
Accumulated other comprehensive loss 2 (86)
-------- --------
Total stockholders' equity 229,378 221,354
-------- --------
$477,187 $419,029
======== ========
</TABLE>
- -----------
See accompanying notes to consolidated financial statements.
1
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Hollywood Park, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 30,
----------------------------------- ---------------------------------
1998 1997 1998 1997
---------------- ---------------- ---------------- ---------------
(in thousands, except per share data - unaudited)
<S> <C> <C> <C> <C>
Revenues:
Gaming $ 59,357 $14,165 $114,706 $26,847
Racing 26,845 26,239 36,714 35,868
Food and beverage 8,293 4,292 13,862 6,860
Hotel and recreational vehicle park 449 0 725 0
Truck stop and service station 3,723 0 6,546 0
Other income 4,458 1,628 8,729 3,564
-------- ------- -------- -------
103,125 46,324 181,282 73,139
-------- ------- -------- -------
Expenses:
Gaming 31,349 8,112 63,316 15,161
Racing 10,213 10,241 15,682 15,409
Food and beverage 10,023 5,090 17,536 8,819
Hotel and recreational vehicle park 160 0 287 0
Truck stop and service station 3,421 0 5,987 0
Administration 22,024 9,785 42,121 18,531
Other 1,839 680 3,575 1,439
REIT restructuring 0 0 469 0
Depreciation and amortization 6,494 3,031 13,049 5,780
-------- ------- -------- -------
85,523 36,939 162,022 65,139
-------- ------- -------- -------
Operating income 17,602 9,385 19,260 8,000
Interest expense 4,054 64 7,715 129
-------- ------- -------- -------
Income before minority interests and income taxes 13,548 9,321 11,545 7,871
Minority interests 0 42 0 63
Income tax expense 5,419 3,676 4,650 3,100
-------- ------- -------- -------
Net income $ 8,129 $ 5,603 $ 6,895 $ 4,708
======== ======= ======== =======
========================================================================================================================
Dividend requirements on convertible preferred stock $ 0 $ 481 $ 0 $ 962
Net income available to common shareholders $ 8,129 $ 5,122 $ 6,895 $ 3,746
Per common share:
Net income - basic $ 0.31 $ 0.28 $ 0.26 $ 0.20
Net income - diluted $ 0.31 $ 0.27 $ 0.26 $ 0.20
Number of shares - basic 26,285 18,462 26,281 18,366
Number of shares - diluted 26,428 20,754 26,771 20,657
</TABLE>
2
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Hollywood Park, Inc.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the six months ended June 30,
--------------------------------
1998 1997
---------- ----------
(in thousands - unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $6,895 $4,708
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,049 5,780
Minority interests 0 15
(Gain) loss on sale or disposal of property,
plant and equipment 391 (24)
Increase in restricted cash (5,771) (6,610)
Increase in other receivables, net (2,204) (1,520)
Increase in prepaid expenses and other assets (1,681) (1,287)
Increase in deferred tax assets (4,084) (165)
Increase in accounts payable 736 387
Decrease in accrued lawsuit settlement (2,750) 0
Increase in accrued compensation 1,303 605
Increase in accrued liabilities 6,961 3,464
(Decrease) increase in gaming liabilities (356) 46
Increase in racing liabilities 11,547 9,566
Increase in accrued interest payable 221 0
Increase (decrease) in deferred tax liabilities 2,459 (16)
--------- ---------
Net cash provided by operating activities 26,716 14,949
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (26,407) (3,927)
Receipts from sale of property, plant and equipment 596 0
Principal collected on notes receivable 1,027 18
Note receivable, HP Yakama investment (7,636) 0
Purchase of short term investments (3,430) (1,937)
Proceeds from short term investments 0 5,428
Payment to buy-out minority interest in Crystal
Park LLC (1,946) 0
Cash acquired in the purchase of a business, net of
transaction and other costs 0 12,264
--------- ---------
Net cash used in (provided by) investing
activities (37,796) 11,846
--------- ---------
Cash flows from financing activities:
Proceeds from secured Bank Credit Facility 30,000 0
Redemption of Boomtown 11.5% First Mortgage Notes (1,253) 0
Payment of secured notes payable (2,382) 0
Common stock options exercised 1,045 654
Dividends paid to preferred stockholders 0 (962)
--------- ---------
Net cash provided by (used in) financing
activities 27,410 (308)
--------- ---------
Increase in cash and cash equivalents 16,330 26,487
Cash and cash equivalents at the beginning of
the period 23,749 11,922
--------- ---------
Cash and cash equivalents at the end of the period $40,079 $38,409
========= =========
</TABLE>
- -----
See accompanying notes to consolidated financial statements.
3
<PAGE>
Hollywood Park, Inc.
Notes to Consolidated Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL Hollywood Park, Inc. (the "Company" or "Hollywood Park") is a
diversified gaming, sports and entertainment company engaged in the ownership
and operation of casinos (including card club casinos), pari-mutuel racing
facilities, and the development of other gaming and sports related
opportunities. Hollywood Park owns and operates, through its Boomtown, Inc.
("Boomtown") subsidiary, land-based, riverboat and dockside gaming operations in
Verdi, Nevada ("Boomtown Reno"), Harvey, Louisiana ("Boomtown New Orleans") and
Biloxi, Mississippi ("Boomtown Biloxi"), respectively. Hollywood Park also owns
two card club casinos, located in the Los Angeles metropolitan area. The
Hollywood Park-Casino is operated by the Company, and is located on the same
property as the Hollywood Park Race Track. The Company also owns the Crystal
Park Hotel and Casino (the "Crystal Park Casino"), which is leased to an
unaffiliated operator. Presently, Hollywood Park is the only company that owns
and operates both California card club casinos and traditional casinos in
Nevada, Louisiana and Mississippi. The Company's premier thoroughbred racing
facilities include, the Hollywood Park Race Track, which the Company has owned
for 60 years, and Turf Paradise, Inc. ("Turf Paradise"), located in Phoenix,
Arizona.
On February 19, 1998, Hollywood Park and Casino Magic Corp. ("Casino Magic")
approved and signed an Agreement and Plan of Merger among Casino Magic,
Hollywood Park and HP Acquisition II, Inc. (a wholly owned subsidiary of
Hollywood Park). Hollywood Park will pay cash of $2.27 for each issued and
outstanding share of Casino Magic common stock, or approximately $81,000,000.
(See "Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.")
The financial information included herein has been prepared in conformity with
generally accepted accounting principles as reflected in Hollywood Park's
consolidated Annual Report on Form 10-K filed with the Securities and Exchange
Commission for the year ended December 31, 1997. 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 1997
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 necessary to present
a fair statement of the financial results for the interim periods. It should be
understood that accounting measurements at interim dates inherently involve
greater reliance on estimates than at year end. The interim racing results of
operations are not indicative of the results for the full year, due to the
seasonality of the Company's horse racing business.
CONSOLIDATION The consolidated financial statements presented herein, included
the accounts of Hollywood Park and its wholly owned subsidiaries: (a) Boomtown,
which was acquired by the Company on June 30, 1997, with the acquisition
accounted for under the purchase method of accounting for a business
combination, and Boomtown's six active subsidiaries; (1) Boomtown Hotel &
Casino, Inc., (2) Bayview Yacht Club, Inc., (3) Mississippi - I Gaming, L.P.,
(4) Louisiana Gaming Enterprises, Inc., (5) Louisiana - I Gaming, and (6)
Boomtown Hoosier, Inc.; (b) Hollywood Park Operating Company and its two wholly
owned subsidiaries, Hollywood Park Food Services, Inc. and Hollywood Park Fall
Operating Company; (c) Turf Paradise, Inc.; (d) HP Yakama, Inc.; and (e)
HP/Compton, Inc. and HP Casino, Inc., which own 89.8% and 10.2%, respectively,
of the Crystal Park Hotel and Casino Development Company LLC ("Crystal Park
LLC"). The Hollywood Park-Casino is a division of Hollywood Park, Inc.
RESTRICTED CASH Restricted cash as of June 30, 1998 and December 31, 1997, was
for amounts due to horsemen for purses, stakes and awards.
4
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CAPITALIZED INTEREST During the three and six months ended June 30, 1998, the
Company capitalized interest related to construction projects of approximately
$281,000 and $507,000, respectively. The Company did not capitalize interest
during the three and six months ended June 30, 1997.
COMPREHENSIVE INCOME Statement of Financial Accounting Standards No. 130,
("SFAS 130") Reporting Comprehensive Income, requires that the Company disclose
--------- --------------------
comprehensive income and its components. The objective of SFAS 130 is to report
a measure of all changes in equity of an enterprise that result from
transactions and other economic events of the period other than transactions
with owners. Comprehensive income is the sum of the following; net income
(loss) and other comprehensive income (loss), which is defined as all other
nonowner changes in equity.
The Company has recorded unrealized gain (loss) on securities as other
comprehensive income (loss) in the accompanying financial statements.
Comprehensive income was computed as follows:
<TABLE>
<CAPTION>
For the three months ended
June 30,
-----------------------------------------------
1998 1997
--------------------- ---------------------
(in thousands, unaudited)
<S> <C> <C>
Net income $8,129 $5,603
Other comprehensive income (loss):
Unrealized gain on securities 8 43
Less reclassification adjustment for
realized (gain) loss 0 0
--------------------- ---------------------
Comprehensive income $8,137 $5,646
===================== =====================
For the six months ended
June 30,
-----------------------------------------------
1998 1997
--------------------- ---------------------
(in thousands, unaudited)
Net income $6,895 $4,708
Other comprehensive income (loss):
Unrealized gain (loss) on securities 83 (7)
Less reclassification adjustment for
realized (gain) loss 0 1
--------------------- ----------------------
Comprehensive income $6,978 $4,702
===================== =====================
</TABLE>
ESTIMATES Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of property, plant and equipment,
to determine the fair value of financial instruments, to account for the
valuation allowance for deferred tax assets and to determine litigation related
obligations. Actual results could differ from these estimates.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Whenever there are recognized events or changes in circumstances that indicate
the carrying amount of an asset may not be recoverable, management reviews the
asset for possible impairment. In accordance with current accounting standards,
management uses estimated expected future net cash flows (undiscounted and
excluding interest costs, and grouped at the lowest level for which there are
identifiable cash flows that are as independent as possible of other asset
groups) to measure the recoverability of the asset. If the expected future net
cash flows are less than the carrying amount of the asset, an impairment loss
would be recognized. An impairment loss would be measured as the amount by
which the carrying amount of the asset exceeded the fair value of the asset,
with fair value measured as the amount at which the asset could be bought or
sold in a current transaction between willing parties, other than in a forced
liquidation sale. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future net cash flows, market conditions, and the
availability of capital. If, in future
5
<PAGE>
periods, there are changes in the estimates or assumptions incorporated into the
impairment review analysis, the changes could result in an adjustment to the
carrying amount of the asset, but at no time would previously recognized
impairment losses be restored.
EARNINGS PER SHARE Basic earnings per share were computed by dividing net
income available to common shareholders (net income less preferred dividend
requirements) by the weighted average number of common shares outstanding during
the period. Diluted per share amounts were similarly computed, but include the
effect, when dilutive, of the conversion of the convertible preferred shares
(which is applicable to the three and six months ended June 30, 1997, only), 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 in future periods.
CASH FLOWS Cash and cash equivalents included certificates of deposit and short
term investments with maturities of 90 days or less.
RACING REVENUES AND EXPENSES The Company records pari-mutuel revenues,
admissions, food and beverage and other income associated with racing on a daily
basis, except for seasonal admissions, which are recorded ratably over the
racing season. Expenses associated with racing revenues were charged against
income in those periods in which racing revenues were recognized.
GAMING REVENUE AND PROMOTIONAL ALLOWANCES Gaming revenues at the Boomtown
properties consisted of the difference between gaming wins and losses, or net
win from gaming activity, and at the Hollywood Park-Casino consisted of fees
collected from patrons on a per seat or per hand basis. Revenues in the
accompanying statements of operations excluded the retail value of food and
beverage provided to players on a complimentary basis. The estimated cost of
providing these promotional allowances during the three months ended June 30,
1998 and 1997, was $3,571,000 and $339,000, respectively, and for the six months
ended June 30, 1998 and 1997, was $7,477,000 and $665,000, respectively. (The
amounts for the three and six months ended June 30, 1997, are exclusive of the
costs associated with Boomtown's operations.)
RECLASSIFICATIONS Certain reclassifications have been made to the 1997 balances
to be consistent with the 1998 financial statement presentation.
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 " Boomtown Merger"). As a result of the Boomtown Merger,
Boomtown became a wholly owned subsidiary of the Company and each share of
Boomtown common stock was converted into the right to receive 0.625 of a share
of Hollywood Park's common stock. Approximately 5,362,850 shares of Hollywood
Park common stock, valued at $9.8125 per share (excluding shares repurchased
from Edward P. Roski, Jr. ("Roski") and subsequently retired) were issued in the
Boomtown Merger.
The Boomtown Merger was accounted for under the purchase method of accounting
for a business combination. The purchase price of the Boomtown Merger was
allocated to the identifiable assets acquired and liabilities assumed based on
their estimated fair values at the date of acquisition. Based on financial
analyses which considered the impact of general economic, financial and market
conditions on the assets acquired and liabilities assumed, it was determined
that the estimated fair values approximated their carrying value. The Boomtown
Merger generated approximately $21,136,000 of excess acquisition cost over the
recorded value of the net assets acquired, all of which was allocated to
goodwill, to be amortized over 40 years. The amortization of the goodwill is
not deductible for income tax purposes. As of June 30, 1997, the
6
<PAGE>
excess acquisition cost over the recorded value of the assets was estimated at
approximately $2,683,000. As of June 30, 1998, the Company revised its initial
estimates of the excess acquisition cost over the recorded value to $21,136,000,
due primarily to a reduction in the valuation of certain gaming fixed assets and
provisions for additional liabilities.
The Company acquired three of the four Boomtown properties; Boomtown Reno,
Boomtown New Orleans, and Boomtown Biloxi. In connection with the Boomtown
Merger, Boomtown's Las Vegas property was divested on July 1, 1997, due to this
property having generated significant operating losses.
NOTE 3 -- SHORT TERM INVESTMENTS
As of June 30, 1998, short term investments consisted of investments in equity
securities. These investments are recorded at fair value in the accompanying
financial statements, as determined by the quoted market price, and are
classified as available-for-sale. As of June 30, 1998, the Company recorded an
unrealized gain on these investments of approximately $83,000. Included in the
portfolio of equity securities were 653,900 shares of Casino Magic common stock,
for which the Company paid $2.00 per common share, or a total cost of $1,328,249
(inclusive of commissions). As of August 6, 1998, the Company purchased an
additional 139,000 shares of Casino Magic common stock, at a cost of $2.03125
per common share, or a total additional cost of $286,702 (inclusive of
commissions).
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held as of June 30, 1998, and December 31, 1997,
consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------------- ---------------------
(unaudited)
(in thousands)
<S> <C> <C>
Land and land improvements $ 51,679 $ 50,945
Buildings and building improvements 273,752 270,271
Equipment 83,655 77,337
Vessels 16,690 18,925
Construction in progress 19,125 21,896
--------------------- ---------------------
444,901 439,374
Less accumulated depreciation 145,449 138,708
--------------------- ---------------------
$299,452 $300,666
===================== =====================
</TABLE>
NOTE 5 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of June 30, 1998, and December 31, 1997, consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
--------------------- ---------------------
(unaudited)
(in thousands)
<S> <C> <C>
Secured notes payable, Bank Credit Facility $ 30,000 $ 0
Secured notes payable, other 3,750 3,750
Unsecured 9.5% Notes 125,000 125,000
Boomtown 11.5% First Mortgage Notes 0 1,253
Unsecured notes payable 3,027 4,009
Capital lease obligations 127 1,527
--------------------- ---------------------
161,904 135,539
Less current maturities 2,085 3,437
--------------------- ----------------------
$159,819 $132,102
===================== =====================
</TABLE>
7
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SECURED NOTES PAYABLE, BANK CREDIT FACILITY On June 30, 1997, the Company
entered into a five year Bank Credit Facility with a bank syndicate led by Bank
of America National Trust and Savings Association. As of June 30, 1998, due to
covenant limitations, approximately $87,280,000 of the total current
$100,000,000 Bank Credit Facility was available, of which $30,000,000 was
outstanding, at an interest rate of 7.88%. 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.
UNSECURED 9.5% NOTES On August 6, 1997, Hollywood Park, Inc. and Hollywood
Park Operating Company, co-issued $125,000,000 of Series A 9.5% Senior
Subordinated Notes due 2007 (the "Series A Notes"). On March 20, 1998, the
Company completed a registered exchange offer for the Series A Notes, pursuant
to which all $125,000,000 principal amount of the Series A Notes were exchanged
by the holders for $125,000,000 aggregate principal amount of Series B 9.5%
Senior Subordinated Notes due 2007, of the Company and Hollywood Park Operating
Company (the "Series B Notes") and, together with the Series A Notes, (the
"Notes") were registered under the Securities Act on Form S-4. Interest on the
Notes is payable semi-annually, on February 1st and August 1st. The Company
paid Liquidated Damages at an annual rate of 0.5% of the principal amount of the
Notes for the period January 27, 1998 to March 20,1998 (the date of consummation
of the exchange offer). The Notes are redeemable, at the option of Hollywood
Park and Hollywood Park Operating Company, in whole or in part, on or after
August 1, 2002, at a premium to face amount, plus accrued interest, as follows:
(a) August 1, 2002 at 104.75%; (b) August 1, 2003 at 102.375%; (c) August 1,
2004 at 101.188%; and (d) August 1, 2005 and thereafter at 100%. The Notes are
unsecured obligations of Hollywood Park and Hollywood Park Operating Company,
guaranteed by all other material restricted subsidiaries of either Hollywood
Park or Hollywood Park Operating Company.
The indenture governing the Notes (the "Indenture") contains certain covenants
that, among other things, limit the ability of Hollywood Park, Hollywood Park
Operating Company and their restricted subsidiaries to incur additional
indebtedness and issue preferred stock, pay dividends or make other
distributions, repurchase equity interests or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates, sell assets,
issue or sell equity interests in their respective subsidiaries or enter into
certain mergers and consolidations. The Company believes that the consummation
of the Casino Magic Merger will be permitted under the terms of the Indenture
provided that, among other things, Casino Magic redeems a portion of its long
term indebtedness in a manner currently contemplated by the parties. (See "Item
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.")
BOOMTOWN 11.5% FIRST MORTGAGE NOTES As permitted in the indenture (the
"Boomtown Indenture") governing the Boomtown 11.5% First Mortgage Notes (the
"Boomtown Notes") in June 1998, Boomtown elected to satisfy and discharge its
obligation regarding the $1,253,000 of Boomtown Notes. As of June 9, 1998,
Boomtown had satisfied all conditions required to discharge its obligations
under the Boomtown Indenture. The total cost to redeem the Boomtown Notes was
$1,378,000.
8
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NOTE 6 -- CONSOLIDATING CONDENSED FINANCIAL INFORMATION
Hollywood Park's subsidiaries (excluding non-material subsidiaries) have fully
and unconditionally guaranteed the payment of all obligations under the Notes.
The following is the consolidating information for the co-obligors and their
respective subsidiaries:
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the three and six months ended June 30, 1998 and 1997 and balance sheet as
of June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
(a) (b)
Hollywood Hollywood Wholly Majority
Park, Inc. Park Owned Owned
(Parent Operating Co. Guarantor Guarantor
co-obligor) (co-obligor) Subsidiaries Subsidiaries
----------- -------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet
- -------------
As of June 30, 1998
Current assets $ 23,792 $ 28,561 $ 32,677 $ 6,531
Property, plant and
equipment, net 67,352 22,664 164,620 44,816
Other non-current assets 27,085 4,564 39,838 2,061
Investment in subsidiaries 185,395 15,369 87,799 0
Inter-company 135,008 144,006 133,868 9
-------- -------- -------- -------
$438,632 $215,164 $458,802 $53,417
======== ======== ======== =======
Current liabilities $ 18,015 $ 33,282 $ 21,135 $ 4,924
Notes payable, current 694 48 66 1,277
Notes payable, long term 32,079 125,206 34 2,500
Other non-current 13,313 0 3,853 0
liabilities
Inter-company 145,160 21,576 197,875 48,280
Equity (deficit) 229,371 35,052 235,839 (3,564)
-------- -------- -------- -------
$438,632 $215,164 $458,802 $53,417
======== ======== ======== =======
Statement of Operations
- -----------------------
For the three months end
June 30, 1998
Revenues:
Gaming $ 11,713 $ 0 $ 33,404 $14,240
Racing 0 24,084 2,761 0
Food and beverage 1,236 0 5,734 1,323
Equity in subsidiaries 17,545 292 (5,018) 0
Inter-company 0 0 1,345 0
Other 1,010 588 6,241 791
-------- -------- -------- -------
31,504 24,964 44,467 16,354
-------- -------- -------- -------
Expenses:
Gaming 6,719 0 17,393 7,237
Racing 0 8,890 1,323 0
Food and beverage 2,389 0 6,002 1,632
Administrative and other 4,953 5,211 12,822 4,365
REIT restructuring 0 0 0 0
Depreciation and
amortization 1,082 987 3,469 900
-------- -------- -------- -------
15,143 15,088 41,009 14,134
-------- -------- -------- -------
Operating income (loss) 16,361 9,876 3,458 2,220
Interest expense 957 3,125 (122) 94
Inter-company interest 0 0 0 1,345
-------- -------- -------- -------
Income (loss) before taxes 15,404 6,751 3,580 781
Income tax expense
(benefit) 7,217 0 (1,798) 0
-------- -------- -------- -------
Net income (loss) $ 8,187 $ 6,751 $ 5,378 $ 781
======== ======== ======== =======
<CAPTION>
(c)
Wholly
Owned Consolidating
Non- and Hollywood
Guarantor Eliminating Park, Inc.
Subsidiaries Entries Consolidated
----------- -------------- -------------
(in thousands)
<S> <C> <C> <C>
Balance Sheet
- -------------
As of June 30, 1998
Current assets $ 220 ($220) $ 91,561
Property, plant and
equipment, net 0 0 299,452
Other non-current assets 0 12,626 86,174
Investment in subsidiaries 0 (288,563) 0
Inter-company 0 (412,891) 0
-------- ---------- --------
$ 220 ($689,048) $477,187
======== ========== ========
Current liabilities $ 0 ($220) $ 77,136
Notes payable, current 0 0 2,085
Notes payable, long term 0 0 159,819
Other non-current (8,397) 8,769
liabilities
Inter-company 0 (412,891) 0
Equity (deficit) 220 (267,540) 229,378
-------- ---------- --------
$ 220 ($689,048) $477,187
======== ========== ========
Statement of Operations
- -----------------------
For the three months end
June 30, 1998
Revenues:
Gaming $ 0 $ 0 $ 59,357
Racing 0 0 26,845
Food and beverage 0 0 8,293
Equity in subsidiaries 0 (12,819) 0
Inter-company 0 (1,345) 0
Other 0 0 8,630
-------- ---------- --------
0 (14,164) 103,125
-------- ---------- --------
Expenses:
Gaming 0 0 31,349
Racing 0 0 10,213
Food and beverage 0 0 10,023
Administrative and other 93 0 27,444
REIT restructuring 0 0 0
Depreciation and
amortization 0 56 6,494
-------- ---------- --------
93 56 85,523
-------- ---------- --------
Operating income (loss) (93) (14,220) 17,602
Interest expense 0 0 4,054
Inter-company interest 0 (1,345) 0
----- ---------- --------
Income (loss) before taxes (93) (12,875) 13,548
Income tax expense
(benefit) 0 0 5,419
----- ---------- --------
Net income (loss) ($93) ($12,875) $ 8,129
======== ========== ========
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Hollywood Park, Inc.
Consolidating Condensed Financial Information (continued)
For the three and six months ended June 30, 1998 and 1997 and balance sheet as of June 30, 1998 and December 31, 1997
(a) (b)
Hollywood Hollywood Wholly Majority
Park, Inc. Park Owned Owned
(Parent Operating Co. Guarantor Guarantor
co-obligor) (co-obligor) Subsidiaries Subsidiaries
----------- -------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
For the six months end
June 30, 1998
Revenues:
Gaming $ 23,117 $ 0 $ 63,319 $28,270
Racing 0 27,872 8,842 0
Food and beverage 2,299 0 9,077 2,486
Equity in subsidiaries 16,280 236 (1,339) 0
Inter-company 0 0 2,701 0
Other 1,897 1,466 11,166 1,471
-------- ------- -------- -------
43,593 29,574 93,766 32,227
-------- ------- -------- -------
Expenses:
Gaming 13,461 0 34,972 14,883
Racing 0 11,781 3,901 0
Food and beverage 4,751 0 9,713 3,072
Administrative and other 9,520 8,759 24,999 8,599
REIT restructuring 469 0 0 0
Depreciation and
amortization 2,207 1,988 6,999 1,782
-------- ------- -------- -------
30,408 22,528 80,584 28,336
-------- ------- -------- -------
Operating income (loss) 13,185 7,046 13,182 3,891
Interest expense 1,548 6,183 (201) 185
Inter-company interest 0 0 0 2,701
-------- ------- -------- -------
Income (loss) before
taxes 11,637 863 13,383 1,005
Income tax expense 4,640 0 10 0
-------- ------- -------- -------
Net income (loss) $ 6,997 $ 863 $ 13,373 $ 1,005
======== ======= ======== =======
Statement of Cash Flows:
- ----------------------------
For the six months ended
June 30, 1998
Net cash provided by
(used in) operating
activities ($197) $14,661 $ 26,884 $ 545
Net cash used in investing
activities (13,152) (938) (22,694) (1,012)
Net cash provided by
(used in) financing
activities 29,942 0 (2,886) 354
<CAPTION>
(c)
Wholly
Owned Consolidating
Non- and Hollywood
Guarantor Eliminating Park, Inc.
Subsidiaries Entries Consolidated
------------- -------------- -------------
(in thousands)
<S> <C> <C> <C>
For the six months end
June 30, 1998
Revenues:
Gaming $ 0 $ 0 $114,706
Racing 0 0 36,714
Food and beverage 0 0 13,862
Equity in subsidiaries 0 (15,177) 0
Inter-company 0 (2,701) 0
Other 0 0 16,000
-------- --------- --------
0 (17,878) 181,282
-------- --------- --------
Expenses:
Gaming 0 0 63,316
Racing 0 0 15,682
Food and beverage 0 0 17,536
Administrative and other 93 0 51,970
REIT restructuring 0 0 469
Depreciation and
amortization 0 73 13,049
-------- --------- --------
93 73 162,022
-------- --------- --------
Operating income (loss) (93) (17,951) 19,260
Interest expense 0 0 7,715
Inter-company interest 0 (2,701) 0
-------- --------- --------
Income (loss) before 0
taxes (93) (15,250) 11,545
Income tax expense 0 0 4,650
-------- --------- --------
Net income (loss) ($93) ($15,250) $ 6,895
======== ========= ========
Statement of Cash Flows:
- ----------------------------
For the six months ended
June 30, 1998
Net cash provided by
(used in) operating
activities $ 0 ($15,177) $ 26,716
Net cash used in investing
activities 0 0 (37,796)
Net cash provided by
(used in) financing
activities 0 0 27,410
</TABLE>
10
<PAGE>
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the three and six months ended June 30, 1998 and 1997 and balance sheet as
of June 30, 1998 and December 31, 1997
<TABLE>
<CAPTION>
(a) (b)
Hollywood Hollywood Wholly Majority
Park, Inc. Park Owned Owned
(Parent Operating Co. Guarantor Guarantor
co-obligor) (co-obligor) Subsidiaries Subsidiaries
----------- -------------- ------------- -------------
(in thousands)
<S> <C> <C> <C> <C>
Statement of Operations
- ----------------------------
For the three months
ended June 30, 1997
Revenues:
Gaming $ 13,265 $ 0 $ 0 $ 900
Racing 0 23,471 2,768 0
Food and beverage 1,198 0 3,094 0
Equity in subsidiaries 656 437 438 0
Other 1,070 456 102 0
-------- -------- -------- -------
16,189 24,364 6,402 900
-------- -------- -------- -------
Expenses:
Gaming 8,112 0 0 0
Racing 0 9,106 1,359 0
Food and beverage 2,464 0 2,627 0
Administrative and other 3,909 5,445 1,004 18
Depreciation and
amortization 1,330 803 361 402
-------- -------- -------- -------
15,815 15,354 5,351 420
-------- -------- -------- -------
Operating income (loss) 374 9,010 1,051 480
Interest expense 59 6 0 0
-------- -------- -------- -------
Income (loss) before taxes 315 9,004 1,051 480
Minority interests 0 0 0 0
Income tax expense 3,675 0 0 0
-------- -------- -------- -------
Net income (loss) ($3,360) $ 9,004 $ 1,051 $ 480
======== ======== ======== =======
For the six months
ended June 30, 1997
Revenues:
Gaming $ 25,347 $ 0 $ 0 $ 1,500
Racing 0 27,404 8,464 0
Food and beverage 2,247 0 4,613 0
Equity in subsidiaries 2,853 293 594 0
Other 2,146 1,182 236 0
-------- -------- -------- -------
32,593 28,879 13,907 1,500
-------- -------- -------- -------
Expenses:
Gaming 15,161 0 0 0
Racing 0 11,538 3,871 0
Food and beverage 4,753 0 4,066 0
Administrative and other 8,487 9,291 2,151 41
Depreciation and
amortization 2,394 1,865 719 802
-------- -------- -------- -------
30,795 22,694 10,807 843
-------- -------- -------- -------
Operating income (loss) 1,798 6,185 3,100 657
Interest expense 116 13 0 0
-------- -------- -------- -------
Income (loss) before taxes 1,682 6,172 3,100 657
Minority interests 0 0 0 0
Income tax expense
(benefit) 3,105 0 (5) 0
-------- -------- -------- -------
Net income (loss) ($1,423) $ 6,172 $ 3,105 $ 657
======== ======== ======== =======
Statement of Cash Flows:
- ----------------------------
For the six months
June 30, 1997
Net cash provided by
(used in) operating
activities $ 6,584 $ 11,593 ($1,055) $ 1,021
Net cash provided by
(used in) investing
activities 3,509 (1,288) (2,105) (534)
Net cash used in
financing activities (308) 0 0 0
<CAPTION>
(c)
Wholly
Owned Consolidating
Non- and Hollywood
Guarantor Eliminating Park, Inc.
Subsidiaries Entries Consolidated
------------- -------------- -------------
(in thousands)
<S> <C> <C> <C>
Statement of Operations
- ----------------------------
For the three months
ended June 30, 1997
Revenues:
Gaming $0 $ 0 $ 14,165
Racing 0 0 26,239
Food and beverage 0 0 4,292
Equity in subsidiaries 0 (1,531) 0
Other 0 0 1,628
--------- ---------- --------
0 (1,531) 46,324
-------- ---------- --------
Expenses:
Gaming 0 0 8,112
Racing 0 0 10,465
Food and beverage 0 0 5,091
Administrative and other 0 0 10,376
Depreciation and
amortization 0 0 2,896
-------- ---------- --------
0 0 36,940
-------- ---------- --------
Operating income (loss) 0 (1,531) 9,384
Interest expense 0 0 65
-------- ---------- --------
Income (loss) before taxes 0 (1,531) 9,319
Minority interests 0 41 41
Income tax expense 0 0 3,675
-------- ---------- --------
Net income (loss) $0 ($1,572) $ 5,603
======== ========== ========
For the six months
ended June 30, 1997
Revenues:
Gaming $0 $ 0 $ 26,847
Racing 0 0 35,868
Food and beverage 0 0 6,860
Equity in subsidiaries 0 (3,740) 0
Other 0 0 3,564
-------- ---------- --------
0 (3,740) 73,139
--------- ---------- --------
Expenses:
Gaming 0 0 15,161
Racing 0 0 15,409
Food and beverage 0 0 8,819
Administrative and other 0 0 19,970
Depreciation and
amortization 0 0 5,780
--------- ---------- --------
0 0 65,139
-------- ---------- --------
Operating income (loss) 0 (3,740) 8,000
Interest expense 0 0 129
-------- ---------- --------
Income (loss) before taxes 0 (3,740) 7,871
Minority interests 0 63 63
Income tax expense
(benefit) 0 0 3,100
------- ---------- --------
Net income (loss) $0 ($3,803) $ 4,708
======= ========== ========
Statement of Cash Flows:
- ----------------------------
For the six months
June 30, 1997
Net cash provided by
(used in) operating
activities $0 ($3,194) $ 14,949
Net cash provided by
(used in) investing
activities 0 12,264 11,846
Net cash used in
financing activities 0 0 (308)
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Hollywood Park, Inc.
Consolidating Condensed Financial Information (continued)
For the three and six months ended June 30, 1998 and 1997 and balance sheet as of June 30, 1998 and December 31, 1997
(a) (b)
Hollywood Hollywood Wholly Majority
Park, Inc. Park Owned Owned
(Parent Operating Co. Guarantor Guarantor
co-obligor) (co-obligor) Subsidiaries Subsidiaries
---------- ------------- ------------ ------------
(in thousands)
<S> <C> <C> <C> <C>
Balance Sheet
- -------------
As of December 31, 1997
Current assets $ 19,844 $ 3,867 $ 25,074 $ 6,720
Property, plant and
equipment, net 68,515 23,753 140,105 68,293
Other non-current assets 22,306 4,701 29,320 7,611
Investment in subsidiaries 126,121 15,132 116,020 0
Inter-company 125,210 148,380 122,035 0
-------- -------- -------- -------
$361,996 $195,833 $432,554 $82,624
======== ======== ======== =======
Current liabilities $ 16,890 $ 14,232 $ 19,583 $ 6,612
Notes payable, long term 2,406 125,256 1,936 2,504
Other non-current
liabilities 4,753 5,202 83 0
Inter-company 146,145 21,589 178,448 49,443
Minority interest 0 0 0 0
Equity 191,802 29,554 232,504 24,065
-------- -------- -------- -------
$361,996 $195,833 $432,554 $82,624
======== ======== ======== =======
<CAPTION>
(c)
Wholly
Owned Consolidating
Non- and Hollywood
Guarantor Eliminating Park, Inc.
Subsidiaries Entries Consolidated
------------ ------------- -------------
(in thousands)
<S> <C> <C> <C>
Balance Sheet
- -------------
As of December 31, 1997
Current assets $0 $ 0 $ 55,505
Property, plant and
equipment, net 0 0 300,666
Other non-current assets 0 (1,080) 62,858
Investment in subsidiaries 0 (257,273) 0
Inter-company 0 (395,625) 0
-------- ---------- --------
$0 ($653,978) $419,029
======== ========== ========
Current liabilities $0 $ 0 $ 57,317
Notes payable, long term 0 0 132,102
Other non-current
liabilities 0 (3,728) 6,310
Inter-company 0 (395,625) 0
Minority interest 0 1,946 1,946
Equity 0 (256,571) 221,354
-------- ---------- --------
$0 ($653,978) $419,029
======== ========== ========
</TABLE>
(a) The Company's wholly owned guarantor subsidiaries are: HP Casino, Inc.,
HP/Compton, Inc., Turf Paradise, Inc., Hollywood Park Food Services, Inc.,
Hollywood Park Fall Operating Company, Boomtown, Inc., Boomtown Hotel &
Casino, Inc., Louisiana I Gaming, Louisiana Enterprises, Inc., Bayview
Yacht Club, Inc., and for periods after December 31, 1997, Crystal Park
Hotel and Casino Development Company, LLC. Due to the June 30, 1997,
Boomtown Merger being accounted for under the purchase method of accounting
for a business combination, the financial results for the three and six
months ended June 30, 1997, do not include the results of Boomtown, Inc.,
Boomtown Hotel & Casino, Inc., Louisiana I Gaming, Louisiana Enterprises,
Inc., and Bayview Yacht Club, Inc.
(b) As of December 31, 1997, Mississippi I Gaming, L.P. which was added as of
the June 30, 1997, Boomtown Merger, was the Company's only majority owned
guarantor subsidiary. Due to the Boomtown Merger being accounted for under
the purchase method of accounting for a business combination, Mississippi
I Gaming, L.P.'s financial results were not included for the three and six
months ended June 30, 1997. Prior to December 31, 1997, Crystal Park Hotel
and Casino Development Company, LLC was also a majority owned guarantor
subsidiary.
(c) Boomtown Hoosier, Inc. is the Company's only wholly owned non-guarantor
subsidiary with financial activity as of second quarter 1998. Boomtown
Hoosier, Inc.'s prior financial activity was not material.
12
<PAGE>
Mississippi - I Gaming, L.P.
Balance Sheets
<TABLE>
<CAPTION>
As of
------------------------------
June 30, December 31,
1998 1997
------------ ------------
(unaudited)
ASSETS (in thousands)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $4,029 $4,143
Other receivables, net 173 113
Prepaid expenses and other assets 2,338 1,614
------------ ------------
Total current assets 6,540 5,870
Property, plant and equipment, net 44,816 45,576
Other assets 2,061 2,068
------------ ------------
$53,417 $53,514
============ ============
- --------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' DEFICIT
Current Liabilities:
Accounts payable $555 $670
Accrued compensation 1,181 923
Accrued liabilities 3,201 3,250
Accrued interest payable, Boomtown, Inc. 3,440 4,989
Current portion of notes payable, Boomtown, Inc. 44,827 44,454
Current portion of notes payable, other 1,277 1,292
------------ ------------
Total current liabilities 54,481 55,578
Notes payable, other 2,500 2,504
Commitments and contingencies 0 0
Partners' deficit:
General partner 12 11
Limited partners (3,576) (4,579)
------------ ------------
Total partners' deficit (3,564) (4,568)
------------ ------------
$53,417 $53,514
============ ============
</TABLE>
- -----
See accompanying notes to financial statements.
13
<PAGE>
Mississippi - I Gaming, L.P.
Statements of Operations
<TABLE>
<CAPTION>
For the three months ended
March 31,
--------------------------
1998 1997
---------- ---------
(in thousands - unaudited)
<S> <C> <C>
Revenues:
Gaming $14,030 $13,101
Food and beverage 1,163 737
Other 680 615
------- -------
15,873 14,453
------- -------
Expenses:
Gaming 7,646 7,388
Food and beverage 1,440 894
Administrative 3,857 3,594
Other 377 356
Depreciation and amortization 882 732
------- -------
14,202 12,964
------- -------
Operating income 1,671 1,489
Interest expense 1,448 1,314
------- -------
Net income $ 223 $ 175
======= =======
Net income allocated to partners:
General partner $ 11 $ 9
Limited parnters 212 166
------- -------
$ 223 $ 175
======= =======
</TABLE>
- -----
See accompanying notes to financial statements.
14
<PAGE>
Mississippi - I Gaming, L.P.
Statements of Cash Flows
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
1998 1997
---------- ----------
(in thousands, unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,004 $ (54)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 1,782 1,809
(Gain) loss on sale of property and equipment (10) 142
(Increase) decrease in other receivables, net (60) 13
Increase in prepaid expenses and other assets (724) (580)
Decrease in other assets 7 70
(Decrease) increase in accounts payable (115) 121
Increase in accrued compensation 258 13
(Decrease) increase in accrued liabilities (49) 377
Decrease in accrued interest payable, Boomtown, Inc. (1,549) (63)
------- -------
Net cash provided by operating activities 544 1,848
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (1,175) (1,396)
Proceeds from sale of property and equipment 163 17
------- -------
Net cash used in investing activities (1,012) (1,379)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable, Boomtown, Inc., net 373 743
Payment notes payable, other (19) (1,507)
------- -------
Net cash provided by (used for) financing activities 354 (764)
------- -------
Decrease in cash and cash equivalents (114) (295)
Cash and cash equivalents at the beginning of the period 4,143 3,337
------- -------
Cash and cash equivalents at the end of the period $ 4,029 $ 3,042
======= =======
</TABLE>
- ---------
See accompanying notes to financial statements.
15
<PAGE>
Mississippi - I Gaming, L.P.
Notes to Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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% owned by
Eric Skrmetta ("Skrmetta").
The Mississippi Partnership owns and operates a casino ("Boomtown Biloxi"),
which opened in July 1994. Boomtown Biloxi occupies nineteen acres on Biloxi
Mississippi's historic Back Bay. The Mississippi Gulf Coast is marketed as the
"Playground of the South" and has been a major tourist destination, even prior
to the advent of full casino gaming in 1992. The Mississippi Gulf Coast
comprises a land area of nearly 1,800 square miles, with more than 30 miles of
white sand beaches fronting the Gulf of Mexico. Recent statistics indicated
that on an annual basis approximately 22 million patrons visited the Gulf Coast
casinos, of which 64% were drawn to the Mississippi Gulf Coast from outside the
state. Boomtown Biloxi operates an "old west" themed 33,632 square foot casino,
which sits on a permanently moored 400 x 110 foot barge. Boomtown Biloxi offers
1,038 slot machines and 35 table games. The land-based facility houses all non-
gaming activities, including restaurants, buffets, a family video fun center and
gift shops.
On August 13, 1997, Hollywood Park exercised its option under the Mississippi
Partnership Agreement 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 Mississippi Partnership Agreement. Hollywood Park
supplied Skrmetta with its calculation of the value of his 15% Mississippi
Partnership interest, and Skrmetta did not agree with the valuation. Hollywood
Park has initiated arbitration proceedings to settle the valuation issue.
The financial information included in this Quarterly Report on Form 10-Q has
been prepared in conformity with generally accepted accounting principles. 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 presentation of the financial results for this interim period.
It should be understood that accounting measurements at interim dates inherently
involve greater reliance on estimates than at year end. 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
Mississippi Partnership's 1997 Annual Report on Form 10-K.
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 Mississippi Partnership reports 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.
GAMING REVENUES AND PROMOTIONAL ALLOWANCES In accordance with industry
practices, the Mississippi Partnership recognized gaming revenues, as the net
win from gaming activities, which is the difference between gaming wins and
losses. Revenues in the accompanying statements of operations excluded the
retail value of food, beverage and other promotional allowances which were
provided to patrons without
16
<PAGE>
charge. The estimated cost of providing such promotional allowances which were
reported as gaming expenses, for the three and six months ended June 30, 1998,
was $1,097,000 and $2,428,000, respectively, and for the three and six months
ended June 30, 1997, was $944,000 and $2,027,000, respectively.
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
Whenever there are recognized events or changes in circumstances that indicate
the carrying amount of an asset may not be recoverable, management reviews the
asset for possible impairment. In accordance with current accounting standards,
management uses estimated expected future net cash flows (undiscounted and
excluding interest costs, and grouped at the lowest level for which there are
identifiable cash flows that are as independent as possible of other asset
groups) to measure the recoverability of the asset. If the expected future net
cash flows are less than the carrying amount of the asset an impairment loss
would be recognized. An impairment loss would be measured as the amount by
which the carrying amount of the asset exceeded the fair value of the asset,
with fair value measured as the amount at which the asset could be bought or
sold in a current transaction between willing parties, other than in a forced
liquidation sale. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future net cash flows, market conditions, and the
availability of capital. If, in future periods, there are changes in the
estimates or assumptions incorporated into the impairment review analysis the
changes could result in an adjustment to the carrying amount of the asset, but
at no time would previously recognized impairment losses be restored.
RECLASSIFICATIONS Certain reclassifications have been made to the 1997 balances
to be consistent with the 1998 financial statement presentation.
NOTE 2 -- CURRENT PREPAID EXPENSES AND OTHER ASSETS AND LONG TERM OTHER ASSETS
Current prepaid expenses and other assets as of June 30, 1998 and December 31,
1997 consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------- --------------------
(in thousands)
<S> <C> <C>
Prepaid insurance $ 278 $ 405
Land lease, related party 500 0
Tidelands lease 425 213
Other prepaid leases 247 184
Inventories 393 382
Prepaid taxes and licenses 272 150
Other current assets 223 280
-------------------- --------------------
$2,338 $1,614
==================== ====================
</TABLE>
Long term other assets as of June 30, 1998 and December 31, 1997 consisted of
the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------- --------------------
(in thousands)
<S> <C> <C>
Land lease, related party $2,000 $2,000
Other assets 61 68
-------------------- --------------------
$2,061 $2,068
==================== ====================
</TABLE>
17
<PAGE>
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held as of June 30, 1998 and December 31, 1997
consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------- --------------------
(in thousands)
<S> <C> <C>
Land and land improvements $ 1,236 $ 1,236
Buildings and building improvements 41,394 41,313
Equipment 10,748 9,998
Construction in progress 63 46
-------------------- --------------------
53,441 52,593
Less accumulated depreciation 8,625 7,017
-------------------- ---------------------
$44,816 $45,576
==================== ====================
</TABLE>
NOTE 4 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of June 30, 1998 and December 31, 1997 consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
-------------------- --------------------
(in thousands)
<S> <C> <C>
Secured notes payable $3,750 $3,750
Capital lease obligations 27 46
-------------------- ---------------------
3,777 3,796
Less current maturities 1,277 1,292
-------------------- ---------------------
$2,500 $2,504
==================== ====================
</TABLE>
As of June 30, 1998 and December 31, 1997, the Mississippi Partnership also had
an outstanding note payable to Boomtown in the amounts of $44,827,000 and
$44,454,000, 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 note payable to Boomtown was
11.0% and 11.5%, as of June 30, 1998 and December 31, 1997, respectively.
NOTE 5 -- COMMITMENTS AND CONTINGENCIES
DEBT GUARANTEES 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 Series A 9.5% Senior Subordinated Notes due 2007, which on March
20, 1998, were exchanged for a like principal amount of 9.5% Series B Senior
Subordinated Notes (collectively the "Notes"). The 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. This Quarterly Report is being filed pursuant to the Indenture
governing the Notes as a guarantor which is not wholly owned by the issuers of
the Notes.
In June 1997, Boomtown repurchased and retired an aggregate of approximately
$102,700,000 in principal amount of Boomtown's 11.5% First Mortgage Notes (the
"Boomtown Notes"). The remaining balance of $1,253,000 was fully and
unconditionally guaranteed by Mississippi - I Gaming, L.P. As permitted in the
Indenture (the "Boomtown Indenture") governing the Boomtown Notes, in June 1998,
Boomtown elected to satisfy and discharge its obligation regarding the Boomtown
Notes. As of June 9, 1998, Boomtown has satisfied all conditions required to
discharge its obligations under the Boomtown Indenture.
LEASES WITH RELATED PARTIES The Mississippi Partnership leases land from
Skrmetta for use by Boomtown Biloxi. The lease term is 99 years and is
cancelable upon one year's notice. The lease called for an initial
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deposit by the Mississippi Partnership of $2,000,000, for annual base lease rent
payments of $2,000,000 and percentage rent equal to 5.0% of adjusted gaming win
(as defined in the lease) over $25,000,000. Skrmetta agreed to provide the land,
free of annual base rent, for two years in exchange for a 15% interest in the
Mississippi Partnership. For the three and six months ended June 30, 1998, the
Mississippi Partnership paid Skrmetta $811,000 and $1,609,000 of rent,
respectively, and for the three and six months ended June 30, 1997, paid
$751,000 and $1,508,000 of rent, respectively.
BARGE LEASE On August 4, 1997, Hollywood Park executed an agreement to purchase
the barge that Boomtown Biloxi sits upon and the associated building shell for
$5,250,000. The Mississippi Partnership had been leasing these assets. The
Mississippi Partnership made a down payment of $1,500,000 upon signing the
agreement, with the balance payable in three equal annual installments of
$1,250,000 with interest set at the prime rate as of the first day of each year.
TIDELANDS LEASE The Mississippi Partnership leases 5.1 acres of submerged
tidelands at the Boomtown Biloxi site from the State of Mississippi. The lease
has a ten year term, (entered into in 1994) with a five year option to renew.
Lease rent for each of the first three years of the lease was $525,000, and will
be $425,000 for the next two years. Rent for the balance of the lease term will
be determined in accordance with Mississippi law, based on an appraisal the
State of Mississippi will obtain.
OTHER 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. On October 26, 1997, the Mississippi Partnership received verbal
notification that its current land-based facility satisfies the Mississippi
Commission's requirement.
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. Factors that may cause actual performance of
Hollywood Park to differ materially from that contemplated by such forward-
looking statements include, among others, the failure to finance or complete or
successfully operate planned improvements and expansions, including the Casino
Magic Merger (and, if the Casino Magic Merger is consummated, the ability to
meet the combined company's debt service obligations or to improve Casino
Magic's financial condition), the passage of adverse gaming-related legislation
in any of the Company's gaming jurisdictions (including, if passed the proposed
legislation in Mississippi described below) and a saturation of or other adverse
changes in gaming markets in which Hollywood Park operates (particularly in the
southeastern United States). 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 Annual Report on Form 10-K, for the year ended December 31, 1997.
PENDING MERGER WITH CASINO MAGIC CORP. On February 19, 1998, Hollywood Park and
Casino Magic Corp. approved and signed an Agreement and Plan of Merger among
Casino Magic Corp., Hollywood Park, Inc., and HP Acquisition II, Inc. (a wholly
owned subsidiary of Hollywood Park) (the "Casino Magic Merger"), pursuant to
which HP Acquisition II, Inc., will merge into Casino Magic, with Casino Magic
surviving and becoming a wholly owned subsidiary of Hollywood Park. Hollywood
Park will pay cash of $2.27 for each issued and outstanding share of Casino
Magic common stock, or an aggregate of approximately $81,000,000. During the
second quarter of 1998 Hollywood Park purchased 653,900 shares of Casino Magic
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common stock, for which it paid $2.00 per common share, or a total cost of
$1,328,249 (inclusive of commissions). As of August 6, 1998, the Company
purchased an additional 139,000 shares of Casino Magic common stock, at a cost
of $2.03125 per common share, or a total additional cost of $286,702 (inclusive
of commissions).
The consummation of the Casino Magic Merger requires, among other things, the
approval of the Casino Magic shareholders, approval of the appropriate gaming
authorities in Mississippi and Louisiana, and an amendment to the Company's
present Bank Credit Facility to provide for the funds required to consummate the
Casino Magic Merger. Casino Magic's shareholder meeting to vote on the Casino
Magic Merger is scheduled for September 9, 1998. The Mississippi gaming
authorities have approved the Casino Magic Merger subject to approval by the
Casino Magic shareholders. The Company expects to present the Casino Magic
Merger to the Louisiana gaming authorities in August 1998. The Company has
executed commitment letters with Bank of America and members of the bank
syndicate for an Amended and Restated Reducing Revolving Loan Agreement (the
"Amended Bank Credit Facility") which would, among other things, increase the
amount available for the Company to borrow up to $300,000,000, reduce interest
and commitment fee rates, and amend certain covenants. Final execution of the
Amended Bank Credit Facility is contingent upon, among other items, completion
of the Casino Magic Merger and redemption of certain Casino Magic debt
obligations.
On February 23, 1998, Hollywood Park entered into a voting agreement (the
"Voting Agreement") with Marlin F. Torguson ("Mr. Torguson") pursuant to which,
among other things, Mr. Torguson has agreed to vote the 7,954,500 shares, or
approximately 22%, of Casino Magic common stock he beneficially owns in favor of
approval and adoption of the Agreement and Plan of Merger and the Casino Magic
Merger, along with any matter that could reasonably be expected to facilitate
the Casino Magic Merger. Mr. Torguson also agreed to continue to serve as an
employee of Casino Magic for three years following the Casino Magic Merger, and
not to compete with Hollywood Park or Casino Magic in any jurisdictions in which
either presently operates.
Casino Magic owns and operates dockside and riverboat gaming properties in Bay
St. Louis, Mississippi ("Casino Magic Bay St. Louis"), Biloxi, Mississippi
("Casino Magic Biloxi") and Bossier City, Louisiana ("Casino Magic Bossier"),
respectively, and is a 51% partner in two land-based casinos in Argentina.
Casino Magic Bay St. Louis began operations in September 1992 on a permanently
moored barge in a 17 acre marina with the adjoining land based facilities
situated on 591 acres. Bay St. Louis is approximately 46 miles east of New
Orleans and 40 miles west of Biloxi. Casino Magic Bay St. Louis offers
approximately 39,500 square feet of gaming space, with 1,132 slot machines and
42 table games. The land based building is three stories with a restaurant,
buffet, snack bar, gift shop and live entertainment lounge. In December 1994,
Casino Magic Bay St. Louis also opened the Casino Magic Inn; a 201 room hotel,
including four deluxe and 20 junior suites. The property also contains the
Magic Dome, an 1,800 seat arena, which hosts approximately 50 events annually,
including nationally televised boxing matches, concerts and other special
events. With the late 1997 addition of the 18 hole Bridges Golf Resort, Casino
Magic Bay St. Louis is positioned as a full service vacation destination.
Casino Magic Biloxi began casino operations in June 1993 and is located on the
Gulf of Mexico in the Mississippi Gulf Coast Region. The property is situated
on the Front Bay on the beach of the Gulf of Mexico in a strip with four other
casinos, and is located on the major highway running through the Mississippi
Gulf Coast. (Whereas, Boomtown Biloxi is located on the Back Bay of Biloxi.)
Casino Magic Biloxi conducts gaming from a permanently moored barge with
approximately 47,700 square feet of gaming space with 1,174 slot machines and 41
gaming tables. The land based facility is located adjacent to the barge on the
approximately 11.5 acre site. On May 1, 1998, Casino Magic Biloxi opened its
378 room luxury hotel, which includes 16 master suites, 70 junior suites, 6,600
square feet of convention and meeting space, a full service restaurant and
retail shops. Casino Magic Biloxi's land based facility is approximately 21,600
square feet and offers buffets, full service restaurants and nationally
franchised fast food services.
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Casino Magic Bossier opened in October 1996, with casino operations conducted
from a dockside riverboat. The property is highly visible with convenient
access from Interstate Highway 20, a major thoroughfare between Bossier
City/Shreveport and the Dallas-Fort Worth area approximately 180 miles to the
west. The Casino Magic Bossier riverboat measures 254 feet long and 78 feet
wide with approximately 30,000 square feet of gaming space, and offers 980 slot
machines and 44 table games. The Casino Magic Bossier facility includes a
55,000 square foot entertainment pavilion connected to a garage providing
parking for approximately 1,400 vehicles. The entertainment pavilion includes
the 350 seat Abracadabra buffet restaurant, a gift shop, a bar and lounge area,
and a 300 seat live entertainment theater. The entertainment pavilion also
includes two smaller full service restaurants. Casino Magic Bossier is just
beginning construction on a 188 room hotel with four master suites, 88 junior
suites and additional full service restaurants. The hotel addition is expected
to be completed in early 1999.
In December 1994, Casino Magic, through its wholly owned subsidiary, Casino
Magic Neuquen SA ("Casino Magic Argentina"), entered into a twelve year
concession agreement with the Province of Neuquen, Argentina. Casino Magic
Argentina operates two casinos in the Province of Neuquen in the cities of
Neuquen and San Martin de los Andes in west-central Argentina. Neuquen Province
is the gateway to the well established tour destinations and ski resorts of the
Andes Mountains. There are approximately 900,000 residents within a 50 mile
radius of the two cities. Casino Magic Argentina, which began operations in
January 1995, includes approximately 29,000 square feet of gaming space and
contains approximately 64 table games, 400 slot machines and a 384 seat bingo
facility.
LEGENDS CASINO -- YAKAMA EXPANSION Legends Casino opened on May 15, 1998,
featuring a 600 seat bingo hall, electronic pull tabs, and table games
including: Blackjack, Poker, Craps, Roulette, Mini-bac, Caribbean Stud. Games
are played in the traditional Las Vegas style, with players betting against the
house. (Legends Casino does not have slot machines.) Legends Casino is located
in Toppenish, Washington, in a valley at the foot of Mt. Adams, a major vacation
destination. Legends Casino is approximately 130 miles from both Seattle,
Washington and Portland, Oregon. The nearest gaming facility is 157 miles away
in Pendelton, Oregon.
Hollywood Park, through its wholly owned subsidiary HP Yamaka, Inc. ("HP
Yakama") loaned approximately $9,243,000 to the Yakama Tribal Gaming Corporation
(the "Tribal Corporation") to construct the Legends Casino. The Tribal
Corporation gave HP Yakama a promissory note for the $9,243,000, payable in 84
equal installments at a 10% rate of interest, with the first installment payable
on July 1, 1998. The Tribal Corporation is current on amounts due under the
promissory note.
Pursuant to a seven year Master Lease between HP Yakama and the Confederated
Tribes and Bands of the Yakama Indian Nation (the "Tribes"), HP Yakama must pay
the Tribes monthly rent of $1,000. HP Yakama and the Tribal Corporation
entered into a corresponding seven year Sublease, under which the Tribal
Corporation owes rent to HP Yakama. Rent under the Sublease is initially set at
28% of Net Revenues (as defined in the relevant agreement), and decreases to 22%
over the seven year Sublease term.
HP Yakama, under the terms of a Profit Participation Agreement with North
American Sports Management ("NORAM") (who entered into the initial agreements
with the Tribal Corporation and the Tribes) is required to pay NORAM 22% of the
actual rent received from the Tribal Corporation under the Sublease.
BOOMTOWN NEW ORLEANS EXPANSION On July 1, 1998, Boomtown New Orleans opened its
$10,000,000 land based expansion, The Great Escape. The Great Escape is a
premier, adult oriented, dining and entertainment complex. The 160 seat "Old
World" casual dining restaurant features an open display kitchen with a varied
and enticing menu. The Great Escape features a state-of-the-art arcade style
amusement center including, among numerous other games, a 3-D giant screen
thrill ride; virtual reality rides; the very popular golf simulators; and a
billiard center. There are also new banquet facilities for parties of up to 500
people. The Great Escape is located on the second floor of the land based
facility and provides a second story entrance to the gaming floors of Boomtown
New Orleans' new larger and resplendent riverboat.
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BOOMTOWN BILOXI On June 18, 1998, the Mississippi Gaming Commission renewed
Boomtown Biloxi's gaming operator's license for another two years.
MISSISSIPPI ANTI-GAMING INITIATIVE In June 1998, a ballot measure to ban casino
gaming in Mississippi was filed with the state's attorney general. If the
ballot measure is approved, it could require Mississippi casinos to shut down
within two years, and remain closed for at least four years. The anti-gaming
coalition has until October 7, 1998, to collect the 98,000 signatures needed to
place the measure on the November 1999 ballot. The Mississippi Gaming
Association and other pro-gaming groups filed suit to revise the initiative or
have it completely voided. On July 24, 1998, a Judge ruled in favor of the
Mississippi Gaming Association's suit, which in effect declared the proposed
initiative null and void, due to the failure to disclose the economic impact of
closing down Mississippi gaming. It is likely that a revised initiative will be
filed which will address the economic impact, and the attempt to ban Mississippi
gaming will continue. It is too soon in the process to predict the outcome of
this situation.
PROPOSED INDIANA PROJECT The Company has an application pending for the
remaining riverboat gaming license to be awarded for operations on the Ohio
River in Indiana. The application was filed under a joint venture between the
Company and Hilton Gaming Corporation ("Hilton"). On May 6, 1998, Hollywood
Park and Hilton agreed that the Company would acquire Hilton's interest in the
joint venture, and Hilton withdrew as an applicant for the remaining Indiana
gaming license. If the Company is awarded the Indiana gaming license, then the
Company will pay Hilton approximately $750,000 in exchange for Hilton's
interest, and plans to own and operate the project on its own.
On May 6, 1998, the Indiana Gaming Commission (the "Commission") met and decided
that it would grant the remaining Indiana gaming license on September 14, 1998.
There can be no assurance that the Commission will grant the gaming license or
that it will be granted to Hollywood Park, or if granted the gaming license,
that the Company will receive all other required approvals and environmental
permits necessary to proceed with this project.
TURF PARADISE The Company has entered into an agreement to sell 12 acres of
land at its Phoenix, Arizona based Turf Paradise racing facility, for
approximately $4,574,000. The purchaser (a national retailer) intends to
construct a major retail outlet at the site. The sale is expected to be
completed no later than first quarter 1999.
HOLLYWOOD PARK GOLF CENTER Due to potential lawsuits from nearby home owners,
in July 1998 the Company closed the Hollywood Park Golf Center. The loss on the
write off of the Hollywood Park Golf Center assets, to be recorded in third
quarter 1998, will be approximately $1,126,000.
CRYSTAL PARK HOTEL AND CASINO As of July 1, 1998, rent was scheduled to
increase to $350,000 per month, but instead, the Company agreed to accept rent
of $150,000 per month through January 1999, at which time the rent is presently
scheduled to increase to $350,000.
YEAR 2000 ISSUE The Company has assessed the impact of the year 2000 issue on
its reporting systems and operations. The year 2000 issue exists because
computer systems and applications were historically designed to use two digit
fields to designate a year, and date sensitive systems may not properly
recognize 2000. Hollywood Park believes that its financial accounting software
will require limited changes to overcome the year 2000 issue, and any changes
are not expected to require material expenditures. Based on the nature of
Hollywood Park's business, it is not expected that any non-financial software
applications that may be impacted by the year 2000 issue would cause any
interruption in operations. The Company expects to complete any changes
required to overcome the year 2000 issue during 1998. The Company currently
estimates that the costs associated with the year 2000 issue, and the
consequences of incomplete or untimely resolution of the year 2000 issue, will
not have a material adverse effect on the results of operations or financial
position of the Company in any given year.
Even if the internal systems of the Company are not materially affected by the
year 2000 issue, the Company could be affected through disruption in the
operation of the outside entities with which the Company interacts. The Company
relies, directly and indirectly, on external systems of business enterprises
such as customers, suppliers and creditors, financial organizations and
governmental entities for accurate exchange of data. The Company is in the
process of determining whether those enterprises that have significant business
relationships with the Company are taking adequate measures to address the year
2000 issue.
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SUNFLOWER RACING, INC. Sunflower Racing, Inc. ("Sunflower") owns the Woodlands
Race Track located in Kansas City, Kansas. On May 17, 1996, Sunflower filed for
reorganization under Chapter 11 of the Bankruptcy Code. On March 31, 1996,
Hollywood Park recorded a non-cash write off of its approximately $11,412,000
investment in Sunflower. In April 1998, the court rejected Sunflower's plan of
reorganization. On June 4, 1998, the bankruptcy judge in Sunflower's bankruptcy
case converted the case from Chapter 11 to Chapter 7 and appointed a trustee to
administer the assets of Sunflower. Sunflower is presently operating under the
supervision of the trustee. The trustee is moving ahead with plans to sell
Sunflower's assets later this year.
Sunflower has appealed the conversion orders as well as the order appointing a
trustee, and the earlier rejection. The appeals are still pending.
REAL ESTATE INVESTMENT TRUST/PAIRED-SHARE STRUCTURE The Company has no present
intentions to pursue a Real Estate Investment Trust Structure.
STOCK REPURCHASE On August 5, 1998, the Company announced its intention to
repurchase and retire up to 20%, or approximately 5,256,000, shares of its
currently issued and outstanding common stock on the open market or in
negotiated transactions. As of August 10, 1998, the Company had repurchased
44,128 shares at a total cost of approximately $486,000.
RESULTS OF OPERATIONS
Hollywood Park's June 30, 1997 acquisition of Boomtown was accounted for under
the purchase method of accounting for a business combination. As required under
the purchase method of accounting, Boomtown's historical financial results were
not consolidated with Hollywood Park's historical financial results, and
therefore, the revenues and expenses vary significantly when comparing the
results of operations for the three and six months ended June 30, 1998, to the
results of operations for the three and six months ended June 30, 1997.
Three months ended June 30, 1998 compared to the three months ended June 30,
----------------------------------------------------------------------------
1997
----
Total revenues for the three months ended June 30, 1998, increased by
$56,801,000, or 122.6%, as compared to the three months ended June 30, 1997,
primarily due to the inclusion of approximately $58,239,000 of Boomtown revenues
in 1998, with no corresponding revenues recorded in 1997. Gaming revenues
increased by $45,192,000, or 319.0%, due primarily to the inclusion of
$47,344,000 of Boomtown related revenues, netted against gaming revenue declines
at the Hollywood Park-Casino, due primarily to the implementation of a ban on
indoor smoking and recent economic problems in various Asian countries (a
significant portion of the Hollywood Park-Casino patrons are Asian). Racing
revenues increased by $606,000, or 2.3%, due primarily to increased simulcasting
of Hollywood Park Race Track's live races to other racing facilities. Food and
beverage revenues increased by $4,001,000, or 93.2%, due to the inclusion of
$3,969,000 of revenues generated at Boomtown properties, for which there were no
corresponding revenues in the 1997 results. Hotel and recreational vehicle park
and truck stop and service station revenues related to Boomtown Reno, with no
corresponding revenues in the 1997 results. Other income increased by
$2,830,000, or 173.8%, due primarily to the inclusion of $2,754,000 of other
income generated at the three Boomtown properties, for which there were no
corresponding revenues in 1997.
Total operating expenses increased by $48,584,000, or 131.5%, for the three
months ended June 30, 1998, as compared to the three months ended June 30, 1997,
primarily as a result of the inclusion of $49,281,000 of expenses related to
Boomtown for which there are no corresponding expenses in the 1997 results of
operations. Gaming expenses increased by $23,237,000, or 286.5%, due primarily
to the inclusion of $24,630,000 of expenses related to Boomtown in the 1998
results and expense reductions of $1,393,000 at the Hollywood Park-Casino, a
result of the gaming revenue declines as previously discussed. Food and
beverage expenses increased by $4,933,000, or 96.9%, due primarily to the
inclusion of $4,838,000 of expenses related to the three Boomtown properties,
with no corresponding expenses recorded in 1997. Hotel
23
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and recreational vehicle park and truck stop and service station expenses
related to operations at Boomtown Reno with no similar costs in the 1997
results. Administrative expenses increased by $12,239,000, or 125.1%, of which
$11,411,000 was related to the three Boomtown properties, with the balance of
the increase primarily attributable to increased Hollywood Park corporate wages
due to additional staffing in 1998. Other expenses increased by $1,159,000, or
170.4%, due primarily to the inclusion of $1,215,000 of expenses related to the
three Boomtown properties. Depreciation and amortization increased by
$3,463,000, or 114.3%, due primarily to the inclusion of $3,606,000 of expenses
related to the three Boomtown properties. Interest expense increased by
$3,990,000, due to interest on the Notes, which were issued in August 1997, and
interest on borrowing from the Company's bank facilities (see "-Liquidity and
Capital Resources" below). Income tax expense increased by $1,743,000 or 47.4%,
due to the increase in pre-tax income in 1998 as compared to 1997.
Six months ended June 30, 1998 compared to the six months ended June 30, 1997
-----------------------------------------------------------------------------
The results of operations for the six months ended June 30, 1998, included the
results of operations of Boomtown, which was acquired by the Company on June 30,
1997, and accounted for under the purchase method of accounting for a business
combination. As required under the rules of purchase accounting, Boomtown's
results of operations, prior to the acquisition, were not combined with those of
Hollywood Park, and therefore, the results of operations for the six months
ended June 30, 1997, did not include Boomtown's results of operations,
generating significant differences when comparing the results of operations for
the six months ended June 30, 1998, to the six months ended June 30, 1997.
Total revenues increased by $108,143,000, or 147.9%, for the six months ended
June 30, 1998, as compared to the six months ended June 30, 1997, due primarily
to the inclusion of approximately $110,454,000 of revenues attributable to
Boomtown. Gaming revenues increased by $87,859,000, or 327.3%, due primarily to
the inclusion of $90,989,000 of gaming revenues attributable to Boomtown, netted
against gaming revenue declines of approximately $2,230,000 at the Hollywood
Park-Casino, primarily a result of a ban on indoor smoking and recent economic
problems in various Asian countries (a significant portion of the Hollywood
Park-Casino's patrons are Asian). Gaming revenues also declined by
approximately $900,000 at the Crystal Park Casino. In 1997, the Crystal Park
Casino was leased to an operator, who subsequently defaulted on the lease and
the Company then leased the property to a new operator, and lowered the rent
during the first year to allow the new operator time to grow the business.
Racing revenues increased by $846,000, or 2.4%, due primarily to increased
revenues generated by simulcasting Hollywood Park Race Track's live races to
other racing facilities. Food and beverage revenues increased by $7,002,000, or
102.1%, due primarily to the inclusion of Boomtown revenues of $7,031,000 in
1998, with no corresponding revenues in the 1997 results. Hotel recreational
vehicle park and truck stop and service station revenues related to Boomtown
Reno, with no corresponding revenues in the 1997 results. Other income
increased by $5,165,000, or 144.9%, due primarily to Boomtown revenues included
in the 1998 results and no corresponding revenues in the 1997 results.
Total operating expenses increased by $96,883,000, or 148.7%, during the six
months ended June 30, 1998, as compared to the six months ended June 30, 1997,
due primarily to the inclusion of approximately $96,996,000 of Boomtown
operating expenses, for which there are no corresponding amounts in the 1997
operating expenses. Gaming expenses increased by $48,155,000, or 317.6%, due
primarily to the inclusion of Boomtown expenses of $49,855,000, netted against
gaming expense declines at the Hollywood Park-Casino, a corresponding result of
the decline in Hollywood Park-Casino's gaming revenues. Food and beverage
expenses increased by $8,717,000, or 98.8%, due primarily to the inclusion of
$8,593,000 of Boomtown expenses in 1998 with no corresponding revenues in 1997.
Hotel and recreational vehicle park and truck stop and service station expenses
related to operations at Boomtown Reno with no corresponding costs in the 1997
results of operations. Administrative expenses increased by $23,590,000, or
127.2%, due primarily to the inclusion of $22,829,000 of Boomtown expenses in
the 1998 results, with the balance of the increase primarily due to increased
expansion expenses at Hollywood Park. Other expenses increased by $2,136,000,
or 148.4%, and included Boomtown costs of $2,280,000, for which there are no
corresponding costs in the
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1997 results. Depreciation and amortization expense increased by $7,269,000, or
125.8%, of which $7,165,000 was attributable to the three Boomtown properties.
Interest expense increased by $7,586,000, due to interest on the Notes and
interest on bank borrowings (see "-Liquidity and Capital Resources" below).
Income tax expense increased by $1,550,000, or 50%, due to the increased pre-tax
income in 1998 as compared to 1997.
LIQUIDITY AND CAPITAL RESOURCES
Hollywood Park's principal source of liquidity as of June 30, 1998, was cash and
cash equivalents of $40,079,000. Cash and cash equivalents increased by
$16,330,000 during the six months ended June 30, 1998. Net cash of $26,716,000
was provided by operating activities. The Hollywood Park Race Track operates
its live race meet during the second quarter of each year, thus generating
additional operating cash. Net cash of $37,796,000 was used in investing
activities. Cash of $26,407,000 was used to purchase capital assets, including
amounts spent for the Boomtown Reno and Boomtown New Orleans construction
projects. Cash of $7,636,000 was lent in connection with the HP Yakama project.
Cash was used for short term investing (including the purchase of Casino Magic
common stock) and the Company also, through it's wholly owned subsidiary HP
Casino, Inc. used cash of $1,946,000 to acquire the remaining minority interest
in Crystal Park LLC. Net cash provided by financing activities was $27,410,000,
which included short term borrowings of $30,000,000 under the Company's Bank
Credit Facility.
Cash and cash equivalents increased by $26,487,000 during the six months ended
June 30, 1997. Net cash of $14,949,000 was provided by operating activities.
Net cash of $11,846,000 was provided by investing activities, which included
cash received in the Boomtown Merger and short term investment proceeds, netted
against disbursements for normal and necessary capital improvements. Net cash
used in financing activities was $308,000.
HOLLYWOOD PARK On June 30, 1997, the Company entered into a five year Bank
Credit Facility with a bank syndicate led by Bank of America National Trust and
Savings Association ("Bank of America"). As of June 30, 1998, due to covenant
limitations, approximately $87,280,000 of the total current $100,000,000 Bank
Credit Facility was available, of which $30,000,000 was outstanding, at an
interest rate of 7.88%. The Bank Credit Facility also provides for a letter of
credit sub-facility of $10,000,000, and a swing line sub-facility of up to
$10,000,000. On May 1, 1998, a $2,035,000 outstanding letter of credit expired
and was not renewed. The Bank Credit Facility is secured by substantially all
of the assets of Hollywood Park and its significant subsidiaries, and imposes
certain customary affirmative and negative covenants.
On February 19, 1998, Hollywood Park announced the execution of an agreement to
consummate the Casino Magic Merger, and under the terms of the Agreement and
Plan of Merger, Hollywood Park will pay cash of $2.27 for each issued and
outstanding share of Casino Magic common stock, or approximately $81,000,000.
The Company has executed commitment letters with Bank of America and members of
the bank syndicate for an Amended and Restated Reducing Revolving Loan Agreement
(the "Amended Bank Credit Facility") which would, among other things, increase
the amount available to borrow to $300,000,000, reduce the interest and
commitment fee rates, and amend certain covenants. Final execution of the
Amended Bank Credit Facility is contingent upon, among other items, completion
of the Casino Magic Merger and redemption of certain Casino Magic debt
obligations.
The Bank Credit Facility has been amended three times, most recently on June 12,
1998. The first amendment, among other matters, reduced the availability of the
facility until the Bank Credit Facility was approved by the Louisiana Gaming
Control Board. Hollywood Park received this approval on July 10, 1997. The
second amendment, among other things, allowed the co-issuance of the Notes by
Hollywood Park Operating Company with Hollywood Park. The third amendment,
among other things, modified certain covenants, allowing for increased capital
expenditures and other investments.
25
<PAGE>
Debt service requirements on the Bank Credit Facility consist of current
interest payments on outstanding indebtedness through September 30, 1999.
Beginning 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. Beginning September 30,
2001, and on the last day of each third calendar month thereafter, the Bank
Credit Facility will decrease by 10% of the commitment in effect on September
30, 1999. Any principal amounts outstanding in excess of the Bank Credit
Facility commitment, as so reduced, will be payable on such quarterly reduction
dates.
Borrowings under the Bank Credit Facility bear interest at an annual rate
determined, at the election of Hollywood Park, by reference to the "Eurodollar
Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate", as
such terms are respectively defined in the Bank Credit Facility, plus margins
which vary depending upon Hollywood Park's ratio of funded debt to earnings
before interest, taxes, depreciation and amortization ("EBITDA"). The margins
start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans, at a
funded debt to EBITDA ratio of less than 1.50. Thereafter, the margin for each
type of loan increases by 25 basis points for each increase in the ratio of
funded debt to EBITDA of 50 basis points or more, up to 2.625% for Eurodollar
loans and 1.625% for Base Rate loans. However, if the ratio of senior funded
debt to EBITDA exceeds 2.50, the applicable margins will increase to 3.25% for
Eurodollar loans, and 2.25% for Base Rate loans. Thereafter, the margins would
increase by 25 basis points for each increase in the ratio of senior funded debt
to EBITDA of 50 basis points or more, up to a maximum of 4.25% for Eurodollar
loans and 3.25% for Base Rate loans. The applicable margins as of June 30,
1998, were 2.25% with respect to the Eurodollar Rate based interest rate and
1.25% with respect to the Base Rate interest rate.
The Bank Credit Facility allows for interest rate swap agreements, or other
interest rate protection agreements, up to a maximum notional amount of
$125,000,000. Presently, Hollywood Park does not utilize such financial
instruments.
Hollywood Park pays a quarterly commitment fee for the average daily amount of
unused portions of the Bank Credit Facility. The commitment fee is also
dependent upon Hollywood Park's ratio of funded debt to EBITDA. The commitment
fee for the Bank Credit Facility starts at 31.25 basis points when the ratio is
less than 1.00, and increases by 6.25 basis points for each increase in the
ratio of 0.50, up to a maximum of 50 basis points. For the quarter beginning
April 1, 1998, the commitment fee was 50 basis points.
On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit
Facility to fund Boomtown's offer to purchase its 11.5% Boomtown First Mortgage
Notes (the "Boomtown Notes"), and repaid this amount on August 7, 1997, with a
portion of the proceeds from the August 6, 1997, issuance of $125,000,000 of
Series A Notes due 2007. The Series A Notes were co-issued by Hollywood Park
and Hollywood Park Operating Company, and were issued pursuant to a private
offering under the Securities Act of 1933, as amended (the "Securities Act").
The balance of the proceeds from the issuance of the Series A Notes was used
primarily for the purchase of a new riverboat for Boomtown New Orleans, and
other general corporate needs.
On March 20, 1998, the Company completed a registered exchange offer for the
Series A Notes, pursuant to which all $125,000,000 principal amount of the
Series A Notes were exchanged by the holders for $125,000,000 aggregate
principal amount of Series B Notes of the Company and Hollywood Park Operating
Company which were registered under the Securities Act on Form S-4. Interest on
the Notes is payable semi-annually, on February 1st and August 1st. The Company
has paid Liquidated Damages at an annual rate of 0.5% of the principal amount of
the Notes for the period January 27, 1998 to March 20, 1998 (the date of
consummation of the exchange offer). The Notes are redeemable, at the option of
Hollywood Park and Hollywood Park Operating Company, in whole or in part, on or
after August 1, 2002, at a premium to face amount, plus accrued interest, as
follows: (a) August 1, 2002 at 104.75%; (b) August 1, 2003 at 102.375%; (c)
August 1, 2004 at 101.188%; and (d) August 1, 2005 and thereafter at 100%. The
Notes are unsecured obligations of Hollywood Park and Hollywood Park Operating
Company, guaranteed by all other material restricted subsidiaries of either
Hollywood Park or Hollywood Park Operating Company.
26
<PAGE>
The indenture governing the Notes contains certain covenants that, among other
things, limits the ability of Hollywood Park, Hollywood Park Operating Company
and their restricted subsidiaries to incur additional indebtedness and issue
preferred stock, pay dividends or make other distributions, repurchase equity
interests (the previously discussed stock repurchase falls within the parameters
of the indenture) or subordinated indebtedness, create certain liens, enter into
certain transactions with affiliates, sell assets, issue or sell equity
interests in their respective subsidiaries or enter into certain mergers and
consolidations. The Company believes that the consummation of the Casino Magic
Merger, and the execution of the Amended Bank Credit Facility will be permitted
under the terms of the Indenture provided that, among other things, Casino Magic
redeems a portion of its long term indebtedness in a manner currently
contemplated by the parties.
Effective August 28, 1997, the Company's 2,749,900 outstanding depositary shares
were converted into approximately 2,291,500 shares of its common stock, thereby
eliminating the annual preferred cash dividend payment of approximately
$1,925,000 in future periods.
As of June 30, 1998, the Company has invested approximately $3,514,000
(inclusive of an unrealized gain of approximately $83,000) in equity securities
(including Casino Magic common stock), which are presently being held as
available-for-sale.
BOOMTOWN In November 1993, Boomtown issued $103,500,000 of 11.5% First Mortgage
Notes (the "Boomtown Notes"). On July 3, 1997, pursuant to a tender offer,
Boomtown repurchased and retired approximately $102,142,000 in principal amount
of the Boomtown Notes, at a purchase price of $1,085 per $1,000, along with
accrued interest thereon. An additional $105,000 of the remaining Boomtown
Notes were tendered in the post Boomtown Merger change of control purchase
offer, at a price of $1,010 for each $1,000, completed August 12, 1997. As
permitted in the indenture governing the Boomtown Notes (the "Boomtown
Indenture"), in June 1998, Boomtown elected to satisfy and discharge its
obligation regarding the remaining $1,253,000 of Boomtown Notes. As of June 9,
1998, Boomtown had satisfied all conditions required to discharge its
obligations under the Boomtown Indenture. Total cost to redeem the Boomtown
Notes was $1,378,000.
As consideration for the sale of its Las Vegas property, Boomtown received two
promissory notes receivable from Mr. Roski, the former lessor of Boomtown's Las
Vegas property, totaling approximately $8,465,000. The first note is for
$5,000,000, bearing interest at Bank of America's reference rate plus 1.5% per
year, with annual principal payments 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. (Mr.
Roski made the required July 1, 1998, principal and interest payment.)
CAPITAL COMMITMENTS The Company has a capital commitment of approximately
$81,000,000, with respect to the purchase of Casino Magic's common stock, in
conjunction with the Casino Magic Merger, and as previously mentioned in
connection with the Amended Bank Credit Facility, will require an additional
$143,000,000 to redeem the 11.5% Casino Magic First Mortgage Notes. The Casino
Magic Merger is expected to be completed in fourth quarter 1998, and the
redemption of the 11.5% Casino Magic First Mortgage Notes to be completed as
soon as practical thereafter.
Expansion Costs In addition to the capital commitments as discussed, Hollywood
- ---------------
Park has other capital needs with respect to Boomtown Reno. 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. As of June 30,
1998, the Company has disbursed approximately $9,400,000 related to the Boomtown
Reno expansion.
GENERAL Hollywood Park is continually evaluating future growth opportunities in
the gaming, sports and entertainment industries. Hollywood Park expects that
funding for the Casino Magic Merger, other
27
<PAGE>
expansion, payment of interest on the Notes, payment of notes payable, and
normal and necessary capital expenditure needs will come from existing cash
balances generated from operating activities and borrowings from the Bank Credit
Facility. In the opinion of management, these resources will be sufficient to
meet Hollywood Park's anticipated cash requirements for the foreseeable future
and in any event for at least the next twelve months.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
- ------------------------------------------------------------------
As of June 30, 1998, Hollywood Park did not hold any investments in market risk
sensitive instruments of the type described in Item 305 of Regulation S-K.
Part II
OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- -----------------------------------------------------------
At an Annual Meeting of Stockholders, held on April 13, 1998, the Company's
stockholders approved the following:
PROPOSAL ONE: Proposal to approve and adopt amendments to the Company's
Certificate of Incorporation, which are necessary to effect the reorganization
of the Company into a paired share real estate investment trust and operating
company structure.
<TABLE>
<S> <C>
For votes 16,434,221
Against votes 413,652
Abstain votes 112,885
Broker non-votes 7,809,023
</TABLE>
PROPOSAL TWO: Proposal to approve and adopt the Hollywood Park Operating
Company 1998 Stock Option Plan.
<TABLE>
<S> <C>
For votes 13,575,789
Against votes 3,226,343
Abstain votes 158,626
Broker non-votes 7,809,023
</TABLE>
PROPOSAL THREE: Proposal to approve and adopt the Hollywood Park Operating
Company 1998 Directors Deferred Compensation Plan.
<TABLE>
<S> <C>
For votes 16,177,218
Against votes 539,373
Abstain votes 249,279
Broker non-votes 7,803,911
</TABLE>
PROPOSAL FOUR: Proposal to approve the Supermajority Elimination Amendment,
which would remove the requirement in the Company's Certificate of Incorporation
that certain transactions be approved by 70% of the Company's outstanding stock.
<TABLE>
<S> <C>
For votes 18,362,570
Against votes 658,527
Abstain votes 236,742
Broker non-votes 6,934,131
</TABLE>
28
<PAGE>
PROPOSAL FIVE: Proposal to approve and adopt the Gaming Amendment to the
Company's Certificate of Incorporation, intended to expand the protection of the
Company's gaming licenses.
<TABLE>
<S> <C>
For votes 16,762,258
Against votes 91,883
Abstain votes 106,617
Broker non-votes 7,809,023
</TABLE>
PROPOSAL SIX: Proposal to elect eleven directors.
<TABLE>
<CAPTION>
Nominee For Votes Against Votes
------- --------- -------------
<S> <C> <C>
R.D. Hubbard 24,474,576 295,205
Richard Goeglein 24,490,384 279,397
Peter L. Harris 24,491,701 278,080
J.R. Johnson 24,490,105 279,676
Robert T. Manfuso 24,491,332 278,449
Harry Ornest 24,492,884 276,897
Timothy J. Parrott 24,493,886 275,895
Lynn P. Reitnouer 24,489,639 280,142
Herman Sarkowsky 24,492,187 277,594
Warren B. Williamson 24,491,933 277,848
Delbert W. Yocam 24,487,617 282,164
</TABLE>
ITEM 5. OTHER INFORMATION
- -------------------------
On July 21, 1998, Mr. Harry Ornest, Director and Vice Chairman of Hollywood
Park, Inc. passed away. The Company is seeking a suitable replacement.
The Company continues to support legislation in California which would
significantly reduce the license fees paid to the state on wagers on
thoroughbred races, and would significantly increase the number of out-of-state
thoroughbred races that Hollywood Park Race Track would be able to simulcast
from other race tracks. Senate Bill 27 ("SB-27") is currently pending before
the Assembly Appropriations Committee. While passage of this legislation is
speculative, the Company is cautiously optimistic that SB-27, or some variation
thereof, will be enacted in 1998. The precise benefits of this legislation are
subject to a number of factors and no assurance can be given of the magnitude of
such benefits in future years.
ITEM 6.A EXHIBITS
- -----------------
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- -------- ----------------------
<S> <C>
10.46 Addendum to the Lease Agreement dated December 19, 1997, by and between Crystal Park Hotel and
Casino Development Company, LLC and California Casino Management, Inc., dated June 30, 1998.
10.47 Option Agreement, by and among The Webster Family Limited Partnership and The Diuguid Family Limited
Partnership, and Pinnacle Gaming Development Corp., dated June 2, 1998.
10.48 Memorandum of Option Agreement, by and between The Webster Family Limited Partnership and The
Diuguid Family Limited Partnership, and Pinnacle Gaming Development Corp., dated June 2, 1998.
10.49 Amended and Restated Options Agreement, by and among Daniel Webster, Marsha S. Webster, William G.
Diuguid, Sara T. Diuguid, J.R. Showers, III and Carol A. Showers, and Pinnacle Gaming Development
Corp., dated June 2, 1998.
29
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
<S> <C>
10.50 Memorandum of Amended and Restated Option Agreement, by and between Daniel Webster, Marsha S.
Webster, William G. Diuduid, Sara T. Diuguid, J.R. Showers, III, and Carol A. Showers, and Pinnacle
Gaming Development Corp., dated June 4, 1998.
10.51 Assignment of Option Agreement, by Daniel Webster and Marsha S. Webster, and Pinnacle Gaming
Development Corp., dated June 2, 1998.
10.52 Amendment No. 3 to Reducing Revolving Loan Agreement, among Hollywood Park, Inc., and the Banks
party thereto, Bank of Scotland, Bankers Trust Company and Societe Generale, as Co-Agents, and Bank
of America National Trust and Savings Association as Managing Agent, dated March 27, 1998.
27.1 Financial Data Schedule
____
</TABLE>
(b) Reports on Form 8-K
None
30
<PAGE>
Hollywood Park, Inc.
Calculation of Earnings Per Share
<TABLE>
<CAPTION>
For the three months ended June 30,
-------------------------------------------------
Basic Diluted (a)
--------------------- ----------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares outstanding 26,285 18,462 26,285 18,463
Average common shares due to assumed conversion
of convertible preferred shares (b) 0 0 0 2,291
Average common shares due to assumed conversion of
stock options 0 0 143 0
-------- -------- -------- --------
Total shares 26,285 18,462 26,428 20,754
======== ======== ======== ========
Net income $8,124 $5,603 $8,124 $5,603
Less dividend requirements on convertible preferred shares 0 481 0 0
-------- -------- -------- --------
Net income available to common shareholders $8,124 $5,122 $8,124 $5,603
======== ======== ======== ========
Net income per share $0.31 $0.28 $0.31 $0.27
======== ======== ======== ========
<CAPTION>
For the six months ended June 30,
--------------------------------------------------
Basic Diluted (a)
--------------------- ---------------------
1998 1997 1998 1997
-------- -------- -------- --------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares outstanding 26,281 18,336 26,281 18,366
Average common shares due to assumed conversion
of convertible preferred shares (b) 0 0 0 2,291
Average common shares due to assumed conversion of
stock options 0 0 490 0
-------- -------- -------- --------
Total shares 26,281 18,336 26,771 20,657
======== ======== ======== ========
Net income $6,890 $4,708 $6,890 $4,708
Less dividend requirements on convertible preferred shares 0 962 0 0
-------- -------- -------- --------
Net income available to common shareholders $6,890 $3,746 $6,890 $4,708
======== ======== ======== ========
Net income per share $0.26 $0.20 $0.26 $0.23
======== ======== ======== ========
</TABLE>
- -------
(a) When the computed diluted values are anti-dilutive, the basic share values
are presented on the face of the consolidated statements of operations.
(b) As of August 28, 1997, the Company's 2,749,000 outstanding depositary
shares were converted into 2,291,492 shares of the Company's common stock.
31
<PAGE>
Hollywood Park, Inc.
Selected Financial Data by Operational Location
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 30,
---------------------------------- ---------------------------------
1998 1997 1998 1997
--------------- -------------- ------------ ---------------
(in thousands, except per share data - unaudited)
<S> <C> <C> <C> <C>
Revenues:
Hollywood Park, Inc. - Casino Division $13,784 $15,323 $26,995 $29,317
HP/Compton, Inc. - Crystal Park Hotel and Casino 300 900 600 1,500
Boomtown Reno 17,912 0 31,348 0
Boomtown New Orleans 23,759 0 46,454 0
Boomtown Biloxi 16,354 0 32,227 0
Boomtown Indiana 0 0 0 0
Hollywood Park Race Track 27,500 26,747 32,978 32,193
Turf Paradise, Inc. 3,101 3,143 9,911 9,705
HP Yakama, Inc. 26 0 26 0
Hollywood Park, Inc. - Corporate 175 211 318 424
Boomtown, Inc. - Corporate 214 0 425 0
-------- ------- -------- -------
103,125 46,324 181,282 73,139
-------- ------- -------- -------
Expenses:
Hollywood Park, Inc. - Casino Division 11,753 13,065 23,460 25,506
HP/Compton, Inc. - Crystal Park Hotel and Casino 83 19 129 41
Boomtown Reno 16,006 0 30,305 0
Boomtown New Orleans 15,777 0 31,573 0
Boomtown Biloxi 13,200 0 26,554 0
Boomtown Indiana 93 0 93 0
Hollywood Park Race Track 16,577 16,732 23,819 24,018
Turf Paradise, Inc. 2,584 2,670 6,958 6,900
HP Yakama, Inc. 35 0 35 0
Hollywood Park, Inc. - Corporate 2,306 1,558 4,272 2,894
Boomtown, Inc. - Corporate 615 0 1,306 0
-------- ------- -------- -------
79,029 34,044 148,504 59,359
-------- ------- -------- -------
Non-recurring expenses:
REIT restructuring 0 0 469 0
Depreciation and amortization:
Hollywood Park, Inc. - Casino Division 648 766 1,346 1,530
HP/Compton, Inc. - Crystal Park Hotel and Casino 460 402 970 802
Boomtown Reno 1,461 0 2,930 0
Boomtown New Orleans 1,189 0 2,380 0
Boomtown Biloxi 900 0 1,782 0
Hollywood Park Race Track 1,048 1,000 2,113 1,991
Turf Paradise, Inc. 298 297 594 592
Hollywood Park, Inc. - Corporate 434 431 861 865
Boomtown, Inc. - Corporate 56 0 73 0
-------- ------- -------- -------
6,494 2,896 13,049 5,780
-------- ------- -------- -------
Operating income (loss):
Hollywood Park, Inc. - Casino Division 1,383 1,492 2,189 2,281
HP/Compton, Inc. - Crystal Park Hotel and Casino (243) 479 (499) 657
Boomtown Reno 445 0 (1,887) 0
Boomtown New Orleans 6,793 0 12,501 0
Boomtown Biloxi 2,254 0 3,891 0
Boomtown Indiana (93) 0 (93) 0
Hollywood Park Race Track 9,875 9,015 7,046 6,184
Turf Paradise, Inc. 219 176 2,359 2,213
HP Yakama, Inc. (9) 0 (9) 0
Hollywood Park, Inc. - Corporate (2,565) (1,778) (4,815) (3,335)
Boomtown, Inc. - Corporate (457) 0 (954) 0
REIT restructuring 0 0 (469) 0
-------- ------- -------- -------
17,602 9,384 19,260 8,000
-------- ------- -------- -------
Interest expense 4,054 65 7,715 129
Minority interests:
HP/Compton, Inc. - Crystal Park Hotel and Casino 0 41 0 63
-------- ------- -------- -------
Income before income tax expense 13,548 9,278 11,545 7,808
Income tax expense 5,419 3,675 4,650 3,100
-------- ------- -------- -------
Net income $ 8,129 $ 5,603 $ 6,895 $ 4,708
======== ======= ======== =======
Dividend requirements on convertible preferred stock $ 0 $ 481 $ 0 $ 962
-------- ------- -------- -------
Net income available to common shareholders $ 8,129 $ 5,122 $ 6,895 $ 3,746
======== ======= ======== =======
Per common share:
Net income - basic $ 0.31 $ 0.28 $ 0.26 $ 0.20
Net income - diluted $ 0.31 $ 0.27 $ 0.26 $ 0.20
Number of shares - basic 26,285 18,462 26,281 18,366
Number of shares - diluted 26,428 20,754 26,771 20,657
</TABLE>
32
<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: August 12, 1998
-----------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ G. Michael Finnigan Dated: August 12, 1998
-----------------------------------
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: August 12, 1998
-----------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ G. Michael Finnigan Dated: August 12, 1998
-----------------------------------
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
33
<PAGE>
Hollywood Park, Inc.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
10.46 Addendum to the Lease Agreement dated December 19, 1997, by and between Crystal Park
Hotel and Casino Development Company, LLC and California Casino Management, Inc., dated
June 30, 1998.
10.47 Option Agreement, by and among The Webster Family Limited Partnership and The Diuguid
Family Limited Partnership, and Pinnacle Gaming Development Corp., dated June 2, 1998.
10.48 Memorandum of Option Agreement, by and between The Webster Family Limited Partnership and
The Diuguid Family Limited Partnership, and Pinnacle Gaming Development Corp., dated June
2, 1998.
10.49 Amended and Restated Options Agreement, by and among Daniel Webster, Marsha S. Webster,
William G. Diuguid, Sara T. Diuguid, J.R. Showers, III and Carol A. Showers, and Pinnacle
Gaming Development Corp., dated June 2, 1998.
10.50 Memorandum of Amended and Restated Option Agreement, by and between Daniel Webster,
Marsha S. Webster, William G. Diuduid, Sara T. Diuguid, J.R. Showers, III, and Carol A.
Showers, and Pinnacle Gaming Development Corp., dated June 4, 1998.
10.51 Assignment of Option Agreement, by Daniel Webster and Marsha S. Webster, and Pinnacle
Gaming Development Corp., dated June 2, 1998.
10.52 Amendment No. 3 to Reducing Revolving Loan Agreement, among Hollywood Park, Inc., and the
Banks party thereto, Bank of Scotland, Bankers Trust Company and Societe Generale, as
Co-Agents, and Bank of America National Trust and Savings Association as Managing Agent,
dated March 27, 1998.
1
27.1 Financial Data Schedule
</TABLE>
<PAGE>
Hollywood Park, Inc.
Exhibit 10.46
To Form 10-Q, June 30, 1998
ADDENDUM
TO THE LEASE AGREEMENT
DATED DECEMBER 19. 1997
BY AND BETWEEN
CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC
AND
CALIFORNIA CASINO MANAGEMENT, INC.
Be it known that Crystal Park Hotel and Casino Development Company, LLC
(hereafter referred to as LANDLORD) and California Casino Management, Inc.
(hereafter referred to as TENANT) do hereby agree to amend the above stated
lease (hereafter referred to as original lease) as follows:
LANDLORD and TENANT (hereafter jointly referred to as PARTIES) do agree that the
increase in monthly lease payments by TENANT to LANDLORD, which was scheduled to
commence on July 1, 1998, shall not take place. Instead, PARTIES agree that for
the period commencing on July 1, 1998 and ending on February 1, 1999 the monthly
lease payment due LANDLORD by TENANT as rent on the property addressed in the
original lease shall be $150,000 (one-hundred-fifty-thousand dollars) per month.
PARTIES agree that provided TENANT makes the above stated $150,000 (one-hundred-
fifty-thousand dollars) monthly lease payments as stated herein to LANDLORD that
LANDLORD will deem TENANT to be in full compliance with the lease between
PARTIES and not in default thereof.
All other terms of the original lease shall be deemed to be unmodified and in
full force.
By their signatures below, or those of their authorized agents, PARTIES agree to
be bound by the above.
Signed:
Crystal Park Hotel and Casino Development Company, LLC
LANDLORD,
By:
/s/ G. Michael Finnigan
- -------------------------------------
its
CFO
- -------------------------------------
Date: June 30, 1998
-------------
California Casino Management, Inc.
TENANT
By:
/s/ Leo Chu
- -------------------------------------
Its:
President
Date: June 29, 1998
-------------
<PAGE>
Hollywood Park, Inc.
Exhibit 10.47
To Form 10-Q, June 30, 1998
OPTION AGREEMENT
----------------
THIS OPTION AGREEMENT (this "AGREEMENT") is made as of June 2, 1998, by and
among THE WEBSTER FAMILY LIMITED PARTNERSHIP and THE DIUGUID FAMILY LIMITED
PARTNERSHIP (collectively, "LANDLORD"), and PINNACLE GAMING DEVELOPMENT CORP., a
Colorado corporation ("TENANT").
RECITALS
A. Landlord is the owner of that certain real property in Switzerland
County, Indiana, described as Parcel A on EXHIBIT A (the "PROPERTY").
---------
B. Tenant is an applicant for an Indiana Riverboat Owner's License to be
issued by the Indiana Gaming Commission for the County of Switzerland, Indiana.
C. In the event a Certificate of Suitability is awarded to Tenant, Tenant
shall lease the Property and utilize the same for the development of a riverboat
casino complex on the Property (the "PROJECT").
NOW, THEREFORE, it is agreed as follows:
1. OPTION. Landlord hereby grants to Tenant the exclusive and
------
irrevocable option (the "OPTION") to lease the Property, together with all
improvements now and hereafter located thereon.
2. OPTION PAYMENT. In consideration of this Option, Tenant has paid Two
--------------
Hundred Thousand Dollars ($200,000.00) to Landlord of even date hereof (the
"OPTION PAYMENT"). The Option Payment is nonrefundable.
3. OPTION PERIOD. The option to lease the Property granted by this
-------------
Agreement shall be exercised by Tenant prior to 5:00 p.m. eastern standard time
on the date which is ten (10) business days after the Tenant or its Affiliate
(as defined in the Lease) is granted a Certificate of Suitability from the
Indiana Gaming Commission (the "COMMISSION") to operate a riverboat casino on
the Ohio River from Switzerland County, Indiana (a "CERTIFICATE"), provided,
that Tenant's right to exercise the option to lease the Property granted by this
Agreement shall expire on December 31, 1999 (the "OPTION EXPIRATION DATE")
unless Tenant extends such date as herein provided. Tenant shall not be entitled
to exercise the Option unless Tenant or its Affiliate receives a Certificate.
Tenant shall be entitled to extend the Option Expiration Date for an additional
one (1) year to December 31, 2000 by written notice and payment of the sum of
Two Hundred Thousand Dollars
<PAGE>
($200,000.00) to Landlord on or before December 31, 1999 (the "OPTION EXTENSION
PAYMENT"). In the event the Option is exercised and the Lease (as hereinafter
defined) is executed, the Option Extension Payment shall be credited against the
Base Rent (as defined in the Lease) in accordance with the terms of the Lease.
4. EXERCISE OF OPTION. Tenant shall exercise the Option within ten (10)
-------------------
business days after the Tenant or its Affiliate receives a Certificate by
delivery of a notice to Landlord indicating Tenant's decision to exercise the
Option (the "NOTICE OF EXERCISE OF OPTION"). Within thirty (30) days after the
Notice of Exercise of Option is delivered, Landlord and Tenant or any entity
controlled or designated by Tenant shall each execute a lease agreement (the
"LEASE") in substantially the form of EXHIBIT B attached hereto.
---------
Notwithstanding the foregoing, Tenant shall not exercise the Option unless
Tenant shall concurrently exercise its option under that certain Option
Agreement dated June 2, 1998 between Tenant and Daniel Webster, Marsha S.
Webster, William G. Diuguid, Sara T. Diuguid, J.R. Showers, III and Carol A.
Showers (the "OTHER OPTION").
5. REMOVAL OF STRUCTURES. Tenant shall advise Landlord within ten (10)
----------------------
days prior to the exercise of the Option whether or not Tenant intends to
utilize the structures located on the Property. In the event Tenant intends not
to utilize such structures, Landlord shall have the right to remove such
structures from the Property at its sole cost and expense.
6. ACQUISITION OF LICENSE. Tenant shall pay to Landlord the sum of Four
-----------------------
Hundred Thousand Dollars ($400,000.00) upon the occurrence of any of the
following:
a. Tenant or its Affiliate acquires an existing License (as
hereinafter defined) or an interest in an existing License; or
b. Casino Magic, Inc. is acquired by Hollywood Park, Inc.
("HOLLYWOOD") and Hollywood or its Affiliate is awarded a Certificate of
Suitability to operate a riverboat casino on the Ohio River from a county
other than Switzerland County, Indiana by the Commission.
The term "LICENSE" shall mean an owner's License as defined in I.C.
(S) 4-33-2-15.
7. CERTIFICATE PAYMENT. Within three (3) business days after Tenant or
--------------------
its Affiliate is awarded a Certificate by the Commission, Tenant shall make a
nonrefundable payment in the amount of Two Hundred Thousand Dollars
($200,000.00) to Landlord. One Hundred Thousand Dollars ($100,000.00) of such
payment shall be credited against the Base Rent in accordance with the terms of
the Lease.
8. LICENSE PAYMENT. Within three (3) business days after Tenant or its
----------------
Affiliate is awarded a License by the Commission, Tenant shall make a
nonrefundable payment in the amount of Two Hundred Thousand Dollars
($200,000.00) to Landlord. One Hundred Thousand Dollars
<PAGE>
($100,000.00) of such payment shall be credited against the Base Rent in
accordance with the terms of the Lease.
9. INTERIM PAYMENT. Within three (3) business days after the earlier of
----------------
(a) the first (1st) anniversary of the date a Certificate is awarded to Tenant
or its Affiliate, or (b) the date a License is awarded to Tenant or its
Affiliate, Tenant shall make a nonrefundable payment in the amount of Two
Hundred Fifty Thousand Dollars ($250,000.00) to Landlord. One Hundred Twenty-
Five Thousand Dollars ($125,000.00) of such payment shall be credited against
the Base Rent in accordance with the terms of the Lease. Tenant acknowledges
that in the event Tenant or its Affiliate is awarded a License on or before the
first (1st) anniversary of the date a Certificate is awarded to Tenant or its
Affiliate, than Tenant shall be obligated to make payments to Landlord under
Paragraphs 7 and 8 of this Agreement in the total amount of Four Hundred Fifty
Thousand Dollars ($450,000.00) within three (3) business days of such event.
10. PERMIT APPLICATION. Tenant shall, at its sole cost and expense,
-------------------
diligently and actively pursue the processing of the existing permit application
(i.e., Permit Application No. 199500322) that is on file with the U.S. Army Corp
of Engineers. Landlord shall cooperate with Tenant and provide Tenant and/or any
agent, representative or independent contractor of Tenant, complete access to
the Property to conduct any and all environmental, archeological and engineering
tests or studies with respect to the Property.
11. TERMINATION. Tenant shall have the right to terminate this Agreement
------------
at any time prior to being awarded a Certificate. Landlord shall have the right
to terminate this Agreement and the Tenant's right to exercise the Option in the
event the Commission awards a fifth (5th) Certificate of Suitability to operate
a riverboat casino on the Ohio River to any entity other than Tenant or its
Affiliate.
12. LANDLORD'S COOPERATION. Landlord shall cooperate fully with Tenant
-----------------------
and shall execute on behalf of Tenant any documents necessary for Tenant to
process the Property through local, city, state and county zoning and
development processes. Prior to Tenant's exercise of the Option, Landlord shall
not be obligated to cooperate with Tenant or execute any documents to process
the Property through any zoning or development processes if such processes would
result in an outcome that would be binding on the Property or Landlord if Tenant
shall fail to lease the Property. Landlord acknowledges that the transaction
contemplated in this Agreement is subject to regulation by governmental
authorities having jurisdiction over gaming in Switzerland County, Indiana, and
elsewhere (collectively referred to as "GAMING AUTHORITIES"). Landlord also
acknowledges that Tenant conducts business pursuant to privileged licenses
issued by Gaming Authorities. Accordingly, Landlord will fully cooperate with
Tenant or any Gaming Authorities concerning any inquiries, investigations and
requests for information made by any Gaming Authorities in connection with the
gaming operations of Tenant or any entity or individual related to or affiliated
with Tenant.
3
<PAGE>
13. INFORMATION AND ACCESS. Within two (2) weeks after the date hereof,
-----------------------
Landlord shall deliver to Tenant copies of all surveys, permits, approvals,
studies, analyses, maps, utility plans, engineering reports, soils reports,
title reports, commitments and policies, and similar written instruments or
documents relating to the Property in Landlord's possession or control not
previously provided to Tenant (the "PROJECT DOCUMENTS"). Landlord shall
immediately deliver to Tenant copies of all Project Documents that Landlord
receives after the date hereof. Landlord shall give to Tenant and Tenant's
counsel, accountants, and other representatives, full access during normal
business hours throughout the Option Period to the Property and all of
Landlord's books, contracts, commitments and records with respect to the
Property and shall furnish Tenant during such period with all such information
concerning its affairs as Tenant may request. Tenant may conduct such tests upon
the Property as Tenant deems necessary, including, but not limited to,
engineering and environmental tests. Tenant shall indemnify Landlord from any
damages, costs or expenses arising out of Tenant's inspection, use or occupancy
of the Property. Copies of any Project Documents not in Landlord's possession or
control but which subsequently come into Landlord's possession or control shall
be delivered immediately to Tenant.
14. REPRESENTATIONS AND WARRANTIES. Landlord represents and warrants to
-------------------------------
Tenant as follows:
a. This Agreement constitutes legal, valid and binding obligations
of Landlord, enforceable in accordance with its respective terms.
b. Neither the execution, delivery or performance of this Agreement
will breach any statute, law, ordinance, rule or regulation of any
governmental authority or conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree
or ruling of any court or governmental authority to which Landlord or the
Property is subject or any agreement or instrument to which it is party or
by which it or the Property is bound, or constitute a default thereunder.
c. No consent, approval or authorization of any governmental
authority (except for the Gaming Authorities) or private party is required
in connection with the execution, delivery and performance of this
Agreement by Landlord.
d. Landlord has good and marketable title to the Property. There are
no monetary liens or encumbrances affecting the Property and Landlord will
not cause or permit any such lien or encumbrance to be placed against the
Property which has priority over the Memorandum of Option described in
Section 29 below.
15. CONFIDENTIALITY. Landlord and Tenant agree to treat confidentially
----------------
the existence and terms of this Agreement and any information, analyses,
compilations, studies or other documents or records (collectively, the
"CONFIDENTIAL MATERIAL") which Tenant or any of Tenant's directors, officers,
employees, representatives, advisors or agents furnish to Landlord or Landlord's
4
<PAGE>
employees, representatives, advisors or agents, and vice-versa (the
"RECIPIENTS"). Landlord and Tenant agree that the Confidential Material will be
kept confidential by Landlord and Tenant and the other Recipients and that any
such information will be disclosed only to Recipients who need to know such
information and any of the Gaming Authorities, or any other State Agency that
requests or requires such information and to no other persons (it being
understood that (a) such Recipients shall be information by Landlord or Tenant,
as the case may be, of the confidential nature of such information, shall be
directed by Landlord to treat such information confidentially and shall agree to
abide by the provisions of this Section, and (b) in any event, Landlord or
Tenant, as the case may be, shall be responsible for any breach of this Section
by any Recipient). The provisions of this Section shall survive the termination
or expiration of this Agreement.
16. BROKERAGE FEES. Each of the parties hereto represents to the other
---------------
that it has not entered into any agreement for the payment of any fees,
compensation or expenses to any person, firm or corporation in connection with
the transactions provided for herein, and each agrees to hold and save the other
harmless from any such fees, compensation or expenses which may be suffered by
reason of any such agreement or purported agreement by the indemnifying party.
17. NOTICES. Any and all notices and demands by any party hereto to any
--------
other party required or desired to be given hereunder shall be in writing and
shall be validly given or made only if deposited in the United States mail,
certified or registered, postage prepaid, return receipt requested, or if made
by Federal Express or other similar delivery service keeping records of
deliveries and attempted deliveries or if sent by telecopy. Service by United
States Mail or by Federal Express or other similar delivery service shall be
conclusively deemed made on the first business day delivery is attempted or upon
receipt, whichever is sooner. Service by telecopy shall be deemed made upon the
next business day following confirmed transmission. The parties may change their
address for the purpose of receiving notices or demands as herein provided by a
written notice given in the manner aforesaid to the others, which notice of
change of address shall not become effective, however, until the actual receipt
thereof by the others.
18. GOVERNING LAW. This Agreement shall be deemed to be made under the
--------------
laws of the State of Indiana and for all purposes shall be governed by and
construed in accordance with the laws thereof.
19. BINDING EFFECT. Subject to any limitation on assignment set forth
---------------
in this Agreement, this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and assigns. It is
specifically agreed that Tenant may not assign, transfer or convey any or all of
its rights and obligations hereunder, by operation of law or otherwise, to any
person or entity other than an Affiliate of Tenant without the Landlord's prior
written consent. Landlord may not assign or transfer its rights and obligations
under this Agreement, by operation of law or otherwise, without the prior
consent of Tenant, which consent may be withheld in Tenant's sole discretion.
Notwithstanding the foregoing, Tenant shall have the right to assign or transfer
any or all of its rights and obligations under this Agreement to an Affiliate of
Tenant. No consent shall be required with respect to an acquisition of the
interests in Tenant of Hilton Hotel Corporation by
5
<PAGE>
Boomtown Hoosier, Inc. or an Affiliate thereof or a subsequent transfer of such
beneficial interest to Horseshoe Gaming, Inc. or its Affiliate. Notwithstanding
the foregoing, Landlord shall have the right to assign or transfer any or all of
its rights and obligations under this Agreement to any blood relative(s) of
Landlord or any corporation, trust, limited liability company or other entity
which is controlled by or created for the benefit of Landlord or Landlord's
blood relative without Tenant's consent or approval. Except as specifically
provided above in this Section, this Agreement is not intended to, and shall
not, create any rights in any person or entity whatsoever except Tenant and
Landlord.
20. SEVERABILITY. If any term, provision, covenant or condition of this
-------------
Agreement or any application thereof should be held by a court of competent
jurisdiction to be invalid, void or unenforceable by the laws applicable
thereto, such provision shall be deemed severable from and shall in no way
affect the enforceability and validity of the remaining provisions of this
Agreement, all provisions, covenants, and conditions of this Agreement, and all
applications thereof, not held invalid, void or unenforceable, shall continue in
full force and effect and shall in no way be affected, impaired or invalidated
thereby.
21. INTERPRETATION. This Agreement is an agreement between financially
---------------
sophisticated and knowledgeable parties and is entered into by the parties in
reliance upon the economic and legal bargains contained herein and shall be
interpreted and construed in a fair and impartial manner without regard to such
factors as the party who prepared (or caused the preparation of) this instrument
or the relative bargaining power of the parties.
22. CALCULATION OF TIME PERIODS. If any date herein set forth for the
----------------------------
performance of any obligation by Landlord or Tenant or for the delivery of any
instrument or notice herein provided should be a Saturday, Sunday, or legal
holiday, such performance or delivery may be made on the next business day
following such Saturday, Sunday, or legal holiday. As used herein, the term
"legal holiday" means any state or federal holiday for which financial
institutions or post offices are closed in the local jurisdiction in which the
Property is located, for observance thereof, and the term "business day" means
any day which is not a Saturday, Sunday, or legal holiday.
23. EXHIBITS. All exhibits referred to herein and attached hereto are
---------
hereby made a part hereof and are incorporated herein by this reference.
24. ENTIRE AGREEMENT. This Agreement contains the entire agreement
-----------------
between the parties relating to the transactions contemplated hereby, and all
prior or contemporaneous agreements, understandings, representations and
statements, oral or written, are merged herein. No modification, waiver,
amendment, discharge or change of this Agreement shall be valid unless the same
is in writing and signed by the party against which the enforcement of such
modification, waiver, amendment, discharge or change is or may be sought.
25. ATTORNEYS' FEES. In the event any action or proceeding is commenced
----------------
by any party against any other in connection herewith, including but not limited
to any proceeding in bankruptcy,
6
<PAGE>
the prevailing party shall be entitled to recover from the other party all costs
and expenses, including, without limitation, reasonable attorneys' fees and
costs incurred in such action or proceeding, including, but not limited to, any
proceeding in bankruptcy, in addition to any other relief awarded by the court.
26. TIME OF ESSENCE. Time is of the essence of this Agreement and all of
----------------
the terms, provisions, covenants and conditions hereof.
27. CAPTIONS AND PRONOUNS. The captions appearing at the commencement of
----------------------
the sections hereof are descriptive only and for convenience in reference to
this Agreement and in no way whatsoever define, limit, amplify or describe the
scope or intent of this Agreement, nor in any way be used in interpreting the
terms of this Agreement or affect this Agreement. Personal pronouns used herein
shall be construed as though of the gender and number required by the context,
and the singular shall include the plural and the plural the singular as may be
required by the context.
28. FURTHER ASSURANCES. In addition to the acts and deeds recited herein
-------------------
and contemplated to be performed, executed and/or delivered by Landlord,
Landlord shall, at Tenant's cost and expense, perform, execute and/or deliver or
cause to be performed, executed and/or delivered any and all further acts, deeds
and assurances as may, from time to time, be reasonably requested by Tenant to
consummate the transactions contemplated in this Agreement and for the better
assuring to Tenant all of its rights hereunder.
29. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same Agreement. The
parties contemplate that they might be executing counterparts of this Agreement
by facsimile and agree and intend that a signature by facsimile machine shall
bind each party so signing with the same effect as though the signature were an
original signature.
30. MEMORANDUM OF OPTION. Concurrently with execution of this Agreement
---------------------
the parties shall cause to be recorded in the real property records where the
Property is located a memorandum of the Option in form of EXHIBIT C attached
---------
hereto.
31. REQUIRED LANDLORD LICENSES. Landlord acknowledges that the Commission
--------------------------
may, as part of the process for determining whether to issue a Certificate or
License to Tenant or to otherwise act on Tenant's application for a License make
findings or adopt a resolution establishing or requiring the completion of
conditions concerning or affecting the Property or ownership thereof.
Accordingly, Landlord agrees to use best efforts to timely complete and submit
to the Commission or its delegate any required disclosure forms or waivers of
confidentiality restrictions which the Commission may require Landlord to submit
under applicable laws to enable the Commission to complete its review of the
Tenant's application. In the event the Commission conditions the issuance of a
License to Tenant on Landlord's divestment of the Property and the Commission is
7
<PAGE>
able to require such divesture under applicable laws as a condition to issuing a
License to Tenant, Landlord shall, within a reasonable time, transfer the
Property to a transferee selected by Landlord and acceptable to the Commission
subject to the terms of this Agreement and the Lease.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
LANDLORD SIGNATURE PAGE
LANDLORD:
--------
THE WEBSTER FAMILY LIMITED PARTNERSHIP,
a(n) ___________ family limited partnership
By: /s/ Daniel Webster
------------------------------------
Daniel Webster, General Partner
By: /s/ Marsha Webster
------------------------------------
Marsha Webster, General Partner
THE DIUGUID FAMILY LIMITED PARTNERSHIP,
a(n) ____________ family limited partnership
By: /s/ Wm. G. Diuguid
------------------------------------
William G. Diuguid, General Partner
By: /s/ Sarah T. Giuguid
------------------------------------
Sara T. Diuguid, General Partner
8
<PAGE>
TENANT SIGNATURE PAGE
TENANT:
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By: /s/ Robert F. List
----------------------------------
Robert F. List, Treasurer
EXHIBIT B
To Option Agreement
LEASE
-----
(PARCEL A)
THIS LEASE is entered into this ___ day of _________, 199_, by and
between THE WEBSTER FAMILY LIMITED PARTNERSHIP, a(n) ___________ family limited
partnership and THE DIUGUID FAMILY LIMITED PARTNERSHIP, a(n) _____________
family limited partnership (collectively, the "LANDLORD"), and PINNACLE GAMING
DEVELOPMENT CORP., a Colorado corporation ("TENANT").
RECITALS
--------
A. Landlord is the owner of certain unimproved real estate located
in Switzerland County, Indiana, as more particularly described in EXHIBIT A
attached hereto and made a part hereof (the "REAL ESTATE");
B. Tenant desires to lease the Real Estate from Landlord for the
purpose of developing and operating thereon riverboat gaming and other
facilities;
C. Landlord is willing to lease the Real Estate to Tenant for such
purpose; and
D. Landlord and Tenant desire to set forth their agreement with
respect to the leasing of the Real Estate and certain other matters affecting
the Real Estate and such improvements;
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, Landlord and Tenant agree as follows:
9
<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
The following terms, when used in this Lease with initial capital
letters, have the following respective meanings:
"ADDITIONAL RENT" has the meaning set forth in Section 4.02.
"ADJUSTMENT DATE" means the first day of each Extension Term.
"AFFILIATE" means any person or entity directly or indirectly
controlling, controlled by, or under common control with Tenant; and when used
with reference to an individual, includes any member of such person's immediate
family. For purposes of this definition, "control" when used with respect to any
specified person or entity means the power to direct the management and policies
of such person or entity, directly or indirectly, whether through the ownership
or control of fifty percent (50%) or more of the shares or other equity or
beneficial interest or power to vote the same, or by the partnership or trust
agreement or other instrument or contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"BASE RENT" has the meaning set forth in Section 4.01.
"CERTIFICATE" shall mean a Certificate of Suitability issued by the
Indiana Gaming Commission to operate a riverboat casino on the Ohio River from
Switzerland County, Indiana.
"CLOSING" has the meaning set forth in Section 7.01.
"COMMENCEMENT DATE" shall mean the earlier of: (a) the date two (2)
years after the Indiana Gaming Commission grants a Certificate to Tenant or its
Affiliate; or (b) the date on which the Improvements are placed in operation as
a riverboat gaming facility by Tenant or its Affiliate and is open to the public
for gaming.
"CONDEMNATION PROCEEDS" means the total aggregate award, including any
award for Landlord's fee simple title, in the event of a total taking or
Constructive Total Taking of the Leased Premises and Improvements.
"CONSTRUCTIVE TOTAL TAKING" means a taking of such scope that, in
Tenant's reasonable discretion, the remaining portion of the Leased Premises
and Improvements is insufficient to permit the restoration of the Improvements
so as to be suitable for the use permitted by Section 5.01.
"ENVIRONMENTAL COMPLAINT" has the meaning set forth in Section 5.04.
<PAGE>
"ENVIRONMENTAL LAWS" means federal, state and local laws, statutes,
ordinances, rules or regulations, effective on or after the date of execution of
this Lease, relating to pollution or protection of the environment, including
laws or regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into the environment (including, without
limitation, ambient air, surface water, ground water or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances or imposing standards of
conduct or liability concerning underground storage tanks. Such laws shall
include, but not be limited to, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. (S) 9601, et seq.; the
-- ---
Resource Conservation and Recovery Act, as amended, 42 U.S.C. (S) 3251 et seq.;
-- ---
the Clean Air Act, as amended, 42 U.S.C. (S) 1857, et seq.; the Federal Water
-- ---
Pollution Control Act, as amended, 33 U.S.C. (S) 466 et seq.; and Indiana Code,
-- ---
Title 13 - Environment, as amended.
"EVENT OF DEFAULT" has the meaning set forth in Section 18.01.
"EXECUTION DATE" shall mean the date this Lease is executed by
Landlord and Tenant.
"EXTENSION TERM" has the meaning set forth in Section 3.02.
"GROSS GAMING WIN" shall mean the "adjusted gross receipts" as defined
in IC (S) 4-33-2-2 and reported to the Indiana Gaming Commission.
"HAZARDOUS DISCHARGE" has the meaning set forth in Section 5.04.
"HAZARDOUS SUBSTANCES" means (a) crude oil or any fraction thereof
that is liquid at standard conditions of temperature and pressure, (b) any
wastes, materials or substances that are radioactive, (c) any hazardous, toxic
or special wastes, materials, substances, constituents, pollutants or
contaminants (as defined by federal, state or local laws, statutes, ordinances,
rules or regulations,) or (d) any other substances subject to federal, state or
local regulation as potentially injurious to public health or welfare or the
environment.
"IMPROVEMENTS" means all buildings and related improvements, including
(without limitation) landscaping, driveways, walkways, surface parking lots,
golf courses, docking and mooring facilities and marina facilities, that are
hereafter located or constructed by Tenant on the Real Estate and/or in the Ohio
River in the vicinity of the Real Estate.
"INDEX" means the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W) Specified for All Items - United States (1982-84=100)
published by the Bureau of Labor Statistics, United States Department of Labor;
provided, however, that if such Index ceases to be published or is converted to
a different standard or is otherwise revised, the Index used for determination
of the Percentage Change shall be adjusted by any then applicable conversion
factor
11
<PAGE>
or, failing that, by using published price or cost indices or published
data which are as comparable as possible to the Index prior to its termination
or revision.
"INDIANA GAMING COMMISSION" means the commission established pursuant
to the Indiana Riverboat Gambling Law, as amended, IC 4-33, et seq.
-- ---
"LEASED PREMISES" has the meaning set forth in Section 2.01.
"LICENSE" shall mean an owner's license as defined in I.C. (S) 4-33-2-
15.
"LICENSE DATE" shall mean the date on which the Indiana Gaming
Commission grants a License to Tenant.
"MORTGAGE" or "MORTGAGE LOAN" means so-called permanent loans and
interim development or construction loans relating to and secured by a mortgage
lien on Tenant's leasehold interest in the Leased Premises (or any part thereof)
and/or the Improvements (or any part thereof) permitted under this Lease; and
also shall refer to and include loan agreements, assignments, security
agreements, financing statements and other documentation evidencing or securing
such loans. Except with the prior written consent of Landlord, no loan or
mortgage securing a loan by an Affiliate of Tenant shall be deemed to be a
Mortgage Loan or Mortgage for purposes of this Lease.
"MORTGAGEE" means the mortgagee or any assignee of the mortgagee under
any Mortgage Loan.
"ORIGINAL TERM" has the meaning set forth in Section 3.01.
"OTHER LEASE" shall mean that certain Lease dated
_____________________, between Tenant and Daniel Webster, Marsha S. Webster,
William Gex Diuguid, Sara T. Diuguid, J.P. Showers III, and Carol A. Showers,
collectively as Landlord.
"OTHER LEASED PREMISES" shall mean the leased premises set forth in
the Other Lease.
"PERCENTAGE CHANGE" means the percentage determined by multiplying one
hundred percent (100%) by the fraction, the numerator of which fraction is the
mostly recently published Index prior to the Adjustment Date for which the
adjustment to Base Rent is being determined and the denominator of which
fraction is the most recently published Index prior to the Commencement Date.
"PURCHASE OPTION" has the meaning set forth in Section 7.01
"PURCHASE PRICE" has the meaning set forth in Section 7.02.
12
<PAGE>
"REAL ESTATE TAXES" means and includes all ad valorem real property
taxes and assessments levied upon or with respect to (or, if any such levy is
upon or with respect to a parcel of real estate and improvements thereon of
which the Leased Premises is a part, then the portion thereof properly allocable
and relating to) the Leased Premises and Improvements (or any part thereof) and
all taxes, levies and charges which may be levied or imposed by any governmental
authority in replacement of, in lieu of, or in addition to ad valorem real
property taxes, in whole or in part, including but not limited to a state or
local option tax designed for property tax relief purposes, or a license or
franchise fee measured by rents received from the Leased Premises and
Improvements, or otherwise measured or based upon Tenant's or Landlord's
interest in the Leased Premises and Improvements.
"RENT" has the meaning set forth in Section 4.08.
"TAXES" means all Real Estate Taxes, personal property taxes, special
and general assessments, water and sewer service charges, licenses and permit
fees, and other governmental impositions and charges of every kind and nature
whatsoever, extraordinary as well as ordinary, which may be assessed, levied, or
become due and payable with respect to, or become a lien on, the Leased Premises
or Improvements (or any part thereof).
"TERM" means the Original Term, together with all Extension Terms for
which Tenant has properly exercised an option to extend the term of this Lease
pursuant to Section 3.02.
"UNAVOIDABLE DELAY" means and includes any delay caused by reason of
strikes, lock-outs, labor troubles, inability to procure materials, failure of
power, fire or other casualty, "acts of God", restrictive governmental
authority, riots, insurrection, war, the act, or failure to act by the Indiana
Gaming Commission, or the act, failure to act, or default of the other party, or
other reason beyond the subject party's reasonable control and not avoidable by
reasonable diligence.
"UTILITY EXPENSES" means and includes all charges relating to the
providing of water, steam, heat, cooling, gas, electricity, light, sewer,
telephone, television, telecommunications, security, fire protection, trash
collection and other similar services furnished to all or any part of the Leased
Premises and Improvements during the Term.
ARTICLE II
----------
LEASED PREMISES
---------------
SECTION 2.01. LEASED PREMISES. Landlord hereby leases to Tenant and
------------ ---------------
Tenant hereby leases from Landlord, upon and subject to the terms, conditions,
covenants and provisions hereof, the Real Estate and all rights, interests, and
easements in any way now or hereafter appurtenant thereto, (the Real Estate and
such appurtenant rights, interests and easements are hereafter referred to
collectively as the "LEASED PREMISES").
13
<PAGE>
SECTION 2.02. LEASEHOLD TITLE. The leasehold estate created by this
------------ ---------------
Lease and Tenant's rights hereunder are subject to the following:
(a) The lien of all Real Estate Taxes, all general and special
assessments and all other governmental dues, charges and impositions not
delinquent;
(b) All easements, restrictions, agreements, covenants and other
matters of record;
(c) All rights of the public, the State of Indiana and any political
subdivision of the State of Indiana (including without limitation counties and
municipalities) in and to that part of the Real Estate (if any) taken or used
for highways, streets, rights-of-way and related purposes;
(d) All applicable zoning, building and land use and other
governmental restrictions, laws, ordinances, rules and regulations;
(e) All matters that would be discovered or disclosed by an accurate
inspection and Indiana Land Title Association minimum standard detail survey of
the Real Estate (including gaps (if any)); and
(f) Flowage easements for the Ohio River.
SECTION 2.03. COVENANT OF QUIET ENJOYMENT. Landlord covenants and
------------ ---------------------------
agrees that Tenant, upon paying the Rent to be paid by it as herein provided and
upon keeping, observing and performing all other covenants and agreements to be
kept, observed or performed by it hereunder, shall at all times during the Term
have the peaceable and quiet enjoyment and possession of the Leased Premises,
without hindrance from Landlord or anyone claiming under Landlord, subject to
matters to which this Lease is subject as provided in the foregoing Section
2.02.
SECTION 2.04. AS IS CONDITION. Tenant's acceptance of the Leased
------------ ---------------
Premises is AS IS, WHERE IS and without warranty of any kind as to condition,
fitness for Tenant's purposes or otherwise.
ARTICLE III
-----------
14
<PAGE>
TERM
----
SECTION 3.01. TERM. The original term of this Lease (the "ORIGINAL
------------ ----
TERM") shall commence on the ninetieth (90th) day following the Execution Date
and, unless sooner terminated as provided in this Lease, shall end at 11:59 p.m.
Eastern Standard Time on the day before the fifth (5th) anniversary of the
License Date.
SECTION 3.02. EXTENSION OF TERM. The term of this Lease shall be
------------ -----------------
automatically extended for nine (9) consecutive periods of five (5) years each
(each such period being referred to herein as an "EXTENSION TERM") upon the
following conditions:
(a) Tenant shall be in full compliance with all terms, covenants and
conditions of this Lease on the last day of the Original Term or the Extension
Term then expiring (as applicable);
(b) Tenant shall have obtained from the Indiana Gaming Commission a
renewal of its License prior to the last day of the Original Term or the
Extension Term then expiring (as applicable); and
(c) Tenant shall not have given the Landlord notice of termination of
this Lease prior to the last day of the Original Term or the Extension Term then
expiring (as applicable).
SECTION 3.03. HOLDING OVER. In the event Tenant shall remain in
------------ ------------
possession of the Leased Premises with the consent of Landlord after the
expiration of the Term and without any extension thereof, Tenant shall be deemed
to be occupying the Leased Premises as a tenant from month-to-month at a monthly
rental equal to one hundred fifteen percent (115%) of one-twelfth of the Base
Rent payable by Tenant for the last twelve months of the Term and subject to all
other covenants, terms and conditions of this Lease insofar as the same shall be
applicable to a month-to-month tenancy. Such month-to-month tenancy shall be
terminable by either party upon thirty (30) days written notice to the other
given as of and prior to the end of any calendar month.
ARTICLE IV
----------
RENT
----
SECTION 4.01. BASE RENT. Commencing on the Commencement Date and
------------ ---------
throughout the Term thereafter, Tenant shall pay to Landlord annual rent in an
amount equal to One Million Dollars ($1,000,000) (the "BASE RENT").
15
<PAGE>
If the Term is extended pursuant to Section 3.02, the Base Rent shall
be adjusted on the Adjustment Date for each Extension Term by multiplying the
Base Rent by the Percentage Change in the Index; provided, however, in no event
shall the Base Rent for any such Extension Term be less than One Million Dollars
($1,000,000).
SECTION 4.02. PAYMENTS OF BASE RENT. The applicable Base Rent
------------ ---------------------
determined pursuant to Section 4.01 shall be payable, in arrears, in monthly
installments, commencing on the Commencement Date and continuing on the
fifteenth (15th) day of each calendar month thereafter during the Term. If the
Commencement Date is a day other than the first day of a calendar month, the
first monthly installment of the Base Rent shall be prorated on a daily basis
using for purposes of such proration the number of days which would have been in
such first monthly installment period if the Commencement Date had been the
first day of the calendar month. The monthly installment payment to Landlord on
account of the Base Rent shall be equal to one twelfth (1/12) of the Base Rent
for such calendar year or partial calendar year.
SECTION 4.03. ADDITIONAL RENT. Commencing on the Commencement Date
------------ ---------------
and continuing for each succeeding calendar year or partial calendar year during
the term of this Lease, Tenant shall pay to Landlord, in addition to the Base
Rent, an annual amount equal to the Gross Gaming Win in excess of One Hundred
Million Dollars ($100,000,000) multiplied by one and one-half percent (1 1/2%)
(the "ADDITIONAL RENT").
SECTION 4.04. PAYMENTS OF ADDITIONAL RENT. On or before the
------------ ---------------------------
fifteenth (15th) day of each month after the month in which the Commencement
Date occurs during the Term, Tenant shall (a) deliver to Landlord a detailed
statement setting forth the calculation of Gross Gaming Win as filed with the
Indiana Gaming Commission and the installments of Additional Rent for the
immediately preceding month and (b) make a corresponding monthly installment
payment to Landlord of Additional Rent. On or before March 31 of each calendar
year or partial calendar year after the calendar year or partial calendar year
in which the Commencement Date occurs during the Term, Tenant shall (a) deliver
to Landlord a detailed annual statement setting forth the calculations of Gross
Gaming Win as filed with the Indiana Gaming Commission and the amount Additional
Rent for the immediately preceding calendar year or partial calendar year, and
(b) pay a final installment Additional Rent in an amount equal to the
difference, if any, between the Additional Rent payable to Landlord for such
calendar year or partial calendar year, as computed and stated in the annual
statement, and the sum of the monthly installments Additional Rent paid to
Landlord for such calendar year or partial calendar year. Notwithstanding the
foregoing, in the event the sum of the monthly installments of Additional Rent
paid to Landlord for such calendar year or partial calendar year exceed the
Additional Rent payable to Landlord for such calendar year or partial calendar
year, as computed and stated in the annual statement, than Tenant shall receive
a credit in an amount equal to the difference of such sums for the next monthly
payments due and payable.
SECTION 4.05. CREDIT FOR CERTIFICATE PAYMENT. Landlord shall credit
------------ ------------------------------
the sum of One Hundred Thousand Dollars ($100,000), fifty percent (50%) of the
nonrefundable payment paid by Tenant to Landlord upon the award the Certificate
to Tenant or its Affiliate pursuant to that
16
<PAGE>
certain Option to Lease Agreement between Tenant and Landlord pursuant to which
this Lease is executed, against the first installments of Base Rent due under
this Lease.
SECTION 4.06. CREDIT FOR LICENSE PAYMENT. Landlord shall credit the
------------ --------------------------
sum of One Hundred Thousand Dollars ($100,000), fifty percent (50%) of the
nonrefundable payment paid by Tenant to Landlord upon the award the License to
Tenant or its Affiliate pursuant to that certain Option to Lease Agreement
between Tenant and Landlord pursuant to which this Lease is executed, against
the first installments of Base Rent due under this Lease.
SECTION 4.07. CREDIT FOR INTERIM PAYMENT. Landlord shall credit the
------------ --------------------------
sum of One Hundred Twenty-Five Thousand Dollars ($125,000), fifty percent (50%)
of the nonrefundable payment paid by Tenant to Landlord upon the earlier (i) the
first (1st) anniversary of the date the Certificate is awarded to Tenant or its
Affiliate or (ii) the date the License is awarded to Tenant or its Affiliate
pursuant to that certain Option to Lease Agreement between Tenant and Landlord,
pursuant to which this Lease is executed, against the first installments of Base
Rent due under this Lease.
SECTION 4.08. RENT DEFINED. The term "RENT" as used herein shall
------------ ------------
mean and include Base Rent, Additional Rent and all additional sums, charges or
amounts of whatever nature to be paid by Tenant to Landlord in accordance with
the provisions of this Lease, whether or not such sums, charges or amounts are
referred to as rent. All payments of Rent shall be made to Landlord at
Landlord's address for notice hereunder, or at such other place or to such other
person, firm or corporation as Landlord shall designate by notice to Tenant.
Rent shall be paid (i) without relief from valuation and appraisement laws, (ii)
without notice, demand, offset, deduction or counterclaim and (iii) with costs
of collection and reasonable attorneys' fees.
SECTION 4.09. RENT TO BE NET TO LANDLORD. It is the intention of the
------------ --------------------------
parties that the Rent payable hereunder shall be net to Landlord and that all
costs, expenses and obligations of every kind and nature whatsoever relating to
the Leased Premises and Improvements shall be paid by Tenant.
SECTION 4.10. INTEREST. Any Rent not paid within fifteen (15) days
------------ --------
after the same is due shall bear interest from the date payment is due until
paid in full at the rate of four percent (4%) per annum above the rate announced
or published as such from time to time by Bank One, Indianapolis, N.A., or any
successor thereof, as its "prime rate."
17
<PAGE>
ARTICLE V
---------
USE OF LEASED PREMISES
----------------------
SECTION 5.01. PERMITTED USES. Tenant shall initially use and occupy
------------ --------------
the Leased Premises for the purpose of constructing thereon the Improvements
described in Tenant's riverboat owner's license application filed with the
Indiana Gaming Commission. After the completion of the Improvements, Tenant
shall continually use and operate such Improvements for the purposes for which
such Improvements were designed and shall continually use and operate the Leased
Premises for uses reasonably required for, or complementary to, the use and
operation of such Improvements. Without limiting the generality of the
foregoing, the Leased Premises shall at all times during the Term be used as the
site where Tenant's riverboat(s) moor for purposes of embarking passengers for
and disembarking passengers from gambling excursions. Tenant shall cause the
gaming and other related facilities operated from the Leased Premises to be
operated in a first class manner and to be open for business to the public
during such hours and on such dates that are commercially reasonable and
customary in the riverboat gaming industry.
SECTION 5.02. COMPLIANCE WITH LAWS, INSURANCE POLICIES. During the
------------ ----------------------------------------
Term, Tenant, at its expense, shall observe and comply with all applicable
federal, state and local statutes, laws, ordinances, rules and regulations
(including, without limitation, the Americans with Disabilities Act and all
Environmental Laws), with all orders and requirements of all governmental
authorities, and with all orders, rules and regulations of the National Board of
Fire Underwriters, the Indiana Board of Fire Underwriters, or any other body or
bodies exercising similar functions, affecting the Leased Premises, or any part
thereof, or the construction of the Improvements or the use or manner of use of
the Leased Premises and Improvements. Tenant, at its expense, shall have the
right to contest by appropriate legal proceedings, the validity or application
of any statute, law, ordinance, rule, regulation, order or requirement of the
nature referred to in this Section 5.02. If compliance with any such statute,
law, ordinance, rule, regulation, order or requirement legally may be delayed
pending the prosecution of any such proceeding, Tenant may delay such compliance
until a final determination of such proceeding. Tenant shall take all actions,
and not fail to take any actions, required or reasonably necessary to obtain and
thereafter maintain a License that allows Tenant to own and operate a riverboat
casino on the Ohio River from Switzerland County, Indiana.
SECTION 5.03. NEGATIVE COVENANTS. Tenant shall not (a) commit or
------------ ------------------
permit any waste to the Leased Premises or the Improvements, (b) cause or permit
any nuisance (public or private) to occur or exist in or on the Leased Premises
or Improvements, or (c) permit the use of the Leased Premises or Improvements
for any lewd or lascivious purpose.
18
<PAGE>
SECTION 5.04. HAZARDOUS SUBSTANCES.
------------ --------------------
(a) Landlord makes no representations or warranties, express or
implied, concerning the presence or absence of (i) Hazardous Substances on,
under or about the Leased Premises or (ii) any contamination of the soil,
surface water or ground water on, under or about the Leased Premises by
Hazardous Substances. Tenant, at its expense and prior to the commencement
of any excavation or filling of the Leased Premises or the construction of
any Improvements on the Leased Premises, shall conduct such environmental
assessments and environmental testing and sampling as Tenant deems
necessary to identify the presence of any Hazardous Substances on, under or
about the Leased Premises or the presence of contamination of the soil,
surface water or ground water on, under or about the Leased Premises by
Hazardous Substances. If such environmental assessments, testing and/or
sampling disclose the presence of any Hazardous Substances on, under or
about the Leased Premises or contamination of the soil, surface water or
ground water on, under or about Leased Premises by Hazardous Substances,
Tenant, at its expense, shall remove or remediate such Hazardous Substances
or contamination to the extent required by, and in a manner that complies
with, all applicable Environmental Laws before proceeding with any
excavation or filling of the Leased Premises or the construction of any
Improvements thereon. If and to the extent requested by Landlord, Tenant
shall provide Landlord with copies of (i) all environmental assessments and
reports of any environmental testing and sampling with respect to the
Leased Premises, (ii) all written recommendations from environmental
consultants or engineers for the removal or remediation of any Hazardous
Substances on, under or about the Leased Premises or the remediation of any
contamination of the soil, surface water or ground water on, under or about
the Leased Premises by Hazardous Substances, and (iii) all documents filed
with or issued by any governmental authority relating to the foregoing.
(b) Tenant shall not place or install any underground storage
tanks on the Leased Premises. Tenant shall not permit any Hazardous
Substances to be placed, held or located on or at the Leased Premises,
other than Hazardous Substances of a nature and in amounts normally present
in or on, or used in connection with the operation of, commercial and
retail facilities of the type constructed on the Leased Premises. Tenant
shall not permit any Hazardous Substances to be disposed of or released
upon the Leased Premises. To the extent any Hazardous Substances permitted
to be placed, held, or located on or at the Leased Premises are regulated
by any Environmental Laws, Tenant shall place, hold, locate or dispose of
such Hazardous Substances in strict compliance with such applicable law.
(c) If Tenant has knowledge of or receives any notice of (i) the
release, spill, discharge or emission of any Hazardous Substance from the
Leased
19
<PAGE>
Premises into the environment (including, without limitation, ambient air,
surface water, groundwater or land (a "HAZARDOUS DISCHARGE") or (ii) any
inquiry, complaint, order, citation or notice with regard to the presence
of any Hazardous Substances on or under the Leased Premises or a Hazardous
Discharge from the Leased Premises (an "ENVIRONMENTAL COMPLAINT") from any
person or entity, including (without limitation) the United States
Environmental Protection Agency and the Indiana Department of Environmental
Management or any successor agency, Tenant shall give immediate notice
thereof to Landlord disclosing full details of the Hazardous Discharge or
Environmental Complaint, as applicable.
(d) Tenant shall indemnify and hold harmless Landlord, its
affiliated entities, and their respective officers, directors, agents and
employees from and against all damages, liability, losses, fines,
penalties, costs and expenses, including (but not limited to) court costs,
attorneys' fees and costs of removal or remediation of any Hazardous
Substances or any contamination of soil, surface water or ground water by
Hazardous Substances, arising out of, resulting from or in any way
connected with (i) any breach or default by Tenant in the observance or
performance of its covenants under the foregoing paragraphs (a) or (b),
(ii) any violation of any Environmental Laws pertaining to the Leased
Premises or Improvements or any activity thereon by Tenant or anyone else
(other than Landlord) during the Term, (iii) any Environmental Complaint,
whether meritorious or not, arising from any act or omission of Tenant or
anyone else (other than Landlord) during the Term or (iv) any Hazardous
Discharge occurring during the Term. Tenant's indemnification obligations
hereunder shall be in addition to any and all other obligations and
liabilities Tenant may have to Landlord at law or in equity, including,
without limitation, the obligation Tenant has to indemnify and hold
Landlord harmless under that certain Option to Lease Agreement between
Tenant and Landlord pursuant to which this Lease is executed. Tenant's
indemnification obligations hereunder shall survive the expiration or
earlier termination of the Term and any transfer by Landlord of title to
the Leased Premises.
(e) Tenant, for itself and, to the extent permitted by law, for
and on behalf of its successors, assigns, licensees and subtenants, hereby
waives and releases any and all causes of action, claims or demands of
whatsoever kind or nature that Tenant or its successors, assigns, licensees
or subtenants now have or hereafter may have against Landlord, its
affiliated entities, and their respective officers, directors, agents and
employees, including (without limitation) claims for contribution for costs
of the removal or remediation of Hazardous Substances on, under or about
the Leased Premises or the remediation of any contamination of the soil,
surface water or ground water on, under or about the Leased Premises by
Hazardous Substances, arising out of or in connection with, resulting from
or in any way related to the presence of Hazardous Substances on, under or
about the Leased
20
<PAGE>
Premises or any contamination of the soil, surface water or ground water
on, under or about the Leased Premises by Hazardous Substances.
ARTICLE VI
----------
RIGHT OF FIRST REFUSAL
----------------------
During the Term of this Lease, Tenant shall have the right of first
refusal concerning the purchase of the Leased Premises on the terms hereinafter
set forth. If at any time during the Term, Landlord shall receive a bona fide
offer, other than at public auction, from a third person (who does not have the
power of eminent domain) for the purchase of the Leased Premises, which offer
Landlord shall desire to accept, Landlord shall promptly deliver to Tenant a
copy of such offer, and Tenant may, within sixty (60) business days thereafter,
elect to purchase the Leased Premises on the same terms as those set forth in
such offer. If Tenant shall not accept such offer within the time specified
therefor and the Landlord shall close upon the sale of the Leased Premises
pursuant to the terms of such third party offer, the right of refusal shall
cease to exist, but this Lease shall continue otherwise on all of the other
terms, covenants and conditions of this Lease. This right of first refusal
shall be inapplicable to a transfer by way of sale, gift or devise, including a
trust, to or for a party related to Landlord or an Affiliate of Landlord, or to
any transfer from one such related or affiliated party to another, but shall
apply to any such transfer to a unrelated or non affiliated third party. If the
Leased Premises shall be conveyed to the Tenant under this right of first
refusal, any prepaid Rent shall be apportioned and applied on account of the
purchase price.
ARTICLE VII
-----------
PURCHASE OPTION
---------------
SECTION 7.01 OPTION TO PURCHASE. So long as this Lease is then in
------------ ------------------
full force and effect and Tenant is not in default hereunder, Tenant shall have
the option to purchase the Leased Premises on, or after, the twentieth (20th)
anniversary of the Commencement Date (the "PURCHASE OPTION") provided that
Tenant notify Landlord of its exercise of the Purchase Option and Tenant
specifies a time and place for closing (the "CLOSING").
SECTION 7.02 PURCHASE PRICE. The purchase price to be paid by
------------ --------------
Tenant to Landlord for the Leased Premises, together with the Other Leased
Premises, shall be Thirty Million Dollars ($30,000,000), subject to adjustments
provided for in this Lease (the "PURCHASE PRICE"). The Purchase Price shall be
adjusted by the percentage increase in the Index from the most recently
published Index prior to the Commencement Date and the most recently published
Index prior to the date that Tenant exercises the Purchase Option; provided,
that the Purchase Price shall never be less than Thirty Million Dollars
($30,000,000). The portion of the Purchase Price payable to Landlord and
allocated to the Leased Premises is Twenty-Seven Million Dollars ($27,000,000).
21
<PAGE>
SECTION 7.03 OPTIONS EXERCISED CONCURRENTLY. Tenant shall not
------------ ------------------------------
exercise the option set forth in this Article VII unless Tenant shall
concurrently exercise the purchase option set forth in the Other Lease.
SECTION 7.04 ITEMS DELIVERED AT CLOSING. At the Closing, Landlord
------------ --------------------------
shall convey title to the Leased Premises to Tenant by limited/special warranty
deed subject only to matters existing on the date of Tenant's title insurance
policy in place as of the date of Closing and matters caused or created by
Tenant.
SECTION 7.05 MISCELLANEOUS ITEMS AND COSTS. Rent shall be prorated
------------ -----------------------------
as of the date of the Closing. At the Closing, Landlord shall provide Tenant
with a suitable affidavit satisfying the requirements of the Internal Revenue
Code relating to withholding of a portion of the Purchase Price in the event of
a purchase from a foreign person.
Landlord shall promptly upon request prepare, execute and deliver such
further documents, and shall promptly obtain beneficiary statements and similar
certificates and perform such other acts as shall from time to time be
reasonably required in effecting the Closing and conveying, assigning,
transferring and confirming unto Tenant the Leased Premises and the rights to be
conveyed or assigned.
ARTICLE VIII
------------
ASSIGNMENT AND ENCUMBRANCES
---------------------------
SECTION 8.01. ASSIGNMENT AND SUBLEASES. Except as hereafter
------------ ------------------------
expressly provided in this Section 8.01 or in Section 15.02, Tenant shall not
assign, sell or transfer this Lease or title to the Improvements or any interest
therein or sublease or lease all or any part of the Leased Premises and/or
Improvements without the prior written consent of Landlord, which consent may
not be unreasonably withheld, conditioned or delayed so long as Tenant remains
fully liable for the obligations under the terms of the Lease. Notwithstanding
the foregoing, Tenant shall have the right to assign, sell or transfer this
Lease or title to the Improvements or any interest therein to: (i) any entity
whose shares of stock are publicly traded on a national stock exchange or (ii)
any entity having a net worth of not less than One Hundred Million Dollars
($100,000,000). In no event shall Tenant assign or transfer this Lease or title
to the Improvements to any person or entity that does not hold a riverboat
owner's license for Switzerland County, Indiana. Any assignment or transfer by
operation of law (voluntary or involuntary), merger, conversion or
reorganization, any assignment or transfer to a receiver or trustee in any
federal or state bankruptcy, insolvency or other proceeding shall constitute an
assignment or transfer for purposes of this Lease. Any change in control of
Tenant or of any entity controlling Tenant shall not constitute an assignment or
transfer for purposes of this Lease. For purposes of this Section 8.01,
"control" means the power to direct the management and policies of Tenant,
directly or indirectly, whether through the ownership or control of fifty
percent (50%) or more of the shares or other equity or beneficial interest or
power to vote the same, or by the partnership or trust agreement or other
instrument or contract or
22
<PAGE>
otherwise; and the term "controlling" has the meaning correlative to the
foregoing. The foregoing restrictions of this Section 7.01 shall not apply to an
assignment or transfer by reason of foreclosure or a deed in lieu of foreclosure
to any Mortgagee or to an assignment or transfer by reason of condemnation or
deed in lieu of condemnation to any condemning authority. In addition, Tenant
shall be entitled to sublease retail space in the Improvement in the ordinary
course of business without the requirement of any consent of Landlord.
SECTION 8.02. ENCUMBRANCES. Except for Mortgages meeting the
------------ ------------
requirements of Section 15.02, Tenant shall have no right to mortgage, pledge or
otherwise encumber its interest under this Lease or the Leased Premises and/or
Improvements, or any part thereof, without the prior written consent of
Landlord, which consent may be granted or withheld in Landlord's sole
discretion.
SECTION 8.03. GENERAL. The consent by Landlord under the foregoing
------------ -------
Sections 8.01 or 8.02 to any assignment, sale, transfer, letting or encumbrance
shall not constitute a waiver of the requirement of consent to any subsequent
assignment, sale, transfer or letting or encumbrance. No assignment or transfer
by Tenant permitted hereby shall operate as a release of Tenant from its
obligations hereunder, and Tenant shall remain jointly and severally liable with
such assignee or transferee for the continuing obligations of the Tenant
hereunder. Any purported assignment, sale, transfer, or letting in violation of
this Article VII shall be void and of no force and effect.
ARTICLE IX
----------
TAXES AND UTILITY EXPENSES
--------------------------
SECTION 9.01. PAYMENT OF TAXES AND UTILITY EXPENSES. Tenant shall
------------ -------------------------------------
pay and discharge punctually, as and when the same shall become due and payable
(except as otherwise provided in Section 9.02):
(a) all Taxes which are assessed with respect to the Leased Premises
and the Improvements, or any part thereof, or any appurtenances or equipment
thereon owned by or leased to Tenant for any calendar year (or part thereof)
within the Term, together with all interest and penalties thereon. Real Estate
Taxes assessed for the calendar year in which the Term commences and ends shall
be prorated and paid as provided in Section 9.02; and
(b) all Utility Expenses commencing with the Commencement Date.
Tenant shall be deemed to have complied with the covenants of this
Section 8.01 if payment of Taxes and Utility Expenses shall have been made
either within any period allowed by applicable law before the same shall become
a lien upon the Leased Premises or Improvements; or, if the Tax or Utility
Expense constitutes a lien before it is due and payable, then, before any
penalty
23
<PAGE>
or interest is assessed with respect thereto. Tenant shall furnish Landlord with
satisfactory evidence of payment of Real Estate Taxes and any other payment
hereunder if requested to do so by Landlord in writing.
Notwithstanding anything in this Section 8.01 to the contrary, in the
event the Leased Premises and Improvements (or any part thereof) are assessed
for Real Estate Tax purposes as part of a larger parcel that is owned by
Landlord, Tenant shall pay to Landlord on or before ten (10) days prior to the
date the Real Estate Taxes with respect to such larger parcel are due and
payable by Landlord (i) Tenant's proportionate share (determined on the basis of
acreage) of the Real Estate Taxes assessed for land with respect to such larger
parcel for land and (ii) the Real Estate Taxes assessed with respect to the
Improvements; and Landlord shall, following receipt of such payment from Tenant,
pay the Real Estate Taxes for such larger parcel.
SECTION 9.02. PRORATION OF REAL ESTATE TAXES. Real Estate Taxes
------------ ------------------------------
assessed for the calendar years in which the Term commences and ends shall be
prorated based upon the number of days within each such calendar year as shall
fall within the Term. Landlord shall reimburse Tenant for Landlord's pro rata
share of the Real Estate Taxes assessed for the calendar year in which the Term
commences promptly upon receipt by Landlord of satisfactory evidence of the
payment of such Real Estate Taxes by Tenant. Tenant shall pay on the date of
termination of this Lease all Real Estate Taxes due and payable during the
calendar year in which the Term ends and Tenant's pro rata share of Real Estate
Taxes assessed for the calendar year in which the Term ends. If the amount of
such Real Estate Taxes is not then determined, the most recently available tax
rates and assessed valuations shall be used in determining the amount to be paid
under this Section 9.02.
SECTION 9.03. RIGHT TO CONTEST. Tenant shall have the right to
------------ ----------------
contest all Taxes and Utility Expenses referred to in Section 9.01 by
appropriate legal proceedings, or in such other manner as it may deem
appropriate. Such legal proceedings shall include any and all appropriate
appeals or other proceedings and appeals from orders, judgments or decrees so
long as the same are sufficient to prevent a foreclosure sale. Tenant shall
conduct all such proceedings at its expense. Landlord, in its capacity as the
fee simple owner of the Real Estate, shall execute all documents reasonably
required for such proceedings. Tenant shall reimburse Landlord for any costs or
expenses incurred by Landlord in connection therewith. Notwithstanding the
foregoing, Tenant shall pay any such Taxes or Utility Expenses prior to the time
the Leased Premises or Improvements (or any part thereof) shall become subject
to sale upon foreclosure of the lien therefor.
SECTION 9.04. DISTRIBUTION OF OVERPAYMENT. If there shall be any
------------ ---------------------------
refunds or rebates on account of Taxes or Utility Expenses paid by Tenant under
the provisions of this Lease, such refund or rebate shall belong to Tenant,
whether or not received by Landlord during the Term; provided, however, that in
the event of a refund or rebate resulting from the contest of Real Estate Taxes,
Landlord shall be entitled to its proportionate share of such refund or rebate
if the Real Estate Taxes were assessed on a larger parcel owned by Landlord of
which the Leased Premises and/or Improvements are a part. Any refunds so
received by Landlord shall be deemed to be received by Landlord in trust for
Tenant and shall be paid to Tenant forthwith. Landlord will, upon request of
24
<PAGE>
Tenant, sign any receipts which may be necessary to secure the payment of any
such refund or rebate.
SECTION 9.05. SEPARATE ASSESSMENTS. If the Leased Premises is part
------------ --------------------
of a larger parcel that is owned by Landlord, Landlord shall make such
application as may be necessary or appropriate to obtain separate tax
assessments for the Leased Premises and Improvements. Tenant shall reimburse
Landlord for any costs or expenses incurred by Landlord in connection therewith.
ARTICLE X
---------
MAINTENANCE AND REPAIRS
-----------------------
Tenant shall at all times during the Term, at its expense, keep and
maintain or cause to be kept and maintained the Leased Premises and Improvements
in a first class, clean and safe condition and repair and in compliance with all
applicable federal, state and local statutes, laws, ordinances, rules and
regulations and all applicable orders and requirements of governmental
authorities, including (without limitation) the making of all necessary
structural repairs and replacements. Landlord shall not be required to furnish
any services or facilities or to make any improvements, repairs or alterations
in or to the Leased Premises or the Improvements during the Term.
ARTICLE XI
----------
MECHANICS' LIENS; INDEMNIFICATION
---------------------------------
SECTION 11.01. MECHANICS' LIENS. Tenant shall promptly after the
------------- ----------------
filing thereof discharge of record, at Tenant's expense, any mechanics',
materialmen's or other lien, or notice of intention to file any such lien, filed
against the Leased Premises or Improvements or any part thereof or interest
therein; provided that Tenant shall have the right to contest the validity of
any such lien in any manner permitted by law so long as Tenant (a) shall provide
to Landlord, title insurance, an indemnity, bond or other assurance or security
reasonably satisfactory to Landlord; and (b) shall thereafter diligently proceed
to cause such lien or notice of intention to file a lien to be removed and
discharged. If Tenant shall fail to so discharge, or to seek to discharge, any
such lien or notice of intention to file a lien, then Landlord may, but shall
not be obligated to, discharge the same, either by paying the amount claimed to
be due, or by procuring the discharge of such lien by depositing in court a bond
for the amount claimed or in such other manner as is or may be permitted by law,
and Tenant shall reimburse and indemnify Landlord in respect thereto.
SECTION 11.02. INDEMNIFICATION BY TENANT. Subject to the provisions
------------- -------------------------
of Section 12.05 and regardless of whether or not caused or alleged to be caused
by the several, joint, concurrent or comparative negligence, but not sole
negligence, of Landlord, Tenant shall, at its sole
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cost and expense, indemnify and save harmless Landlord against and from any and
all liability, damages, losses, fines, penalties, costs and expenses (including,
but not limited to, court costs and attorneys' fees) arising out of, resulting
from or in any way connected with: (a) Tenant's possession, use or control of
the Leased Premises or Improvements or any part thereof during the Term, (b) any
condition of the Leased Premises or Improvements or any part thereof during the
Term, (c) any breach or default on the part of Tenant in the performance of any
covenant or agreement to be observed or performed by Tenant pursuant to the
terms of this Lease, (d) any willful or negligent act or omission of Tenant, or
any of its agents, contractors, licensees, subtenants or its or their employees,
customers or invitees, or (e) any accident, injury to or death of persons or
damage to property whatsoever in or about the Leased Premises or Improvements or
any part thereof during the Term. In case any claim, action or proceeding
covered by the preceding indemnification provisions shall be brought against
Landlord, Tenant, upon written notice from Landlord, shall defend such action or
proceeding with counsel acceptable to Landlord.
Tenant's indemnification obligations hereunder shall be in addition to
any and all other obligations Tenant may have to Landlord at law or in equity
and shall survive the expiration or earlier termination of the Term and any
transfer by Landlord of title to the Leased Premises.
ARTICLE XII
-----------
INSURANCE
---------
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<PAGE>
SECTION 12.01. LIABILITY INSURANCE. Tenant shall maintain and keep
------------- -------------------
in force at all times during the Term, with an insurance company or companies
licensed to do business in the State of Indiana and otherwise acceptable to
Landlord (a) comprehensive general public liability insurance covering any and
all claims for injuries to or death of persons or damage to property occurring
in or upon the Leased Premises and Improvements and having initial minimum
levels of combined coverage for bodily injury (including death resulting
therefrom) and property damage, including umbrella coverage, of not less than
Ten Million Dollars ($10,000,000.00), for each occurrence and on an annual
aggregate basis and (b) workmen's compensation and employer's liability
insurance in such amounts as shall be required by law from time to time, but in
no event less than One Hundred Thousand Dollars ($100,000) per accident.
Tenant's comprehensive general public liability insurance shall have extensions
of coverage to include blanket contractual liability for written and oral
contracts (including Tenant's indemnification obligations hereunder), broad form
property damage and premises operations (including explosion, collapse and
underground coverage). In addition, Tenant shall maintain or cause its
contractor(s) or construction manager to maintain products and completed
operations coverage through the period ending two (2) years after completion of
construction of the Improvements. Each policy referred to in this Section 11.01
shall name Landlord as an additional insured, as well as Tenant's contractor(s)
and/or construction manager during the period of construction of any
Improvements and during any period in which construction, alteration or
substantial repair work is being performed on or to the Leased Premises or
Improvements (or any part thereof). Such liability insurance may be provided by
a single policy or combination of underlying policies, with the balance provided
by an excess or umbrella liability policy; provided such excess or umbrella
insurance complies with all other requirements of this Lease with respect to
such insurance.
SECTION 12.02. PROPERTY INSURANCE. During the Term, Tenant shall
------------- ------------------
keep the Improvements insured with an insurance company licensed to do business
in the State of Indiana and otherwise acceptable to Landlord for the benefit of
Landlord and Tenant, as their respective interests may appear, against loss or
damage by fire or other casualty (including earthquake, to the extent customary
and available at reasonable costs) covered by a customary extended coverage
endorsement, in an amount equal to one hundred percent (100%) of the replacement
cost thereof and providing for and having a deductible in an amount not
exceeding One Hundred Thousand Dollars ($100,000). In addition during the period
of construction of the Improvements (or during any period in which construction,
alteration or substantial repair work is being performed on or to the Leased
Premises or Improvements (or any part thereof), Tenant shall maintain in force
builder's all risk coverage, with fire and extended coverages. Such builder's
all risk coverage may be written as an endorsement to the casualty insurance
required by the first sentence of this Section 11.02 and shall protect the
interests of Landlord and Tenant's construction manager and/or contractors and
subcontractors as their respective interests may appear. Notwithstanding the
foregoing, Tenant shall at all times maintain such insurance in an amount
sufficient to meet all co-insurance requirements under such insurance policy.
Landlord shall not carry any insurance concurrent in coverage and contributing
in the event of loss with any insurance required to be furnished by Tenant
hereunder, if the effect of such separate insurance would be to reduce the
protection or the payment to be made under Tenant's insurance.
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SECTION 12.03. PROOF OF INSURANCE. Tenant shall deliver copies of
------------- ------------------
the insurance policies showing the coverages required by this Article XI to
Landlord within thirty (30) days after the Commencement Date but in all events
prior to the commencement of any excavation or filling of the Real Estate or the
construction of any Improvements, and thereafter a copy of each replacement
policy shall be provided not less than thirty (30) days prior to the expiration
of the policy being replaced. Each such policy referred to in this Article XII
shall contain a provision providing that the policy shall not be canceled, not
renewed or materially amended without thirty (30) days prior written notice to
Landlord.
SECTION 12.04. ADJUSTMENT IN INSURANCE. If by reason of changed
------------- -----------------------
conditions or by reason of experience Landlord reasonably determines that the
insurance amounts referred to in the foregoing Section 12.01 are inadequate,
Tenant shall, at the request of Landlord, increase the amounts of such insurance
carried to the extent appropriate for a like facility under like circumstances.
In the event that it shall become customary for lessees of similar premises to
maintain types or coverages of insurance other than those required to be
maintained by Tenant under this Article XII, Tenant shall maintain such other
types of coverages of insurance upon the written request of Landlord so long as
such types or coverages of insurance can be obtained by Tenant at reasonable
cost.
SECTION 12.05. WAIVER OF SUBROGATION. Tenant and Landlord waive all
------------- ---------------------
rights against each other and against those for whom the other is legally liable
for all losses covered by insurance provided under this Article XI to the extent
the limits of such insurance are adequate to cover such losses, it being the
intent of this provision to allocate all risk of such loss to such insurance;
provided, however, that this waiver shall not be effective if it would preclude
- -------- -------
or prejudice the right of Landlord or Tenant to recover under such insurance
policy. If the policies of insurance provided for under this Article XI require
an endorsement to provide for continued coverage where there is a waiver of
subrogation, Tenant shall cause such policies to be so endorsed.
SECTION 12.06. INSURANCE PROCEEDS. The proceeds of all policies of
------------- ------------------
insurance on the Improvements maintained pursuant to Section 11.02 remaining
after any required payment to any Mortgagee shall be used as a trust fund toward
the repair, replacement or rebuilding of the Improvements. Accordingly, all
insurance proceeds paid to Tenant and/or Landlord under such policies shall be
deemed to be received and held by such party in trust for the payment of the
costs of repairing, replacing and rebuilding the Improvements. All such
insurance proceeds so received shall be deposited by such party with the first
Mortgagee or if there is no Mortgagee with a banking or similar institution
approved by Landlord, to be held and disbursed by such Mortgagee or institution
for the payment of the costs of repairing, replacing and rebuilding the
Improvements in the manner and upon the conditions customarily applicable to
construction loans. If the insurance proceeds shall exceed the cost of
repairing, replacing or rebuilding the Improvements, the balance remaining after
payment of such costs shall be the property of and shall be paid to Tenant. The
institution so holding and disbursing the insurance proceeds may deduct from any
insurance proceeds deposited with it the amount of its charges for the
performance of its services and any reasonable expenses incurred by it in
connection therewith.
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Landlord shall cooperate fully with Tenant in collecting such
insurance proceeds and shall execute and deliver, as requested by Tenant, any
and all proofs, receipts, releases and other instruments as may be appropriate
for such purpose.
SECTION 12.07. GENERAL PROVISIONS. In the event Tenant shall fail or
------------- ------------------
refuse to obtain any insurance required by this Article XI, Landlord, in
addition to any other rights Landlord may have under this Lease or at law or in
equity, shall have the right to obtain such insurance. The cost of such
insurance shall constitute additional Rent payable by Tenant to Landlord
immediately upon demand.
ARTICLE XIII
------------
DESTRUCTION
-----------
SECTION 13.01. TENANT'S OBLIGATION TO REPAIR. If at any time during
------------- -----------------------------
the Term the Improvements shall be destroyed or damaged by fire or other cause,
Tenant shall cause the same to be repaired, replaced or rebuilt within a period
of time which, under all prevailing circumstances, shall be reasonable, subject
to Unavoidable Delays. In the repair, replacement or rebuilding of any
Improvements hereunder, Tenant shall repair, replace or rebuild the Improvements
so damaged or destroyed to their condition immediately before such damage or
destruction, subject to all then applicable laws, ordinances, rules or
regulations of any governmental authority affecting the same. If the insurance
proceeds payable in respect of any such damage or destruction, less any cost of
collection and any less amounts required to be paid to any Mortgagee, shall be
insufficient to pay the entire cost of such repair, replacement or rebuilding,
Tenant shall provide for the deficiency. In such event, the time within which
Tenant shall be required to commence and complete its obligations hereunder
shall include a reasonable time to obtain and close the necessary commitments
for equity or mortgage financing to cover the deficiency.
SECTION 13.02. NO RENT ABATEMENT. In no event shall Rent or other
------------- -----------------
charges due hereunder abate in the event of such damage or destruction.
ARTICLE XIV
-----------
CONDEMNATION
------------
SECTION 14.01. TOTAL CONDEMNATION. If at any time during the Term
------------- ------------------
there shall be a total taking or a Constructive Total Taking of the Leased
Premises and Improvements (or any part thereof) in condemnation proceedings or
by any right of eminent domain or by a conveyance in lieu thereof, this Lease
shall terminate on the date of such taking and the Rent payable by Tenant
hereunder shall be prorated and paid to the date of such taking.
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<PAGE>
SECTION 14.02. PROCEEDS OF TOTAL CONDEMNATION. In the event of any
------------- ------------------------------
such total taking or Constructive Total Taking and the termination of this
Lease, the Condemnation Proceeds shall be paid to Chicago Title Insurance
Company, or such other entity mutually agreeable to Landlord and Tenant, as
trustee ("TRUSTEE"), but shall be applied by Trustee in the following order of
priority:
(a) First, to the Mortgagees in the order of priority of
such Mortgages to the extent of unpaid principal amounts of such
Mortgages, but only to the extent such unpaid principal amount
represents loan proceeds that were used for the constructing and
equipping of Improvements and all replacements thereof or the
refinancing thereof, and all accrued and unpaid interest thereon
and all costs, expenses and advances pursuant thereto and all
advances made by such Mortgagee for the benefit of the Leased
Premises and Improvements and the continued use and operation
thereof;
(b) Second, to the payment of costs and expenses, including
(without limitation) court costs and reasonable attorneys' fees,
incurred by Landlord and Tenant in connection with such taking;
(c) Third, to Landlord in an amount equal to the value of
the Real Estate determined as if unencumbered by this Lease and
unimproved;
(d) Fourth, to Landlord in an amount equal to the then
present value of the Base Rent and Additional Rent (based upon
the amount of Additional Rent paid by Tenant for the calendar
year immediately preceding such total taking or Constructive
Total Taking) which would have been due and payable to Landlord
during the Original Term or the applicable Extension Term if such
total taking or Constructive Total Taking had not occurred; and
(e) Any remaining balance shall be paid to Tenant.
Nothing herein contained shall impair the right of Tenant to the full award,
compensation or damages payable as an award for loss of business or for moving
expenses, as long as such award shall not reduce the amount of the award
otherwise recoverable by Landlord from the condemning authority.
SECTION 14.03. PARTIAL CONDEMNATION. In the event of a taking that
------------- --------------------
is less than a Constructive Total Taking, this Lease shall not terminate or be
affected in any way, except as provided in Section 14.04. The Condemnation
Proceeds in such event shall be paid to the Trustee and applied by the Trustee,
to the extent available (following any required payments to Mortgagees), in the
following order of priority:
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(a) First, to the payment of costs and expenses, including
(without limitation) reasonable attorneys' fees, incurred by
Landlord and Tenant in connection with such taking;
(b) The balance of the Condemnation Proceeds shall be
payable in trust to the first Mortgagee or if there is no
Mortgagee to a banking or similar institution approved by
Landlord to be disbursed by such Mortgagee or institution for
payment of the costs of repairing, replacing or rebuilding the
Improvements in the manner then reasonably feasible as required
by Section 14.04;
(c) The Condemnation Proceeds, if any, remaining after
repair, replacement or rebuilding shall be paid to Tenant, except
to the extent of an equitable portion of the Condemnation
Proceeds allocable by agreement of Landlord and Tenant to
Landlord on account of any taking of fee title to any portion of
the Real Estate.
SECTION 14.04. RESTORATION. In the event of a taking that is less
------------- -----------
than a Constructive Total Taking, Tenant shall proceed with due diligence,
subject to Unavoidable Delays, to repair, replace or rebuild the remaining
Improvements to their former condition as may be reasonably possible. If the
Condemnation Proceeds are insufficient to pay the entire cost of such repair,
replacement or rebuilding, Tenant shall pay any such deficiency.
SECTION 14.05. TEMPORARY CONDEMNATION. If, at any time during the
------------- ----------------------
Term, the whole or any part of the Leased Premises or Improvements or Tenant's
interest therein under this Lease shall be taken in condemnation proceedings or
by any right of eminent domain for temporary use or occupancy, the foregoing
provisions of this Article XIV shall not apply, and, except to the extent that
Tenant may be prevented from so doing pursuant to the terms of the order of the
condemning authority, Tenant shall perform and observe all of the other terms,
covenants, conditions and obligations hereof to be performed and observed by it,
as though such taking had not occurred. In the event of any such taking of the
character referred to in this Section 14.05, Tenant shall be entitled to receive
the entire amount of the Condemnation Proceeds paid for such taking, whether
paid by way of damages, rent, costs of moving or restoration or otherwise,
unless such period of temporary use or occupancy shall extend beyond the
expiration of the Term, in which case the Condemnation Proceeds shall be
apportioned between Landlord and Tenant as of the date of expiration of the
Term. Upon the expiration of any such period of temporary use or occupancy
during the Term, Tenant shall, at its expense, restore the Improvements as
nearly as may be reasonably possible to the condition in which the same were
immediately prior to such taking. If such period of temporary use or occupancy
shall extend beyond the expiration of the Term, any portion of the Condemnation
Proceeds received by Tenant as compensation for the cost of restoration of the
Improvements shall be paid by Tenant to Landlord on the date of termination of
this Lease, and Tenant shall be thereby relieved of the obligation to perform
such restoration.
SECTION 14.06. RENT ADJUSTMENT. In the event of a taking of the
------------- ---------------
character referred to in Section 14.03, this Lease shall terminate as to the
portion of the Leased Premises so taken. No
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such partial taking shall affect the Rent payable hereunder unless (i) the
taking includes or affects leasable or other income producing space, or (ii) the
taking has or will have, in Tenant's reasonable judgment, an adverse effect upon
the operations of the Leased Premises or Improvements. In either of such events,
upon the request of Tenant (and payment to Landlord of the payment, if any,
agreed upon pursuant to Section 14.03), the Base Rent payable for the balance of
the Term of this Lease shall be equitably and proportionately reduced from the
date of such taking. If Landlord and Tenant cannot agree upon the amount of such
reduction in Base Rent (or payment out of Condemnation Proceeds pursuant to
Section 14.03), they shall be determined on a consistent basis by an independent
appraiser with M.A.I. credentials selected by agreement of Landlord and Tenant
or, in the absence of agreement on a single appraiser, by an independent
appraiser with M.A.I. credentials selected by agreement of the appraisers
appointed (one each) by Landlord and Tenant. Until the amount of the reduction
in the Base Rent has been determined, Tenant shall continue to pay Landlord the
Base Rent provided for herein. Upon determination of the reduction in Base Rent,
Tenant shall be entitled to credit the amount by which any Base Rent theretofore
paid by Tenant for such period exceeds the amount of the Base Rent for such
period as so reduced against the first installments of Base Rent thereafter
payable under the Lease; provided, however, that if at the time of such
determination the Term has ended or such credit exceeds the amount of all future
installments of Base Rent payable hereunder, Landlord shall pay to Tenant an
amount equal to such excess upon demand.
SECTION 14.07. RIGHTS TO APPEAR. Landlord, Tenant and any Mortgagee
------------- ----------------
shall have the right to participate in any condemnation proceeding for the
purpose of protecting their rights hereunder, and in this connection,
specifically and without limitation, to introduce evidence to establish the
value of or damage to the Real Estate, the Leased Premises and/or the
Improvements (or any part thereof).
ARTICLE XV
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MORTGAGES
---------
SECTION 15.01. FEE TITLE NOT SUBORDINATED. Nothing herein shall be
------------- --------------------------
deemed to constitute a subordination of Landlord's fee simple title in the Real
Estate to any Mortgage or to require Landlord to execute any Mortgage or
agreement or instrument or take any action to effect any such subordination.
SECTION 15.02. LEASEHOLD MORTGAGES.
------------- -------------------
(a) Without the requirement of any consent of
Landlord, Tenant shall have the right to mortgage its entire
interest under this Lease and in and to the Improvements.
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The execution and delivery of any such Mortgage shall
not be deemed to constitute an assignment or transfer of this
Lease, nor shall the holder of any such Mortgage be deemed (prior
to a foreclosure judgment and the taking of possession as
hereinafter provided) an assignee or transferee of this Lease so
as to require such holder to assume the performance of any of the
terms, covenants or conditions on the part of Tenant to be
performed hereunder. Tenant shall give prompt notice to Landlord
of the execution and delivery of a Mortgage meeting the
requirements of this Section 15.02 and shall furnish it with
conformed copies thereof.
(b) Notwithstanding anything contained in this Lease
to the contrary, no purchaser or transferee at any foreclosure
sale or other transfer authorized by law or this Lease shall
acquire any right, title or interest in or to this Lease, the
Leased Premises or the Improvements unless (i) said purchaser or
transferee shall, in the instrument transferring the same or
immediately after acquiring the same, assume and agree to keep,
observe and perform all of the terms, covenants and provisions of
this Lease on the part of the Tenant to be kept, observed and
performed (including the obligation to cure defaults arising
prior to such assumption curable by the payment of money or
otherwise reasonably susceptible of being cured) and shall
therein agree that no further or additional mortgage or
assignment of this Lease shall be made, except as provided in
this Article XIV and (ii) a duplicate-original of said assumption
agreement, duly executed and acknowledged by said purchaser or
transferee, shall be delivered to Landlord promptly following the
consummation of such sale or transfer.
SECTION 15.03. NOTICES AND RIGHTS ON TENANT'S DEFAULT. If Tenant or
------------- ---------------------------------------
a Mortgagee shall provide to Landlord a copy of any such Mortgage, together with
written notice specifying the name and address of the Mortgagee, Landlord agrees
that so long as any such Mortgage shall remain unsatisfied of record or until
written notice of satisfaction is given by the Mortgagee to Landlord, the
provisions of this Article XV shall apply. Following any such notification
specifying the name and address of a Mortgagee:
(a) Landlord shall give such Mortgagee notice of each
notice given to Tenant under this Lease (such notice to be given
in the same manner as provided in the following Article XXV for
notices to a party to this Lease) at such Mortgagee's last
address for notice provided to Landlord as provided above. No
such notice to Tenant shall be effective unless notice thereof is
so given to all such Mortgagee(s). Landlord shall have no
obligation to give notice to a Mortgagee at any address other
than such Mortgagee's last address for notice provided to
Landlord.
(b) Such Mortgagee(s) shall have the right, until forty-
five (45) days after the later of (i) expiration of Tenant's
applicable cure period, or (ii) receipt of its copy of any such
notice as is given to Tenant, to remedy or cause to be remedied
the
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Event of Default which is the basis of the notice; and Landlord
shall accept performance by such Mortgagee as performance by
Tenant.
(c) In case of an Event of Default by Tenant under this
Lease, other than an Event of Default susceptible of being cured
solely by the payment of money, Landlord shall take no action to
effect a termination of this Lease by service of a notice or
otherwise without first giving to such Mortgagee(s) a reasonable
time, under prevailing circumstances, within which either: (i) to
obtain possession of the Leased Premises and Improvements
(including possession by a receiver) and to cure such Event of
Default, in the case of an Event of Default that is susceptible
of being cured when such Mortgagee has obtained possession of the
Leased Premises and Improvements; or (ii) to institute and
complete foreclosure proceedings or otherwise acquire Tenant's
estate under this Lease, in the case of an Event of Default which
is not so susceptible of being cured by such Mortgagee upon
obtaining possession. The provisions of this clause (c) of this
Section 15.03 are conditioned on the Mortgagee delivering to
Landlord, within the forty-five (45) day period specified in
clause (b) above, an instrument agreeing that it will attempt
with due diligence to obtain possession of the Leased Premises
and Improvements, and that upon obtaining possession of the
Leased Premises and Improvements, whether through foreclosure or
otherwise, it will cure such Event of Default (other than an
Event of Default described in Article XVIII).
(d) Such Mortgagee shall not be required to continue
possession or continue foreclosure proceedings under clause (c)
of this Section if the particular Event of Default has been
cured.
(e) Landlord's right to terminate this Lease by reason of
any Event of Default described in Article XVIII shall end, with
respect to such Event of Default, on the date such Mortgagee or
any purchaser at the foreclosure sale or by assignment in lieu
thereof shall obtain possession of the Leased Premises as
successor to Tenant (whether or not under a new lease); provided
that Landlord has not, prior to such date, validly exercised its
right to terminate this Lease, and provided that any purchaser or
transferee upon foreclosure or assignment in lieu thereof
complies with the provisions of Section 15.02(b).
(f) Notwithstanding anything to the contrary contained in
this Lease, if Landlord shall purport to terminate this Lease for
any reason prior to the last day of the Term, Landlord shall
enter into a new lease for the Leased Premises with any
Mortgagee, or its designee, for the remainder of what would have
been the Term of this Lease in the absence of such purported
termination, effective as of the date and time of such purported
termination, at the Rent and upon the same terms, covenants and
conditions contained herein, and Landlord, simultaneously with
the execution and delivery of such new lease, shall assign and
turn over to the tenant named therein the monies and subleases,
if any, then being held by Landlord pursuant to this Lease,
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which Tenant would have been entitled to but for such purported
termination, and said new tenant shall assume such subleases
without recourse to Landlord, provided that:
(i) such Mortgagee shall make written request for
such new lease within sixty (60) days after the date of such
purported termination; and
(ii) such Mortgagee shall pay or cause to be paid to
Landlord on the commencement date of the term of the new
lease, all installments of Rent that at such time are or
would have been due and unpaid through such commencement
date under this Lease but for such purported termination and
shall cure all uncured Events of Default of Tenant under
this Lease that are curable by the payment of money or
otherwise reasonably susceptible of being cured by such
Mortgagee; and shall pay or cause to be paid to Landlord on
that date all expenses, including reasonable attorneys'
fees, reasonable management fees and court costs and
disbursements incurred by Landlord in connection with any
such default and purported termination as well as in
connection with the execution and delivery of such new
lease, less the net income collected by Landlord from the
date of such purported termination of this Lease to the
commencement date of such new lease, any excess of such net
income over the total of said sums and expenses to be
applied by Landlord to the payment of the Rent thereafter
becoming due under such new lease.
In the event two or more Mortgagees each exercise their
rights hereunder and there is a conflict that renders it
impossible to comply with all such requests, the Mortgagee whose
leasehold Mortgage would be senior in priority if there were a
foreclosure shall prevail. If all of the foregoing conditions
shall be satisfied, the purported termination shall be deemed
ineffective and void ab initio, so that the new lease shall be
-- ------
deemed to be a continuation of this Lease for all purposes under
applicable law. If such conditions shall not be met, the Lease
shall be deemed to have terminated upon the expiration of the
sixty (60) day period provided for in the foregoing clause (i) of
this paragraph (f).
(g) In the event any Mortgagee pays any Rent or other sums
due hereunder which relate to periods other than during its
actual ownership of the leasehold estate, such Mortgagee shall be
subrogated to any and all rights which Tenant may assert against
Landlord with respect to such period for which such Rent or other
sums were paid.
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(h) No surrender or cancellation of this Lease (other than
a termination by Landlord in compliance with the conditions of
this Article XV) shall be effective without written approval of
the Mortgagee(s); nor shall the acquisition of both the fee and
leasehold estates in the Leased Premises in one entity be deemed
to effect a merger thereof without the express written consent of
the owner/lessee and all Mortgagees at the time said fee and
leasehold estates are so acquired by one entity.
SECTION 15.04. NO OBLIGATION TO CURE. Nothing herein contained shall
------------- ---------------------
require any Mortgagee to cure or undertake to cure any default of Tenant, unless
and until such Mortgagee elects to exercise any right under Section 15.03 as to
which such cure or undertaking to cure is a condition.
SECTION 15.05. MODIFICATION OF LEASE. If in connection with
------------- ---------------------
obtaining a Mortgage from a prospective Mortgagee, such Mortgagee shall request
reasonable modifications in this Lease as a condition to the making of such
Mortgage Loan, Landlord will execute an agreement in recordable form so
modifying this Lease, provided that such modifications do not adversely affect
Landlord hereunder.
SECTION 15.06. EXCLUSION. The rights contained in this Article XV
------------- ---------
and elsewhere in this Lease with respect to Mortgagees shall not apply to any
Mortgagee who shall fail to give Landlord written notice of its identity and
address.
SECTION 15.07. NOTICES TO LANDLORD. Tenant shall provide to Landlord
------------- -------------------
written notice of any material default by Tenant as to which Tenant receives
notice pursuant to any Mortgage; and Tenant shall attempt in good faith to
obtain the agreement of any Mortgagee to accept any cure tendered by Landlord
(without obligation of Landlord to undertake any such cure) of any such material
Mortgage default.
ARTICLE XVI
-----------
SPECIFIC PERFORMANCE
--------------------
In addition to any other rights that Tenant or Landlord may have under
this Lease, if the other fails or refuses to execute, acknowledge and deliver
any instrument or instruments or to take any other action (other than an action
solely involving the payment of any sum of money) required to effectuate the
provisions of this Lease within the time period required by this Lease or, if no
time period therefor is specified in this Lease, within any reasonable time
period specified in any request from the other party, then from and after the
date fifteen (15) days after the date of delivery of a final written demand to
the other party requesting such execution, acknowledgment and delivery or other
action, the requesting party shall be entitled to specific performance,
declaratory relief, or such other remedies at law or equity which may be
appropriate to effectuate the provisions of this Lease.
36
<PAGE>
ARTICLE XVII
------------
LANDLORD'S RIGHT OF ENTRY
-------------------------
Tenant shall permit Landlord and its authorized representatives, upon
reasonable prior notice, to enter the Leased Premises and Improvements for the
purpose of (a) inspecting the same, (b) showing the same to prospective
purchaser's of Landlord's title to the Leased Premises or to prospective
tenant's of the Leased Premises, or (c) performing any work in the Leased
Premises that may be necessary by reason of Tenant's failure to perform any such
work or to commence the same within ten (10) days after written notice from
Landlord (or without notice in case of emergency). Nothing herein shall imply
any duty on the part of Landlord to do any such work, and performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to perform
the same. Landlord shall not be liable for inconvenience, annoyance,
disturbance, loss of business or other damage to Tenant or any subtenant or
licensee of Tenant by reason of performing any such work, and the obligations of
Tenant under this Lease shall not be affected thereby.
ARTICLE XVIII
-------------
DEFAULTS
--------
SECTION 18.01. EVENTS OF DEFAULT. Each of the following events, if
------------- -----------------
not remedied as hereinafter provided, shall be deemed an "Event of Default":
(a) The occurrence of any event set forth in Article XX, as therein
provided;
(b) Tenant's failure to pay any installment of Rent within thirty
(30) days of the due date thereof;
(c) Tenant's failure to perform any other covenant or agreement
herein contained on Tenant's part to be kept or performed and the continuance of
such failure for a period of thirty (30) days after notice in writing to Tenant
from Landlord specifying the nature of such failure;
(d) Tenant obtains a License for Switzerland County, Indiana and such
License shall be cancelled, terminated or revoked or shall have expired and not
be renewed, and Tenant shall not have assigned this Lease with the consent of
Landlord, which consent will not be unreasonably withheld, conditioned or
delayed, to any other person or entity that holds a License for Switzerland
County, Indiana within one (1) year after the date of such cancellation,
termination, revocation or expiration; or
37
<PAGE>
(e) In the event Tenant abandons its efforts to obtain the License.
Upon the occurrence of any Event of Default, Landlord may, at its option, give
to Tenant a written notice of its election to end the Term of this Lease upon a
date specified in such notice, which date shall be not less than forty-five (45)
days after the date of delivery to Tenant of such notice by Landlord.
Simultaneously with the sending of any notice of default or termination to
Tenant, Landlord shall send a copy of such notice to Mortgagees, as required by
Section 15.03.
SECTION 18.02. EXTENSIONS. If Landlord gives notice at any time of a
------------- ----------
default of a nature that cannot be cured within the thirty (30) day period
provided in Section 18.01(c), then such default shall not be deemed an Event of
Default so long as Tenant, following notice from Landlord, proceeds to cure the
default as soon as reasonably possible and continues to take all reasonable
steps necessary to complete the same within a period of time which, under all
prevailing circumstances, shall be reasonable. In addition, no Event of Default
shall be deemed to have occurred if and so long as Tenant shall be delayed in or
prevented from curing the same within the applicable cure period by Unavoidable
Delay.
SECTION 18.03. REMEDIES. Upon any Event of Default pursuant to
------------- --------
Section 18.01, or at any time thereafter so long as the same is not cured,
Landlord may, in addition to and without prejudice to any other rights and
remedies Landlord shall have under this Lease or at law or in equity, (a) cure
any such Event of Default and collect the cost thereof from Tenant upon demand
or (b) reenter the Leased Premises and Improvements and recover possession
thereof (subject in each case to the rights of Mortgagees provided in Article
XV) in the manner prescribed by law, or (c) terminate this Lease. In case of
any such reentry and recovery of possession, Landlord may, subject to Article
XV:
(i) collect all rents, proceeds and profits of the Leased
Premises and Improvements and operate the same for its own
account, and relet the Leased Premises and Improvements or any
part thereof, either in the name of Landlord or otherwise, for a
term or terms which may, at Landlord's option, be less than or
exceed the then remaining Term of this Lease; and/or
(ii) terminate this Lease.
During any period of possession hereunder, Landlord, at Landlord's option, may
complete such construction, alterations, repairs, and/or replacements of in the
Leased Premises and Improvements as Landlord, in Landlord's reasonable judgment,
considers advisable and necessary; and the making of such alterations, repairs
and/or replacements shall not operate or be construed to release Tenant from
liability hereunder.
ARTICLE XIX
-----------
TENANT'S RIGHT TO TERMINATION
-----------------------------
38
<PAGE>
Tenant shall have the right to terminate this Lease if any of the
following occur, or fail to occur, as the case may be: (i) on or before ninety
(90) days after the Execution Date Tenant is unable to obtain an acceptable, in
Tenant's reasonable discretion, title insurance policy, survey, environmental
assessment report or required permits covering the Leased Premises on or before
such date; (ii) on or before the Commencement Date Tenant has not obtained a
License and Tenant is not in default under this Lease; or (iii) it becomes
illegal under applicable local, state or federal law for the Tenant and all
other entities to operate a riverboat casino on the Ohio River in connection
with the Leased Premises, and there are no appeals, proceedings or actions
pending that would invalidate or have the affect of invalidating such law.
ARTICLE XX
----------
BANKRUPTCY AND INSOLVENCY
-------------------------
SECTION 20.01. CERTAIN EVENTS OF DEFAULT SPECIFIED. If during the
------------- -----------------------------------
Term:
(a) Tenant shall be adjudicated a bankrupt or adjudged to be
insolvent;
(b) A receiver or trustee shall be appointed for Tenant's property
and affairs, unless such appointment shall be vacated within ninety (90)
days of its entry;
(c) Tenant shall make an assignment for the benefit of creditors;
(d) A petition shall be filed proposing the adjudication of Tenant as
a bankrupt or insolvent or the reorganization of Tenant or an arrangement
by Tenant with its creditors whether pursuant to the United States
Bankruptcy Code or any similar federal or state proceedings, unless such
petition is filed by a party other than Tenant and is withdrawn or is
dismissed within ninety (90) days after the date of filing; or
(e) Any execution or attachment shall be issued against Tenant or any
of Tenant's property, whereby the Leased Premises or Improvements shall be
taken or occupied or attempted to be taken or occupied by someone other
than Tenant, unless such attachment is a prejudgment attachment that is set
aside within (90) days after the issuance of the same;
then, subject to Section 20.02, an Event of Default hereunder shall be deemed to
have occurred so that the provisions of Article XVIII hereof shall become
effective; and Landlord shall have the rights and remedies provided for therein
in addition to all other legal remedies available to Landlord.
39
<PAGE>
SECTION 20.02. PRESERVATION OF LEASEHOLD ESTATE. Notwithstanding
------------- --------------------------------
anything to the contrary contained in Article XIX, upon the occurrence of an
Event of Default pursuant to this Article XX, then (in addition to any rights of
Mortgagees under Article XV) if the Rent due and payable hereunder shall
continue to be paid and the other covenants and agreements of this Lease on
Tenant's part to be kept and performed shall continue to be kept and performed,
no Event of Default shall be deemed to have occurred and the provisions of
Article XVIII shall not become effective.
ARTICLE XXI
-----------
UTILITY EASEMENTS
-----------------
Upon request of Tenant, Landlord shall grant easements at locations
and in scope reasonably acceptable to Landlord as may be required by public
utility companies or governmental authorities as a condition to providing any
utility services necessary or appropriate for the use and operation of the
Leased Premises and Improvements as permitted by this Lease.
ARTICLE XXII
------------
SURRENDER
---------
SECTION 22.01. SURRENDER OF LEASED PREMISES. Tenant shall surrender
------------- ----------------------------
the Leased Premises and Improvements to Landlord at the expiration or earlier
termination of the Term or of Tenant's right to possession hereunder, without
delay, in good order, condition and repair except for reasonable wear and tear
after the last necessary repair, replacement, or rebuilding made by Tenant, with
all leasehold improvements necessary for the continued operation of the
Improvements for the purposes for which such Improvements were designed, free
and clear of all liens and encumbrances except the liens for taxes and
assessments not then due and payable, and without any payment or allowance
whatever by Landlord for the Improvements. For purposes of this Article XXII
leasehold improvements shall include (without limitation) floor coverings
(excluding area rugs), wall coverings, ceilings, lighting systems and fixtures,
plumbing fixtures and other mechanical systems, equipment and facilities and
built-in installations. Leasehold improvements do not include trade fixtures,
trade equipment, kitchen equipment, furniture, inventory and similar movable
personal property.
SECTION 22.02. DEMOLITION OF IMPROVEMENTS. Notwithstanding the
------------- --------------------------
provisions of Sections 22.01 or 22.03, Landlord shall have the right to require
that Tenant demolish and remove all or certain designated Improvements from the
Leased Premises upon the expiration of the Term. Such election by Landlord
shall be made by written notice from Landlord to Tenant given within thirty (30)
days after Tenant provides written notice to Landlord in accordance with the
provisions of Section 22.03. In the event of such election by Landlord, Tenant
shall commence and complete
40
<PAGE>
such demolition or removal at Tenant's expense and shall grade and seed the
Leased Premises following such demolition and removal within a reasonable time
after the expiration of the Term. Before commencing any demolition or removal,
Tenant shall furnish to Landlord surety bonds insuring completion of the
demolition and removal as required by this Section. In the event that Tenant
shall fail fully and properly to complete such demolition and removal within a
reasonable time after the expiration of the Term, Landlord shall be entitled to
complete the same, and the costs thereof incurred by Landlord shall be payable
by Tenant to Landlord as additional Rent; provided, however, that if such
demolition and removal cannot be completed by Tenant within a reasonable time
after the expiration of the Term because of Unavoidable Delay, the Term shall be
extended by a period of time commensurate with such Unavoidable Delay so as to
permit Tenant an opportunity to complete its demolition and removal.
SECTION 22.03. REMOVAL OF IMPROVEMENTS. Notwithstanding the
------------- -----------------------
provisions of Sections 22.01 or 22.02, Tenant shall have the right to remove any
or all leasehold improvements, personal property or Improvements from the Leased
Premises as of the expiration of the Term. Tenant shall provide Landlord with a
written notice within thirty (30) days after the termination or expiration of
this Lease specifying the leasehold improvements, personal property and
Improvements that it intends to remove from the Leased Premises.
SECTION 22.04. PERSONAL PROPERTY NOT REMOVED. Any personal property
------------- -----------------------------
of Tenant which shall remain in or upon the Leased Premises as of the date
Tenant has surrendered possession of the Leased Premises shall be deemed to have
been abandoned by Tenant, and at the option of Landlord, such property: (a)
shall be retained by Landlord as its property; (b) shall be disposed of by
Landlord in such manner as Landlord shall determine, without accountability to
any person; or (c) shall be promptly removed by Tenant, at Tenant's expense,
upon written request from Landlord. Landlord shall not be responsible for any
loss or damage occurring to any property owned by Tenant or any licensee or
sublessee of Tenant.
SECTION 22.05. GRANT OF RECIPROCAL EASEMENTS. In the event that, at
------------- -----------------------------
the time of the expiration or earlier termination of the Term, Tenant or an
Affiliate of Tenant owns real estate adjacent to the Real Estate on which are
constructed driveways or walkways providing access to any Improvements or any
other facilities essential to the reasonable, economic use of the Improvements,
Tenant shall grant or cause its Affiliate to grant Landlord such easements
appurtenant to the Real Estate as Landlord shall reasonably request providing
for the continued use of such driveways, walkways and/or facilities in
connection with the Improvements in the manner the same were used prior to the
expiration or earlier termination of the Term. Such easements may require
Landlord to contribute to the cost of maintenance and repair of such driveways,
walkways and/or facilities upon terms reasonable and appropriate under the
prevailing circumstances.
SECTION 22.06. SURVIVAL OF TERMS. The terms of this Article XXII
------------- -----------------
shall survive any termination of this Lease.
41
<PAGE>
ARTICLE XXIII
-------------
NO WAIVER
---------
Failure of Landlord or Tenant to complain of any act or omission on
the part of the other party, however long the same may continue, shall not be
deemed to be a waiver by said party of any of its rights hereunder. No waiver by
Landlord or Tenant at any time, express or implied, of any breach of any
provision of this Lease shall be deemed a waiver of a breach of any other
provision of this Lease or a consent to any subsequent breach of the same or any
other provision. No acceptance by Landlord of any partial payment shall
constitute an accord or satisfaction, and such partial payment shall only be
deemed a part payment on account.
ARTICLE XXIV
------------
LANDLORD'S LIABILITY
--------------------
SECTION 24.01. ASSIGNMENT BY LANDLORD. Subject to the provisions of
-------------- -----------------------
Article VI above, Landlord may transfer or assign its interest in this Lease and
title to the Leased Premises to any person or entity without the requirement of
any consent by Tenant. In the event of the transfer or assignment of Landlord's
interest in this Lease and title to the Leased Premises and the assumption by
such transferee or assignee of all duties and obligations for the performance or
observance of any covenants or agreements to be performed or observed by
Landlord hereunder, only the transferee or assignee shall be responsible for the
performance or observance of such covenants or agreements thereafter under this
Lease. It is the intent of this Section 24.01 that the provisions of this Lease
shall be binding on Landlord, its successors and assigns, only during and in
respect of their respective periods of ownership.
SECTION 24.02. LIMITATION ON RIGHT OF RECOVERY AGAINST LANDLORD.
-------------- -------------------------------------------------
Notwithstanding anything to the contrary contained in this Lease, there shall be
absolutely no personal liability on Landlord, or any successor or assign of
Landlord, with respect to the terms, covenants and provisions of this Lease, and
Tenant shall look solely to the interest of the Landlord, its successors and
assigns, in the Leased Premises for the satisfaction of each and every remedy of
Tenant in the event of any breach by Landlord (or by such successor or assign)
of any of the terms, covenants and provisions of this Lease to be observed or
performed by Landlord hereunder, such exculpation of personal liability to be
absolute and without any exception whatsoever.
42
<PAGE>
ARTICLE XXV
-----------
FORCE MAJEURE
-------------
In the event that Landlord or Tenant shall be delayed, hindered in, or
prevented from the performance of any act required hereunder by reason of
Unavoidable Delay, then performance of such act shall be excused for the period
of the Unavoidable Delay and the period for the performance of any such act
shall be extended for a period equivalent to the period of the Unavoidable
Delay.
ARTICLE XXVI
------------
NOTICES
-------
No notice, approval, consent or other communication authorized or
required by this Lease shall be effective unless the same shall be in writing.
Any such communication shall be deemed given when either (a) hand delivered,
with signed receipt obtained therefor, (b) sent postage prepaid by United States
registered or certified mail, return receipt requested, directed or addressed in
each case to the other party at its address set forth below, or such other
address as either party may designate by notice given from time to time in
accordance with this Article XXVI, or (c) sent by nationally recognized
overnight courier service with all charges prepaid or billed to sender, directed
or addressed in each case to the other party at its address set forth below, or
such other address as either party may designate by notice given from time to
time in accordance with this Article XXVI; and (d) delivered or sent in the same
manner to any Mortgagee entitled to a copy of such notice pursuant to Section
15.03.
The address for notices to Landlord is:
Dan's Marina Mile 530,
Ohio River & Craig's Creek
Warsaw, Kentucky 41095
Attention: Daniel Webster
The address for notices to Tenant is:
Pinnacle Gaming Development Corp.
Post Office Box 399
Verdi, Nevada 89439
Attention: Robert F. List
43
<PAGE>
ARTICLE XXVII
-------------
CERTIFICATES
------------
Either party shall, without charge, at any time and from time to time
hereafter, within fifteen (15) days after written request of the other, certify
by written instrument duly executed and acknowledged to any mortgagee or
purchaser, or proposed mortgagee or proposed purchaser, or any other person,
firm or corporation specified in such request:
(a) As to whether this Lease has been supplemented or amended, and if
so, the substance and manner of such supplement or amendment;
(b) As to the validity and force and effect of this Lease, in
accordance with its tenor as then constituted;
(c) As to the existence of any default hereunder on the part of the
other party to this Lease;
(d) As to the existence of any offsets, counterclaims or defenses
thereto on the part of such other party;
(e) As to the commencement and expiration dates of the Term; and
(f) As to any other matters as may reasonably be so requested.
Any certificate referred to in this Article XXVII may be relied upon
by the party requesting it and any other person, firm or corporation to whom the
same may be exhibited or delivered, and the contents of such certificate shall
be binding on the party executing same.
ARTICLE XXIX
------------
GENERAL
-------
SECTION 29.01. GOVERNING LAW. This Lease and the performance hereof
------------- -------------
shall be governed, interpreted, construed and enforced by and in accordance with
the laws of the State of Indiana.
SECTION 29.02. PARTIAL INVALIDITY. If any term, covenant, condition
------------- ------------------
or provision of this Lease, or the application thereof to any person or
circumstance, shall at any time or to any extent be held invalid, illegal or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby, and this Lease
shall be construed as if the invalid, illegal or unenforceable provision was not
included herein.
44
<PAGE>
SECTION 29.03. MEMORANDUM OF LEASE. The parties shall, at the
------------- -------------------
request of either of them, promptly execute and deliver duplicate originals of
an instrument, in recordable form, which will constitute a memorandum of this
Lease, setting forth a description of the Leased Premises, the term of this
Lease and any other portions thereof.
SECTION 29.04. REMOTE VESTING. This Lease and all rights and
------------- --------------
interests created hereby are intended to comply in all respects with applicable
common or statutory law, including the common law Rule Against Perpetuities or
analogous statutory restrictions. Therefore, any provision of this Lease that
shall be construed by a final, non-appealable judicial determination to create
or permit to arise any interest in the Leased Premises that may vest in the
future in any person shall be deemed to prohibit the creation of such interest
from and after the date that is twenty-one (21) years after the death of the
survivor of the now living lawful descendants of any of the persons who are
attorneys practicing with the firm of Baker & Daniels in Indianapolis, Indiana,
as of the date of this Lease.
SECTION 29.05. INTERPRETATION. Wherever herein the singular number
------------- --------------
is used, the same shall include the plural, and the masculine gender shall
include the feminine and neuter genders, and vice versa, as the context shall
require. The section headings used herein are for reference and convenience
only and shall not enter into the interpretation hereof. This Lease may be
executed in several counterparts, each of which shall be an original, but all of
which shall constitute one and the same instrument.
SECTION 29.06. ENTIRE AGREEMENT. This Lease and that certain Option
------------- ----------------
to Lease Agreement between Landlord and Tenant pursuant to which this Lease is
executed constitute the entire agreement of the parties with respect to the
leasing of the Leased Premises by Tenant from Landlord, and there are no
representations, understanding or agreements between the parties that are not
set forth herein or therein. This Lease may not be modified except by a written
instrument signed by Tenant and Landlord.
SECTION 29.07. PARTIES. Except as herein otherwise expressly
------------- -------
provided, the covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective
successors and assigns.
SECTION 29.08. CONSTRUCTION OF AGREEMENT. Landlord and Tenant have
------------- -------------------------
participated fully in the negotiation and preparation of this Lease.
Accordingly, this Lease shall not be construed more strictly against any one of
the parties hereto.
SECTION 29.09. ATTORNEYS' FEES. Tenant shall pay the costs and
------------- ---------------
attorneys' fees incurred by Landlord in obtaining possession of the Leased
Premises after default of Tenant or upon the expiration or earlier termination
of the Term. The nonprevailing party shall pay the reasonable costs and
attorneys' fees incurred by the prevailing party in successfully enforcing
against the nonprevailing party any covenant or agreement of this Lease.
45
<PAGE>
SECTION 29.10. AUTHORITY. Landlord and Tenant each represent and
------------- ---------
warrant to the other, respectively, that (a) such party has the power and
authority to execute and deliver this Lease and to observe and perform the
respective covenants to be observed by them hereunder, (b) that the undersigned
person executing this Lease on such party's behalf has been fully empowered and
duly authorized by all necessary action of such party to execute and deliver
this Lease for and on behalf of such party, and (c) this Lease is the legal,
valid and binding obligation of such party.
SECTION 29.11 REQUIRED LANDLORD LICENSES. Landlord acknowledges that
------------- --------------------------
the Indiana Gaming Commission may, as part of the process for determining
whether to issue a Certificate or License to Tenant or to otherwise act on
Tenant's application for a License make findings or adopt a resolution
establishing or requiring the completion of conditions concerning or affecting
the Leased Premises or ownership thereof. Accordingly, Landlord agrees to use
best efforts to timely complete and submit to the Indiana Gaming Commission or
its delegate any required disclosure forms or waivers of confidentiality
restrictions which the Indiana Gaming Commission may require Landlord to submit
under applicable laws to enable the Indiana Gaming Commission to complete its
review of the Tenant's application. In the event the Indiana Gaming Commission
conditions the issuance of a License to Tenant on Landlord's divestment of the
Leased Premises and the Indiana Gaming Commission is able to require such
divesture under applicable laws as a condition to issuing a License to Tenant,
Landlord shall, within a reasonable time, transfer the Leased Premises to a
transferee selected by Landlord and acceptable to the Indiana Gaming Commission
subject to the terms of this Lease.
46
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Lease as of
the day an d year first above written.
LANDLORD:
THE WEBSTER FAMILY LIMITED PARTNERSHIP,
a(n) ___________ family limited partnership
By: __________________________________
Daniel Webster, General Partner
By: __________________________________
Marsha Webster, General Partner
THE DIUGUID FAMILY LIMITED PARTNERSHIP,
a(n) ____________ family limited partnership
By: __________________________________
William G. Diuguid, General Partner
By: __________________________________
Sara T. Diuguid, General Partner
TENANT:
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By: __________________________________
Robert F. List, Treasurer
<PAGE>
Hollywood Park, Inc.
Exhibit 10.48
To Form 10-Q, June 30, 1998
MEMORANDUM OF
-------------
OPTION AGREEMENT
----------------
THIS MEMORANDUM OF OPTION AGREEMENT (this "MEMORANDUM"), is made as of this
2nd day of June, 1998, by and between THE WEBSTER FAMILY LIMITED PARTNERSHIP,
a(n) ___________ family limited partnership and THE DIUGUID FAMILY LIMITED
PARTNERSHIP, a(n) _____________ family limited partnership (collectively, the
"LANDLORD"), and PINNACLE GAMING DEVELOPMENT CORP., a Colorado corporation
("TENANT"), for the purpose of evidencing their execution of a certain Option
Agreement dated of even date herewith (the "AGREEMENT").
AGREEMENT:
1. Pursuant to the Agreement, Tenant and Landlord have agreed that Tenant
shall have the right or option to lease and Landlord shall have the obligation
to lease to Tenant upon the occurrence of certain conditions more particularly
described in the Agreement certain real property in Switzerland County, Indiana,
as more particularly described on EXHIBIT A attached hereto and made a part
---------
hereof (the "REAL ESTATE"), together with all rights, privileges, interest,
easements, hereditaments, appurtenances, fixtures and improvements now or
hereafter belonging, appertaining, located on, attached to, or used in
connection with the Real Estate (collectively, the "APPURTENANCES") (the Real
Estate, together with the Appurtenances, being referred to herein as the
"PROPERTY"); provided, however, Tenant's right to lease the Property shall
expire on December 31, 1999, or on December 31, 2000 in the event Tenant extends
the Agreement, or such later time as the parties may agree.
2. It is the intention of the parties hereto that this instrument shall
be recorded in the office of the recorder of Switzerland County, State of
Indiana for the purpose of effecting and affording record and constructive
notice of the contractual interest of Tenant under the Agreement in and to the
Property.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Memorandum of Option
Agreement as of the date first above written.
"LANDLORD"
THE WEBSTER FAMILY LIMITED PARTNERSHIP,
a(n) ___________ family limited partnership
By: /s/ Daniel Webster
-----------------------------------------
Daniel Webster, General Partner
By: /s/ Marsha Webster
-----------------------------------------
Marsha Webster, General Partner
THE DIUGUID FAMILY LIMITED PARTNERSHIP,
a(n) ____________ family limited partnership
By: /s/ Wm. G. Diuguid
-----------------------------------------
William G. Diuguid, General Partner
By: /s/ Sara T. Diuguid
-----------------------------------------
Sara T. Diuguid, General Partner
"TENANT"
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By: /s/ Robert F. List
-----------------------------------------
Robert F. List, Treasurer
2
<PAGE>
STATE OF KENTUCKY )
) SS:
COUNTY OF GALLATIN )
Before me, a Notary Public in and for said County and State, personally
appeared DANIEL WEBSTER, known to me to be a General Partner of THE WEBSTER
FAMILY LIMITED PARTNERSHIP, who being first duly sworn by me upon his oath,
acknowledged the execution of the foregoing Memorandum of Option Agreement for
and on behalf of said entity.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
---
/s/ Tina M. Logodon
---------------------------
Notary Public - Signature
Tina M. Logodon
---------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/03/02 Gallatin
- ---------------------- ---------------------------
3
<PAGE>
STATE OF KENTUCKY )
) SS:
COUNTY OF GALLATIN )
Before me, a Notary Public in and for said County and State, personally
appeared MARSHA WEBSTER, known to me to be a General Partner of THE WEBSTER
FAMILY LIMITED PARTNERSHIP, who being first duly sworn by me upon her oath,
acknowledged the execution of the foregoing Memorandum of Option Agreement for
and on behalf of said entity.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
---
/s/ Tina M. Logoden
---------------------------
Notary Public - Signature
Tina M. Logoden
---------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/03/02 Gallatin
- ---------------------- ---------------------------
STATE OF KENTUCKY )
) SS:
COUNTY OF Gallatin )
Before me, a Notary Public in and for said County and State, personally
appeared WILLIAM G. DIUGUID, known to me to be a General Partner of THE DIUGUID
FAMILY LIMITED PARTNERSHIP, who being first duly sworn by me upon his oath,
acknowledged the execution of the foregoing Memorandum of Option Agreement for
and on behalf of said entity.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
---
/s/ Tina M. Logoden
---------------------------
Notary Public - Signature
Tina M. Logoden
---------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/02/02 Gallatin
- ---------------------- ---------------------------
4
<PAGE>
STATE OF KENTUCKY )
) SS:
COUNTY OF GALLATIN )
Before me, a Notary Public in and for said County and State, personally
appeared SARA T. DIUGUID, known to me to be a General Partner of THE DIUGUID
FAMILY LIMITED PARTNERSHIP, who being first duly sworn by me upon his oath,
acknowledged the execution of the foregoing Memorandum of Option Agreement for
and on behalf of said entity.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
---
/s/ Tina M. Logoden
---------------------------
Notary Public - Signature
Tina M. Logoden
---------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/03/02 Gallatin
- ---------------------- ---------------------------
STATE OF INDIANA )
) SS:
COUNTY OF Marion )
Before me, a Notary Public in and for said County and State,
personally appeared ROBERT F. LIST, known to me to be the Treasurer of PINNACLE
GAMING DEVELOPMENT CORP., who being first duly sworn by me upon his oath,
acknowledged the execution of the foregoing Memorandum of Option Agreement for
and on behalf of said entity.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
---
/s/ Loretta K. Cook
---------------------------
Notary Public - Signature
Loretta K. Cook
---------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
08/23/01 Marion
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5
<PAGE>
Hollywood Park, Inc.
Exhibit 10.49
To Form 10-Q, June 30, 1998
AMENDED AND RESTATED OPTION AGREEMENT
-------------------------------------
THIS AMENDED AND RESTATED OPTION AGREEMENT (this "AGREEMENT") is made as of
June 2, 1998, by and among DANIEL WEBSTER, a resident of the Commonwealth of
Kentucky, MARSHA S. WEBSTER, a resident of the Commonwealth of Kentucky, WILLIAM
G. DIUGUID, a resident of the Commonwealth of Kentucky, SARA T. DIUGUID, a
resident of the Commonwealth of Kentucky, J.R. SHOWERS, III, a resident of the
State of Indiana, and CAROL A. SHOWERS, a resident of the State of Indiana
(collectively, "LANDLORD"), and PINNACLE GAMING DEVELOPMENT CORP., a Colorado
corporation ("TENANT").
RECITALS
A. Landlord and Indiana Ventures LLC, a Nevada limited liability company
("INDIANA VENTURE"), entered into that certain Option Agreement (Expansion
Parcel), dated December 22, 1995 (the "ORIGINAL AGREEMENT").
B. Tenant has assumed all of Indiana Venture's right, title and interest
in and to the Original Agreement.
C. Landlord is the owner of that certain real property in Switzerland
County, Indiana, described as Parcel B on EXHIBIT A (the "PROPERTY").
---------
D. Tenant is an applicant for an Indiana Riverboat Owner's License to be
issued by the Indiana Gaming Commission for the County of Switzerland, Indiana.
E. In the event a Certificate of Suitability is awarded to Tenant, Tenant
shall lease the Property and utilize the same for the development of a riverboat
casino complex on the Property (the "PROJECT").
F. Landlord and Tenant desire to amend and restate the Original Agreement
in its entirety as hereinafter provided, and upon and subject to the terms and
conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
1. OPTION. Landlord hereby grants to Tenant the exclusive and irrevocable
------
option (the "OPTION") to lease the Property, together with all improvements now
and hereafter located thereon.
<PAGE>
2. OPTION PAYMENT. In consideration of this Option, Tenant has paid One
--------------
Dollar ($1.00) to Landlord of even date hereof (the "OPTION PAYMENT"). The
Option Payment is nonrefundable.
<PAGE>
3. OPTION PERIOD. The option to lease the Property granted by this
-------------
Agreement shall be exercised by Tenant prior to 5:00 p.m. eastern standard time
on the date which is ten (10) business days after the Tenant or its Affiliate
(as defined in the Lease) is granted a Certificate of Suitability from the
Indiana Gaming Commission (the "COMMISSION") to operate a riverboat casino on
the Ohio River from Switzerland County, Indiana (a "CERTIFICATE"), provided,
that Tenant's right to exercise the option to lease the Property granted by this
Agreement shall expire on December 31, 1998 (the "OPTION EXPIRATION DATE")
unless Tenant extends such date as herein provided. Tenant shall not be entitled
to exercise the Option unless Tenant or its Affiliate receives a Certificate.
Tenant shall be entitled to extend the Option Expiration Date to December 31,
1999 by written notice and payment of the sum of Fifty Thousand Dollars
($50,000.00) to Landlord on or before December 31, 1998 (the "FIRST OPTION
EXTENSION PAYMENT"). Tenant shall be entitled to further extend the Option
Expiration Date to December 31, 2000 by written notice and payment of the sum of
Fifty Thousand Dollars ($50,000.00) to Landlord on or before December 31, 1999
(the "SECOND OPTION EXTENSION PAYMENT") (the First Option Extension Payment and
the Second Option Extension Payment are hereinafter referred to together as the
"OPTION EXTENSION PAYMENTS"). In the event the Option is exercised and the Lease
(as hereinafter defined) is executed, the Option Extension Payments shall be
credited against the Base Rent (as defined in the Lease) in accordance with the
terms of the Lease.
4. EXERCISE OF OPTION. Tenant shall exercise the Option within ten (10)
------------------
business days after the Tenant or its Affiliate receives a Certificate by
delivery of a notice to Landlord indicating Tenant's decision to exercise the
Option (the "NOTICE OF EXERCISE OF OPTION"). Within thirty (30) days after the
Notice of Exercise of Option is delivered, Landlord and Tenant or any entity
controlled or designated by Tenant shall each execute a lease agreement (the
"LEASE") in substantially the form of EXHIBIT B attached hereto.
---------
Notwithstanding the foregoing, Tenant shall not exercise the Option unless
Tenant shall concurrently exercise its option under that certain Option
Agreement dated June 2, 1998 between Tenant and The Webster Family Limited
Partnership and The Diuguid Family Limited Partnership (the "OTHER OPTION").
5. REMOVAL OF STRUCTURES. Tenant shall advise Landlord within ten (10)
---------------------
days prior to the exercise of the Option whether or not Tenant intends to
utilize the structures located on the Property. In the event Tenant intends not
to utilize such structures, Landlord shall have the right to remove such
structures from the Property at its sole cost and expense.
6. ACQUISITION OF LICENSE. Tenant shall pay to Landlord the sum of One
----------------------
Hundred Thousand Dollars ($100,000.00) upon the occurrence of any of the
following:
a. Tenant or its Affiliate acquires an existing License (as
hereinafter defined) or an interest in an existing License; or
b. Casino Magic, Inc. is acquired by Hollywood Park, Inc.
("HOLLYWOOD") and Hollywood or its Affiliate is awarded a Certificate of
Suitability to operate a riverboat casino on the Ohio River from a county
other than Switzerland County, Indiana by the Commission.
3
<PAGE>
The term "LICENSE" shall mean an owner?s License as defined in I.C.
(s) 4-33-2-15.
7. CERTIFICATE PAYMENT. Within three (3) business days after Tenant or
-------------------
its Affiliate is awarded a Certificate by the Commission, Tenant shall make a
nonrefundable payment in the amount of Fifty Thousand Dollars ($50,000.00) to
Landlord. Twenty-Five Thousand Dollars ($25,000.00) of such payment shall be
credited against the Base Rent in accordance with the terms of the Lease.
8. LICENSE PAYMENT. Within three (3) business days after Tenant or its
---------------
Affiliate is awarded a License by the Commission, Tenant shall make a
nonrefundable payment in the amount of Fifty Thousand Dollars ($50,000.00) to
Landlord. Twenty-Five Thousand Dollars ($25,000.00) of such payment shall be
credited against the Base Rent in accordance with the terms of the Lease.
9. PERMIT APPLICATION. Tenant shall, at its sole cost and expense,
------------------
diligently and actively pursue the processing of the existing permit application
(i.e., Permit Application No. 199500322) that is on file with the U.S. Army Corp
of Engineers. Landlord shall cooperate with Tenant and provide Tenant and/or any
agent, representative or independent contractor of Tenant, complete access to
the Property to conduct any and all environmental, archeological and engineering
tests or studies with respect to the Property.
10. TERMINATION. Tenant shall have the right to terminate this Agreement
-----------
at any time prior to being awarded a Certificate. Landlord shall have the right
to terminate this Agreement and the Tenant's right to exercise the Option in the
event the Commission awards a fifth (5th) Certificate of Suitability to operate
a riverboat casino on the Ohio River to any entity other than Tenant or its
Affiliate.
11. LANDLORD'S COOPERATION. Landlord shall cooperate fully with Tenant
----------------------
and shall execute on behalf of Tenant any documents necessary for Tenant to
process the Property through local, city, state and county zoning and
development processes. Prior to Tenant's exercise of the Option, Landlord shall
not be obligated to cooperate with Tenant or execute any documents to process
the Property through any zoning or development processes if such processes would
result in an outcome that would be binding on the Property or Landlord if Tenant
shall fail to lease the Property. Landlord acknowledges that the transaction
contemplated in this Agreement is subject to regulation by governmental
authorities having jurisdiction over gaming in Switzerland County, Indiana, and
elsewhere (collectively referred to as "GAMING AUTHORITIES"). Landlord also
acknowledges that Tenant conducts business pursuant to privileged licenses
issued by Gaming Authorities. Accordingly, Landlord will fully cooperate with
Tenant or any Gaming Authorities concerning any inquiries, investigations and
requests for information made by any Gaming Authorities in connection with the
gaming operations of Tenant or any entity or individual related to or affiliated
with Tenant.
12. INFORMATION AND ACCESS. Within two (2) weeks after the date hereof,
----------------------
Landlord shall deliver to Tenant copies of all surveys, permits, approvals,
studies, analyses, maps, utility plans,
4
<PAGE>
engineering reports, soils reports, title reports, commitments and policies, and
similar written instruments or documents relating to the Property in Landlord's
possession or control not previously provided to Tenant (the "PROJECT
DOCUMENTS"). Landlord shall immediately deliver to Tenant copies of all Project
Documents that Landlord receives after the date hereof. Landlord shall give to
Tenant and Tenant's counsel, accountants, and other representatives, full access
during normal business hours throughout the Option Period to the Property and
all of Landlord?s books, contracts, commitments and records with respect to the
Property and shall furnish Tenant during such period with all such information
concerning its affairs as Tenant may request. Tenant may conduct such tests upon
the Property as Tenant deems necessary, including, but not limited to,
engineering and environmental tests. Tenant shall indemnify Landlord from any
damages, costs or expenses arising out of Tenant's inspection, use or occupancy
of the Property. Copies of any Project Documents not in Landlord's possession or
control but which subsequently come into Landlord's possession or control shall
be delivered immediately to Tenant.
13. REPRESENTATIONS AND WARRANTIES. Landlord represents and warrants to
------------------------------
Tenant as follows:
a. This Agreement constitutes legal, valid and binding obligations
of Landlord, enforceable in accordance with its respective terms.
b. Neither the execution, delivery or performance of this Agreement
will breach any statute, law, ordinance, rule or regulation of any
governmental authority or conflict with or result in a breach of any of the
terms, conditions or provisions of any judgment, order, injunction, decree
or ruling of any court or governmental authority to which Landlord or the
Property is subject or any agreement or instrument to which it is party or
by which it or the Property is bound, or constitute a default thereunder.
c. No consent, approval or authorization of any governmental authority
(except for the Gaming Authorities) or private party is required in
connection with the execution, delivery and performance of this Agreement
by Landlord.
d. Landlord has good and marketable title to the Property. There are
no monetary liens or encumbrances affecting the Property and Landlord will
not cause or permit any such lien or encumbrance to be placed against the
Property which has priority over the Memorandum of Option described in
Section 28 below.
14. CONFIDENTIALITY. Landlord and Tenant agree to treat confidentially
---------------
the existence and terms of this Agreement and any information, analyses,
compilations, studies or other documents or records (collectively, the
"CONFIDENTIAL MATERIAL") which Tenant or any of Tenant's directors, officers,
employees, representatives, advisors or agents furnish to Landlord or Landlord's
employees, representatives, advisors or agents, and vice-versa (the
"RECIPIENTS"). Landlord and Tenant agree that the Confidential Material will be
kept confidential by Landlord and Tenant and
5
<PAGE>
the other Recipients and that any such information will be disclosed only to
Recipients who need to know such information and any of the Gaming Authorities,
or any other State Agency that requests or requires such information and to no
other persons (it being understood that (a) such Recipients shall be information
by Landlord or Tenant, as the case may be, of the confidential nature of such
information, shall be directed by Landlord to treat such information
confidentially and shall agree to abide by the provisions of this Section, and
(b) in any event, Landlord or Tenant, as the case may be, shall be responsible
for any breach of this Section by any Recipient). The provisions of this Section
shall survive the termination or expiration of this Agreement.
15. BROKERAGE FEES. Each of the parties hereto represents to the other
--------------
that it has not entered into any agreement for the payment of any fees,
compensation or expenses to any person, firm or corporation in connection with
the transactions provided for herein, and each agrees to hold and save the other
harmless from any such fees, compensation or expenses which may be suffered by
reason of any such agreement or purported agreement by the indemnifying party.
16. NOTICES. Any and all notices and demands by any party hereto to any
-------
other party required or desired to be given hereunder shall be in writing and
shall be validly given or made only if deposited in the United States mail,
certified or registered, postage prepaid, return receipt requested, or if made
by Federal Express or other similar delivery service keeping records of
deliveries and attempted deliveries or if sent by telecopy. Service by United
States Mail or by Federal Express or other similar delivery service shall be
conclusively deemed made on the first business day delivery is attempted or upon
receipt, whichever is sooner. Service by telecopy shall be deemed made upon the
next business day following confirmed transmission. The parties may change their
address for the purpose of receiving notices or demands as herein provided by a
written notice given in the manner aforesaid to the others, which notice of
change of address shall not become effective, however, until the actual receipt
thereof by the others.
17. GOVERNING LAW. This Agreement shall be deemed to be made under the
-------------
laws of the State of Indiana and for all purposes shall be governed by and
construed in accordance with the laws thereof.
18. BINDING EFFECT. Subject to any limitation on assignment set forth in
--------------
this Agreement, this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. It is
specifically agreed that Tenant may not assign, transfer or convey any or all of
its rights and obligations hereunder, by operation of law or otherwise, to any
person or entity other than an Affiliate of Tenant without the Landlord's prior
written consent. Landlord may not assign or transfer its rights and obligations
under this Agreement, by operation of law or otherwise, without the prior
consent of Tenant, which consent may be withheld in Tenant's sole discretion.
Notwithstanding the foregoing, Tenant shall have the right to assign or transfer
any or all of its rights and obligations under this Agreement to an Affiliate of
Tenant. No consent shall be required with respect to an acquisition of the
interests in Tenant of Hilton Hotel Corporation by Boomtown Hoosier, Inc. or an
Affiliate thereof or a subsequent transfer of such beneficial interest to
Horseshoe Gaming, Inc. or its Affiliate. Notwithstanding the foregoing, Landlord
shall have the
6
<PAGE>
right to assign or transfer any or all of its rights and obligations under this
Agreement to any blood relative(s) of Landlord or any corporation, trust,
limited liability company or other entity which is controlled by or created for
the benefit of Landlord or Landlord's blood relative without Tenant's consent or
approval. Except as specifically provided above in this Section, this Agreement
is not intended to, and shall not, create any rights in any person or entity
whatsoever except Tenant and Landlord.
19. SEVERABILITY. If any term, provision, covenant or condition of this
------------
Agreement or any application thereof should be held by a court of competent
jurisdiction to be invalid, void or unenforceable by the laws applicable
thereto, such provision shall be deemed severable from and shall in no way
affect the enforceability and validity of the remaining provisions of this
Agreement, all provisions, covenants, and conditions of this Agreement, and all
applications thereof, not held invalid, void or unenforceable, shall continue in
full force and effect and shall in no way be affected, impaired or invalidated
thereby.
20. INTERPRETATION. This Agreement is an agreement between financially
--------------
sophisticated and knowledgeable parties and is entered into by the parties in
reliance upon the economic and legal bargains contained herein and shall be
interpreted and construed in a fair and impartial manner without regard to such
factors as the party who prepared (or caused the preparation of) this instrument
or the relative bargaining power of the parties.
21. CALCULATION OF TIME PERIODS. If any date herein set forth for the
---------------------------
performance of any obligation by Landlord or Tenant or for the delivery of any
instrument or notice herein provided should be a Saturday, Sunday, or legal
holiday, such performance or delivery may be made on the next business day
following such Saturday, Sunday, or legal holiday. As used herein, the term
"legal holiday" means any state or federal holiday for which financial
institutions or post offices are closed in the local jurisdiction in which the
Property is located, for observance thereof, and the term "business day" means
any day which is not a Saturday, Sunday, or legal holiday.
22. EXHIBITS. All exhibits referred to herein and attached hereto are
--------
hereby made a part hereof and are incorporated herein by this reference.
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement
----------------
between the parties relating to the transactions contemplated hereby, and amends
and restates in its entirety the Original Agreement, and all prior or
contemporaneous agreements, understandings, representations and statements, oral
or written, are merged herein. No modification, waiver, amendment, discharge or
change of this Agreement shall be valid unless the same is in writing and signed
by the party against which the enforcement of such modification, waiver,
amendment, discharge or change is or may be sought.
24. ATTORNEYS' FEES. In the event any action or proceeding is commenced
---------------
by any party against any other in connection herewith, including but not limited
to any proceeding in bankruptcy, the prevailing party shall be entitled to
recover from the other party all costs and expenses, including, without
limitation, reasonable attorneys' fees and costs incurred in such action or
7
<PAGE>
proceeding, including, but not limited to, any proceeding in bankruptcy, in
addition to any other relief awarded by the court.
25. TIME OF ESSENCE. Time is of the essence of this Agreement and all of
---------------
the terms, provisions, covenants and conditions hereof.
26. CAPTIONS AND PRONOUNS. The captions appearing at the commencement of
---------------------
the sections hereof are descriptive only and for convenience in reference to
this Agreement and in no way whatsoever define, limit, amplify or describe the
scope or intent of this Agreement, nor in any way be used in interpreting the
terms of this Agreement or affect this Agreement. Personal pronouns used herein
shall be construed as though of the gender and number required by the context,
and the singular shall include the plural and the plural the singular as may be
required by the context.
27. FURTHER ASSURANCES. In addition to the acts and deeds recited herein
------------------
and contemplated to be performed, executed and/or delivered by Landlord,
Landlord shall, at Tenant's cost and expense, perform, execute and/or deliver or
cause to be performed, executed and/or delivered any and all further acts, deeds
and assurances as may, from time to time, be reasonably requested by Tenant to
consummate the transactions contemplated in this Agreement and for the better
assuring to Tenant all of its rights hereunder.
28. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same Agreement. The
parties contemplate that they might be executing counterparts of this Agreement
by facsimile and agree and intend that a signature by facsimile machine shall
bind each party so signing with the same effect as though the signature were an
original signature.
29. MEMORANDUM OF OPTION. Concurrently with execution of this Agreement
--------------------
the parties shall cause to be recorded in the real property records where the
Property is located a memorandum of the Option in form of EXHIBIT C attached
---------
hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
[INTENTIONALLY BLANK]
8
<PAGE>
LANDLORD SIGNATURE PAGE
LANDLORD:
/s/ Daniel Webster
----------------------------------
Daniel Webster
/s/ Marsha Webster
----------------------------------
Marsha Webster
/s/ William G. Diuguid
----------------------------------
William G. Diuguid
/s/ Sara T. Diuguid
----------------------------------
Sara T. Diuguid
/s/ J.R. Showers, III
----------------------------------
J.R. Showers, III
/s/ Carol A. Showers
----------------------------------
Carol A. Showers
<PAGE>
TENANT SIGNATURE PAGE
TENANT:
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By: /s/ Robert F. List
----------------------------------
Robert F. List, Treasurer
EXHIBIT B
ASSIGNMENT OF OPTION AGREEMENT
------------------------------
THIS ASSIGNMENT OF OPTION AGREEMENT (the "ASSIGNMENT") is made this 2nd day
of June, 1998, by DANIEL WEBSTER, a resident of the Commonwealth of Kentucky and
MARSHA S. WEBSTER, a resident of the Commonwealth of Kentucky (together, the
"ASSIGNOR") to PINNACLE GAMING DEVELOPMENT CORP., a Colorado corporation
("ASSIGNEE").
RECITALS
--------
A. Assignor, as Buyers, and John Keeton and Dorothy Keeton (together, the
"SELLERS") entered into that certain Option Agreement, dated November 9, 1997
(the "OPTION AGREEMENT"), whereby Assignor has the right or option to purchase
and Sellers have the obligation to sell to Purchaser until December 31, 1998, or
until December 31, 1999 if the option is extended, or until such later time as
the parties may agree, certain real property located in Switzerland County,
Indiana, as more particularly described in the Option Agreement (the
"PROPERTY").
B. Assignor, together with William G. Diuguid, Sara T. Diuguid, J.R.
Showers, III and Carol A. Showers (collectively, the "LANDLORD") have entered
into that certain Amended and Restated Option Agreement with Assignee dated of
even date herewith, a copy of which is attached hereto as EXHIBIT A and
---------
incorporated herein by reference (the "PARCEL B OPTION AGREEMENT").
C. Assignor has agreed to assign all of its right, title and interest in
and to the Option Agreement to Assignee.
D. Assignee has agreed to accept the assignment of all Assignor's right,
title and interest in and to the Option Agreement.
AGREEMENT
---------
<PAGE>
NOW, THEREFORE, in consideration of the mutual covenants, conditions,
provisions and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Assignor does hereby assign to Assignee all of its right, title and
interest in and to the Option Agreement upon the same covenants, terms,
conditions and provisions as are contained therein, effective as of the earlier
date of (a) Assignee's exercise of the Parcel B Option Agreement, or (b) the
payment by Assignee of the First Option Extension Payment (as defined in the
Parcel B Option Agreement) to Landlord (the "ASSIGNMENT DATE").
2. Assignee does hereby accept the assignment of all Assignor's right,
title and interest in and to the Option Agreement and does hereby assume
Assignor's obligations thereunder.
3. In addition to the mutual covenants and agreements contained herein,
Assignee has contemporaneously herewith paid to Assignor Twenty Thousand Dollars
($20,000), the receipt and sufficiency of which is hereby acknowledged by
Assignor. In addition, Assignee agrees to pay Fifty Thousand Dollars ($50,000)
to Assignor upon the closing of the Property in accordance with the terms of the
Option Agreement or Assignee or its direct affiliate otherwise acquires the
Property.
4. Assignor hereby represents and warrants to Assignee that Assignor has
not heretofore assigned, conveyed, sold or granted any interest in the Option
Agreement and that the Option Agreement is in full force and effect and neither
party is in default thereunder.
5. In the event Assignee fails to extend the Option as set forth in the
Option Agreement, Assignee will promptly notify Assignor.
6. Assignor and Assignee agree to release each other, and their
respective agents, employees, representatives, members and successors (the
"RELATED PARTIES") from and against any claims, demands, causes of action,
losses, damages, liabilities, costs and expenses asserted against, or imposed
upon or incurred by the Related Parties (including attorneys' fees and
expenses), whether suit is instituted or not, (a) arising by reason or failure
of Assignor or Assignee to perform or fulfill any of their obligations under the
Option Agreement arising from and after the Assignment Date, or (b) arising out
of or in accordance with the execution of the Option Agreement or the
circumstances surrounding the execution of the Option Agreement.
7. This Assignment shall be binding upon and inure to the benefit of
Assignor and Assignee and their respective legal representatives, successors and
assigns.
8. This Assignment may be executed in any number of counterparts, each of
which when executed and delivered shall be of the same binding effect as an
original.
<PAGE>
9. Concurrently with execution of this Agreement the parties shall cause
to be recorded in the real property records where the Property is located a
memorandum of the Assignment in form of EXHIBIT A attached hereto.
---------
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Option Agreement as of the day and year first written above.
[INTENTIONALLY BLANK]
-12-
<PAGE>
ASSIGNOR SIGNATURE PAGE
-----------------------
"ASSIGNOR"
_____________________________________
Daniel Webster
_____________________________________
Marsha S. Webster
-13-
<PAGE>
ASSIGNEE SIGNATURE PAGE
-----------------------
"ASSIGNEE"
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By:_________________________________
Robert F. List, Treasurer
<PAGE>
HOLLYWOOD PARK, INC
Exhibit 10.50
To Form 10-Q, June 30, 1998
MEMORANDUM OF AMENDED AND RESTATED
----------------------------------
OPTION AGREEMENT
----------------
THIS MEMORANDUM OF OPTION AGREEMENT (this "MEMORANDUM"), is made as of this
4th day of June, 1998, by and between DANIEL WEBSTER, a resident of the
Commonwealth of Kentucky, MARSHA S. WEBSTER, a resident of the Commonwealth of
Kentucky, WILLIAM G. DIUGUID, a resident of the Commonwealth of Kentucky, SARA
T. DIUGUID, a resident of the Commonwealth of Kentucky, J.R. SHOWERS, III, a
resident of the State of Indiana, and CAROL A. SHOWERS, a resident of the State
of Indiana (collectively, "LANDLORD"), and PINNACLE GAMING DEVELOPMENT CORP., a
Colorado corporation ("TENANT"), for the purpose of evidencing their execution
of a certain Amended and Restated Option Agreement dated of even date herewith
(the "AGREEMENT").
AGREEMENT:
1. Pursuant to the Agreement, Tenant and Landlord have agreed that Tenant
shall have the right or option to lease and Landlord shall have the obligation
to lease to Tenant upon the occurrence of certain conditions more particularly
described in the Agreement certain real property in Switzerland County, Indiana,
as more particularly described on EXHIBIT A attached hereto and made a part
---------
hereof (the "REAL ESTATE"), together with all rights, privileges, interest,
easements, hereditaments, appurtenances, fixtures and improvements now or
hereafter belonging, appertaining, located on, attached to, or used in
connection with the Real Estate (collectively, the "APPURTENANCES") (the Real
Estate, together with the Appurtenances, being referred to herein as the
"PROPERTY"); provided, however, Tenant's right to lease the Property shall
expire on December 31, 1998, or on December 31, 1999 or December 31, 2000 in the
event Tenant extends the Agreement, or such later time as the parties may agree.
2. It is the intention of the parties hereto that this instrument shall be
recorded in the office of the recorder of Switzerland County, State of Indiana
for the purpose of effecting and affording record and constructive notice of the
contractual interest of Tenant under the Agreement in and to the Property.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Memorandum of Amended
and Restated Option Agreement as of the date first above written.
"LANDLORD"
__/s/ Daniell Webster____________
Daniel Webster
__/s/ Marsha Webster_____________
Marsha Webster
__/s/ William G. Diuguid____________
William G. Diuguid
__/s/ Sara T. Diuguid______________
Sara T. Diuguid
__/s/ J. R. Showers III______________
J.R. Showers, III
__/s/ Carol A. Showers_______________
Carol A. Showers
"TENANT"
PINNACLE GAMING DEVELOPMENT CORP.
By: __/s/ Robert F. List________________
Robert F. List, Treasurer
2
<PAGE>
STATE OF KY )
) SS:
COUNTY OF Gallatin )
Before me, a Notary Public in and for said County and State, personally
appeared DANIEL WEBSTER, who being first duly sworn by me upon his oath,
acknowledged the execution of the foregoing as his voluntary act and deed.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
/s/ Tina M. Logodon
---------------------------------
Notary Public - Signature
Tina M. Logodon
---------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/02/02 Gallatin
- --------------------------- ---------------------------------
STATE OF KY )
) SS:
COUNTY OF Gallatin )
Before me, a Notary Public in and for said County and State, personally
appeared MARSHA WEBSTER, who being first duly sworn by me upon her oath,
acknowledged the execution of the foregoing as her voluntary act and deed.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
/s/ Tina M. Logodon
---------------------------------
Notary Public - Signature
Tina M. Logodon
---------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
003/02/02 Gallatin
- --------------------------- ---------------------------------
3
<PAGE>
STATE OF KY )
) SS:
COUNTY OF Gallatin )
Before me, a Notary Public in and for said County and State, personally
appeared WILLIAM G. DIUGUID, who being first duly sworn by me upon his oath,
acknowledged the execution of the foregoing as his voluntary act and deed.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
/s/ Tina M. Logodon
---------------------------------
Notary Public - Signature
Tina M. Logodon
---------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/02/02 Gallatin
- --------------------------- ---------------------------------
STATE OF KY )
) SS:
COUNTY OF Gallatin )
Before me, a Notary Public in and for said County and State, personally
appeared SARA T. DIUGUID, who being first duly sworn by me upon her oath,
acknowledged the execution of the foregoing as her voluntary act and deed.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
/s/ Tina M. Logodon
---------------------------------
Notary Public - Signature
---------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/02/02 Gallatin
- --------------------------- ---------------------------------
4
<PAGE>
STATE OF KY )
) SS:
COUNTY OF Gallatin )
Before me, a Notary Public in and for said County and State, personally
appeared J.R. SHOWERS, III, who being first duly sworn by me upon his oath,
acknowledged the execution of the foregoing as his voluntary act and deed.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
/s/ Tina M. Logodon
---------------------------------
Notary Public - Signature
Tina M. Logodon
---------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/02/02 Gallatin
- --------------------------- ---------------------------------
STATE OF KY )
) SS:
COUNTY OF Gallatin )
Before me, a Notary Public in and for said County and State, personally
appeared CAROL A. SHOWERS, who being first duly sworn by me upon her oath,
acknowledged the execution of the foregoing as her voluntary act and deed.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
/s/ Tina M. Logodon
---------------------------------
Notary Public - Signature
Tina M. Logodon
---------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
03/02/02 Gallatin
- --------------------------- ---------------------------------
5
<PAGE>
STATE OF INDIANA KY )
) SS:
COUNTY OF Marion )
Before me, a Notary Public in and for said County and State, personally
appeared ROBERT F. LIST, known to me to be the Treasurer of PINNACLE GAMING
DEVELOPMENT CORP., who being first duly sworn by me upon his oath, acknowledged
the execution of the foregoing Memorandum of Option Agreement for and on behalf
of said entity.
WITNESS my hand and Notarial Seal this 4th day of June, 1998.
/s/ Lorretta K. Cook
---------------------------------
Notary Public - Signature
Lorretta K. Cook
---------------------------------
Notary Public - Printed
My Commission Expires: My County of Residence:
08/23/01 Marion
- --------------------------- ---------------------------------
6
<PAGE>
Hollywood Park, Inc.
Exhibit 10.51
To Form 10-Q, June 30, 1998
ASSIGNMENT OF OPTION AGREEMENT
------------------------------
THIS ASSIGNMENT OF OPTION AGREEMENT (the "ASSIGNMENT") is made this 2nd day
of June, 1998, by DANIEL WEBSTER, a resident of the Commonwealth of Kentucky and
MARSHA S. WEBSTER, a resident of the Commonwealth of Kentucky (together, the
"ASSIGNOR") to PINNACLE GAMING DEVELOPMENT CORP., a Colorado corporation
("ASSIGNEE").
RECITALS
--------
A. Assignor, as Buyers, and John Keeton and Dorothy Keeton (together, the
"SELLERS") entered into that certain Option Agreement, dated November 9, 1997
(the "OPTION AGREEMENT"), whereby Assignor has the right or option to purchase
and Sellers have the obligation to sell to Purchaser until December 31, 1998, or
until December 31, 1999 if the option is extended, or until such later time as
the parties may agree, certain real property located in Switzerland County,
Indiana, as more particularly described in the Option Agreement (the
"PROPERTY").
B. Assignor, together with William G. Diuguid, Sara T. Diuguid, J.R.
Showers, III and Carol A. Showers (collectively, the "LANDLORD") have entered
into that certain Amended and Restated Option Agreement with Assignee dated of
even date herewith, a copy of which is attached hereto as EXHIBIT A and
---------
incorporated herein by reference (the "PARCEL B OPTION AGREEMENT").
C. Assignor has agreed to assign all of its right, title and interest in
and to the Option Agreement to Assignee.
D. Assignee has agreed to accept the assignment of all Assignor's right,
title and interest in and to the Option Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants, conditions,
provisions and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Assignor does hereby assign to Assignee all of its right, title and
interest in and to the Option Agreement upon the same covenants, terms,
conditions and provisions as are contained therein, effective as of the earlier
date of (a) Assignee's exercise of the Parcel B Option Agreement, or (b) the
payment by Assignee of the First Option Extension Payment (as defined in the
Parcel B Option Agreement) to Landlord (the "ASSIGNMENT DATE").
<PAGE>
2. Assignee does hereby accept the assignment of all Assignor's right,
title and interest in and to the Option Agreement and does hereby assume
Assignor's obligations thereunder.
3. In addition to the mutual covenants and agreements contained herein,
Assignee has contemporaneously herewith paid to Assignor Twenty Thousand Dollars
($20,000), the receipt and sufficiency of which is hereby acknowledged by
Assignor. In addition, Assignee agrees to pay Fifty Thousand Dollars ($50,000)
to Assignor upon the closing of the Property in accordance with the terms of the
Option Agreement or Assignee or its direct affiliate otherwise acquires the
Property.
4. Assignor hereby represents and warrants to Assignee that Assignor has
not heretofore assigned, conveyed, sold or granted any interest in the Option
Agreement and that the Option Agreement is in full force and effect and neither
party is in default thereunder.
5. In the event Assignee fails to extend the Option as set forth in the
Option Agreement, Assignee will promptly notify Assignor.
6. Assignor and Assignee agree to release each other, and their
respective agents, employees, representatives, members and successors (the
"RELATED PARTIES") from and against any claims, demands, causes of action,
losses, damages, liabilities, costs and expenses asserted against, or imposed
upon or incurred by the Related Parties (including attorneys' fees and
expenses), whether suit is instituted or not, (a) arising by reason or failure
of Assignor or Assignee to perform or fulfill any of their obligations under the
Option Agreement arising from and after the Assignment Date, or (b) arising out
of or in accordance with the execution of the Option Agreement or the
circumstances surrounding the execution of the Option Agreement.
7. This Assignment shall be binding upon and inure to the benefit of
Assignor and Assignee and their respective legal representatives, successors and
assigns.
8. This Assignment may be executed in any number of counterparts, each of
which when executed and delivered shall be of the same binding effect as an
original.
9. Concurrently with execution of this Agreement the parties shall cause
to be recorded in the real property records where the Property is located a
memorandum of the Assignment in form of EXHIBIT A attached hereto.
---------
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Option Agreement as of the day and year first written above.
[INTENTIONALLY BLANK]
<PAGE>
ASSIGNOR SIGNATURE PAGE
-----------------------
"ASSIGNOR"
/s/ Daniel Webster 06/04/98
---------------------------------------------
Daniel Webster
/s/ Marsha S. Webster 06/04/98
---------------------------------------------
Marsha S. Webster
-3-
<PAGE>
ASSIGNEE SIGNATURE PAGE
-----------------------
"ASSIGNEE"
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By: /s/ Robert F. List
------------------------------------
Robert F. List, Treasurer
EXHIBIT A
Hollywood Park, Inc.
Exhibit 10.49
To Form 10-Q, June 30, 1998
AMENDED AND RESTATED OPTION AGREEMENT
THIS AMENDED AND RESTATED OPTION AGREEMENT (this "AGREEMENT") is made as of
June 2, 1998, by and among DANIEL WEBSTER, a resident of the Commonwealth of
Kentucky, MARSHA S. WEBSTER, a resident of the Commonwealth of Kentucky, WILLIAM
G. DIUGUID, a resident of the Commonwealth of Kentucky, SARA T. DIUGUID, a
resident of the Commonwealth of Kentucky, J.R. SHOWERS, III, a resident of the
State of Indiana, and CAROL A. SHOWERS, a resident of the State of Indiana
(collectively, "LANDLORD"), and PINNACLE GAMING DEVELOPMENT CORP., a Colorado
corporation ("TENANT").
RECITALS
A. Landlord and Indiana Ventures LLC, a Nevada limited liability company
("INDIANA VENTURE"), entered into that certain Option Agreement (Expansion
Parcel), dated December 22, 1995 (the "ORIGINAL AGREEMENT").
B. Tenant has assumed all of Indiana Venture's right, title and interest
in and to the Original Agreement.
C. Landlord is the owner of that certain real property in Switzerland
County, Indiana, described as Parcel B on EXHIBIT A (the "PROPERTY").
---------
<PAGE>
D. Tenant is an applicant for an Indiana Riverboat Owner's License to be
issued by the Indiana Gaming Commission for the County of Switzerland, Indiana.
E. In the event a Certificate of Suitability is awarded to Tenant, Tenant
shall lease the Property and utilize the same for the development of a riverboat
casino complex on the Property (the "PROJECT").
F. Landlord and Tenant desire to amend and restate the Original Agreement
in its entirety as hereinafter provided, and upon and subject to the terms and
conditions hereinafter set forth.
NOW, THEREFORE, it is agreed as follows:
1. OPTION. Landlord hereby grants to Tenant the exclusive and
------
irrevocable option (the "OPTION") to lease the Property, together with all
improvements now and hereafter located thereon.
2. OPTION PAYMENT. In consideration of this Option, Tenant has paid One
--------------
Dollar ($1.00) to Landlord of even date hereof (the "OPTION PAYMENT"). The
Option Payment is nonrefundable.
<PAGE>
3. OPTION PERIOD. The option to lease the Property granted by this
-------------
Agreement shall be exercised by Tenant prior to 5:00 p.m. eastern standard time
on the date which is ten (10) business days after the Tenant or its Affiliate
(as defined in the Lease) is granted a Certificate of Suitability from the
Indiana Gaming Commission (the "COMMISSION") to operate a riverboat casino on
the Ohio River from Switzerland County, Indiana (a "CERTIFICATE"), provided,
that Tenant's right to exercise the option to lease the Property granted by this
Agreement shall expire on December 31, 1998 (the "OPTION EXPIRATION DATE")
unless Tenant extends such date as herein provided. Tenant shall not be entitled
to exercise the Option unless Tenant or its Affiliate receives a Certificate.
Tenant shall be entitled to extend the Option Expiration Date to December 31,
1999 by written notice and payment of the sum of Fifty Thousand Dollars
($50,000.00) to Landlord on or before December 31, 1998 (the "FIRST OPTION
EXTENSION PAYMENT"). Tenant shall be entitled to further extend the Option
Expiration Date to December 31, 2000 by written notice and payment of the sum of
Fifty Thousand Dollars ($50,000.00) to Landlord on or before December 31, 1999
(the "SECOND OPTION EXTENSION PAYMENT") (the First Option Extension Payment and
the Second Option Extension Payment are hereinafter referred to together as the
"OPTION EXTENSION PAYMENTS"). In the event the Option is exercised and the Lease
(as hereinafter defined) is executed, the Option Extension Payments shall be
credited against the Base Rent (as defined in the Lease) in accordance with the
terms of the Lease.
4. EXERCISE OF OPTION. Tenant shall exercise the Option within ten (10)
------------------
business days after the Tenant or its Affiliate receives a Certificate by
delivery of a notice to Landlord indicating Tenant's decision to exercise the
Option (the "NOTICE OF EXERCISE OF OPTION"). Within thirty (30) days after the
Notice of Exercise of Option is delivered, Landlord and Tenant or any entity
controlled or designated by Tenant shall each execute a lease agreement (the
"LEASE") in substantially the form of EXHIBIT B attached hereto.
---------
Notwithstanding the foregoing, Tenant shall not exercise the Option unless
Tenant shall concurrently exercise its option under that certain Option
Agreement dated June 2, 1998 between Tenant and The Webster Family Limited
Partnership and The Diuguid Family Limited Partnership (the "OTHER OPTION").
5. REMOVAL OF STRUCTURES. Tenant shall advise Landlord within ten (10)
---------------------
days prior to the exercise of the Option whether or not Tenant intends to
utilize the structures located on the Property. In the event Tenant intends not
to utilize such structures, Landlord shall have the right to remove such
structures from the Property at its sole cost and expense.
6. ACQUISITION OF LICENSE. Tenant shall pay to Landlord the sum of One
----------------------
Hundred Thousand Dollars ($100,000.00) upon the occurrence of any of the
following:
a. Tenant or its Affiliate acquires an existing License
(as hereinafter defined) or an interest in an existing License;
or
b. Casino Magic, Inc. is acquired by Hollywood Park, Inc.
("HOLLYWOOD") and Hollywood or its Affiliate is awarded a
Certificate of Suitability to operate a
6
<PAGE>
riverboat casino on the Ohio River from a county other than
Switzerland County, Indiana by the Commission.
The term "LICENSE" shall mean an owner's License as defined in I.C.
(S) 4-33-2-15.
7. CERTIFICATE PAYMENT. Within three (3) business days after Tenant or
-------------------
its Affiliate is awarded a Certificate by the Commission, Tenant shall make a
nonrefundable payment in the amount of Fifty Thousand Dollars ($50,000.00) to
Landlord. Twenty-Five Thousand Dollars ($25,000.00) of such payment shall be
credited against the Base Rent in accordance with the terms of the Lease.
8. LICENSE PAYMENT. Within three (3) business days after Tenant or its
---------------
Affiliate is awarded a License by the Commission, Tenant shall make a
nonrefundable payment in the amount of Fifty Thousand Dollars ($50,000.00) to
Landlord. Twenty-Five Thousand Dollars ($25,000.00) of such payment shall be
credited against the Base Rent in accordance with the terms of the Lease.
9. PERMIT APPLICATION. Tenant shall, at its sole cost and expense,
------------------
diligently and actively pursue the processing of the existing permit application
(i.e., Permit Application No. 199500322) that is on file with the U.S. Army Corp
of Engineers. Landlord shall cooperate with Tenant and provide Tenant and/or any
agent, representative or independent contractor of Tenant, complete access to
the Property to conduct any and all environmental, archeological and engineering
tests or studies with respect to the Property.
10. TERMINATION. Tenant shall have the right to terminate this Agreement
-----------
at any time prior to being awarded a Certificate. Landlord shall have the right
to terminate this Agreement and the Tenant's right to exercise the Option in the
event the Commission awards a fifth (5th) Certificate of Suitability to operate
a riverboat casino on the Ohio River to any entity other than Tenant or its
Affiliate.
11. LANDLORD'S COOPERATION. Landlord shall cooperate fully with Tenant
----------------------
and shall execute on behalf of Tenant any documents necessary for Tenant to
process the Property through local, city, state and county zoning and
development processes. Prior to Tenant's exercise of the Option, Landlord shall
not be obligated to cooperate with Tenant or execute any documents to process
the Property through any zoning or development processes if such processes would
result in an outcome that would be binding on the Property or Landlord if Tenant
shall fail to lease the Property. Landlord acknowledges that the transaction
contemplated in this Agreement is subject to regulation by governmental
authorities having jurisdiction over gaming in Switzerland County, Indiana, and
elsewhere (collectively referred to as "GAMING AUTHORITIES"). Landlord also
acknowledges that Tenant conducts business pursuant to privileged licenses
issued by Gaming Authorities. Accordingly, Landlord will fully cooperate with
Tenant or any Gaming Authorities concerning any inquiries, investigations and
requests for information made by any Gaming Authorities in connection with the
gaming operations of Tenant or any entity or individual related to or affiliated
with Tenant.
7
<PAGE>
12. INFORMATION AND ACCESS. Within two (2) weeks after the date hereof,
----------------------
Landlord shall deliver to Tenant copies of all surveys, permits, approvals,
studies, analyses, maps, utility plans, engineering reports, soils reports,
title reports, commitments and policies, and similar written instruments or
documents relating to the Property in Landlord's possession or control not
previously provided to Tenant (the "PROJECT DOCUMENTS"). Landlord shall
immediately deliver to Tenant copies of all Project Documents that Landlord
receives after the date hereof. Landlord shall give to Tenant and Tenant's
counsel, accountants, and other representatives, full access during normal
business hours throughout the Option Period to the Property and all of
Landlord's books, contracts, commitments and records with respect to the
Property and shall furnish Tenant during such period with all such information
concerning its affairs as Tenant may request. Tenant may conduct such tests upon
the Property as Tenant deems necessary, including, but not limited to,
engineering and environmental tests. Tenant shall indemnify Landlord from any
damages, costs or expenses arising out of Tenant's inspection, use or occupancy
of the Property. Copies of any Project Documents not in Landlord's possession or
control but which subsequently come into Landlord's possession or control shall
be delivered immediately to Tenant.
13. REPRESENTATIONS AND WARRANTIES. Landlord represents and warrants to
------------------------------
Tenant as follows:
a. This Agreement constitutes legal, valid and binding
obligations of Landlord, enforceable in accordance with its
respective terms.
b. Neither the execution, delivery or performance of this
Agreement will breach any statute, law, ordinance, rule or
regulation of any governmental authority or conflict with or
result in a breach of any of the terms, conditions or provisions
of any judgment, order, injunction, decree or ruling of any court
or governmental authority to which Landlord or the Property is
subject or any agreement or instrument to which it is party or by
which it or the Property is bound, or constitute a default
thereunder.
c. No consent, approval or authorization of any
governmental authority (except for the Gaming Authorities) or
private party is required in connection with the execution,
delivery and performance of this Agreement by Landlord.
d. Landlord has good and marketable title to the Property.
There are no monetary liens or encumbrances affecting the
Property and Landlord will not cause or permit any such lien or
encumbrance to be placed against the Property which has priority
over the Memorandum of Option described in Section 28 below.
8
<PAGE>
14. CONFIDENTIALITY. Landlord and Tenant agree to treat confidentially
---------------
the existence and terms of this Agreement and any information, analyses,
compilations, studies or other documents or records (collectively, the
"CONFIDENTIAL MATERIAL") which Tenant or any of Tenant's directors, officers,
employees, representatives, advisors or agents furnish to Landlord or Landlord's
employees, representatives, advisors or agents, and vice-versa (the
"RECIPIENTS"). Landlord and Tenant agree that the Confidential Material will be
kept confidential by Landlord and Tenant and the other Recipients and that any
such information will be disclosed only to Recipients who need to know such
information and any of the Gaming Authorities, or any other State Agency that
requests or requires such information and to no other persons (it being
understood that (a) such Recipients shall be information by Landlord or Tenant,
as the case may be, of the confidential nature of such information, shall be
directed by Landlord to treat such information confidentially and shall agree to
abide by the provisions of this Section, and (b) in any event, Landlord or
Tenant, as the case may be, shall be responsible for any breach of this Section
by any Recipient). The provisions of this Section shall survive the termination
or expiration of this Agreement.
15. BROKERAGE FEES. Each of the parties hereto represents to the other
--------------
that it has not entered into any agreement for the payment of any fees,
compensation or expenses to any person, firm or corporation in connection with
the transactions provided for herein, and each agrees to hold and save the other
harmless from any such fees, compensation or expenses which may be suffered by
reason of any such agreement or purported agreement by the indemnifying party.
16. NOTICES. Any and all notices and demands by any party hereto to any
-------
other party required or desired to be given hereunder shall be in writing and
shall be validly given or made only if deposited in the United States mail,
certified or registered, postage prepaid, return receipt requested, or if made
by Federal Express or other similar delivery service keeping records of
deliveries and attempted deliveries or if sent by telecopy. Service by United
States Mail or by Federal Express or other similar delivery service shall be
conclusively deemed made on the first business day delivery is attempted or upon
receipt, whichever is sooner. Service by telecopy shall be deemed made upon the
next business day following confirmed transmission. The parties may change their
address for the purpose of receiving notices or demands as herein provided by a
written notice given in the manner aforesaid to the others, which notice of
change of address shall not become effective, however, until the actual receipt
thereof by the others.
17. GOVERNING LAW. This Agreement shall be deemed to be made under the
-------------
laws of the State of Indiana and for all purposes shall be governed by and
construed in accordance with the laws thereof.
18. BINDING EFFECT. Subject to any limitation on assignment set forth in
--------------
this Agreement, this Agreement shall inure to the benefit of and be binding upon
the parties hereto and their respective successors and assigns. It is
specifically agreed that Tenant may not assign, transfer or convey any or all of
its rights and obligations hereunder, by operation of law or otherwise, to any
person or entity other than an Affiliate of Tenant without the Landlord's prior
written consent. Landlord may not assign or transfer its rights and obligations
under this Agreement, by operation of law or otherwise, without the prior
consent of Tenant, which consent may be withheld in Tenant's
9
<PAGE>
sole discretion. Notwithstanding the foregoing, Tenant shall have the right to
assign or transfer any or all of its rights and obligations under this Agreement
to an Affiliate of Tenant. No consent shall be required with respect to an
acquisition of the interests in Tenant of Hilton Hotel Corporation by Boomtown
Hoosier, Inc. or an Affiliate thereof or a subsequent transfer of such
beneficial interest to Horseshoe Gaming, Inc. or its Affiliate. Notwithstanding
the foregoing, Landlord shall have the right to assign or transfer any or all of
its rights and obligations under this Agreement to any blood relative(s) of
Landlord or any corporation, trust, limited liability company or other entity
which is controlled by or created for the benefit of Landlord or Landlord's
blood relative without Tenant's consent or approval. Except as specifically
provided above in this Section, this Agreement is not intended to, and shall
not, create any rights in any person or entity whatsoever except Tenant and
Landlord.
19. SEVERABILITY. If any term, provision, covenant or condition of this
------------
Agreement or any application thereof should be held by a court of competent
jurisdiction to be invalid, void or unenforceable by the laws applicable
thereto, such provision shall be deemed severable from and shall in no way
affect the enforceability and validity of the remaining provisions of this
Agreement, all provisions, covenants, and conditions of this Agreement, and all
applications thereof, not held invalid, void or unenforceable, shall continue in
full force and effect and shall in no way be affected, impaired or invalidated
thereby.
20. INTERPRETATION. This Agreement is an agreement between financially
--------------
sophisticated and knowledgeable parties and is entered into by the parties in
reliance upon the economic and legal bargains contained herein and shall be
interpreted and construed in a fair and impartial manner without regard to such
factors as the party who prepared (or caused the preparation of) this instrument
or the relative bargaining power of the parties.
21. CALCULATION OF TIME PERIODS. If any date herein set forth for the
---------------------------
performance of any obligation by Landlord or Tenant or for the delivery of any
instrument or notice herein provided should be a Saturday, Sunday, or legal
holiday, such performance or delivery may be made on the next business day
following such Saturday, Sunday, or legal holiday. As used herein, the term
"legal holiday" means any state or federal holiday for which financial
institutions or post offices are closed in the local jurisdiction in which the
Property is located, for observance thereof, and the term "business day" means
any day which is not a Saturday, Sunday, or legal holiday.
22. EXHIBITS. All exhibits referred to herein and attached hereto are
--------
hereby made a part hereof and are incorporated herein by this reference.
23. ENTIRE AGREEMENT. This Agreement contains the entire agreement
----------------
between the parties relating to the transactions contemplated hereby, and amends
and restates in its entirety the Original Agreement, and all prior or
contemporaneous agreements, understandings, representations and statements, oral
or written, are merged herein. No modification, waiver, amendment, discharge or
change of this Agreement shall be valid unless the same is in writing and signed
by the party against which the enforcement of such modification, waiver,
amendment, discharge or change is or may be sought.
10
<PAGE>
24. ATTORNEYS' FEES. In the event any action or proceeding is commenced
---------------
by any party against any other in connection herewith, including but not limited
to any proceeding in bankruptcy, the prevailing party shall be entitled to
recover from the other party all costs and expenses, including, without
limitation, reasonable attorneys' fees and costs incurred in such action or
proceeding, including, but not limited to, any proceeding in bankruptcy, in
addition to any other relief awarded by the court.
25. TIME OF ESSENCE. Time is of the essence of this Agreement and all of
---------------
the terms, provisions, covenants and conditions hereof.
26. CAPTIONS AND PRONOUNS. The captions appearing at the commencement of
---------------------
the sections hereof are descriptive only and for convenience in reference to
this Agreement and in no way whatsoever define, limit, amplify or describe the
scope or intent of this Agreement, nor in any way be used in interpreting the
terms of this Agreement or affect this Agreement. Personal pronouns used herein
shall be construed as though of the gender and number required by the context,
and the singular shall include the plural and the plural the singular as may be
required by the context.
27. FURTHER ASSURANCES. In addition to the acts and deeds recited herein
------------------
and contemplated to be performed, executed and/or delivered by Landlord,
Landlord shall, at Tenant's cost and expense, perform, execute and/or deliver or
cause to be performed, executed and/or delivered any and all further acts, deeds
and assurances as may, from time to time, be reasonably requested by Tenant to
consummate the transactions contemplated in this Agreement and for the better
assuring to Tenant all of its rights hereunder.
28. COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which when executed and delivered shall be an original,
but all such counterparts shall constitute one and the same Agreement. The
parties contemplate that they might be executing counterparts of this Agreement
by facsimile and agree and intend that a signature by facsimile machine shall
bind each party so signing with the same effect as though the signature were an
original signature.
29. MEMORANDUM OF OPTION. Concurrently with execution of this Agreement
--------------------
the parties shall cause to be recorded in the real property records where the
Property is located a memorandum of the Option in form of EXHIBIT C attached
---------
hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement to be
effective as of the date first above written.
[INTENTIONALLY BLANK]
11
<PAGE>
LANDLORD SIGNATURE PAGE
LANDLORD:
/s/ Daniel Webster
----------------------------------
Daniel Webster
/s/ Marsha Webster
----------------------------------
Marsha Webster
/s/ William G. Diuguid
----------------------------------
William G. Diuguid
/s/ Sara T. Diuguid
----------------------------------
Sara T. Diuguid
/s/ J.R. Showers, III
----------------------------------
J.R. Showers, III
/s/ Carol A. Showers
----------------------------------
Carol A. Showers
<PAGE>
TENANT SIGNATURE PAGE
TENANT:
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By: /s/ Robert F. List
------------------------------------
Robert F. List, Treasurer
EXHIBIT B
ASSIGNMENT OF OPTION AGREEMENT
------------------------------
THIS ASSIGNMENT OF OPTION AGREEMENT (the "ASSIGNMENT") is made this 2nd day
of June, 1998, by DANIEL WEBSTER, a resident of the Commonwealth of Kentucky and
MARSHA S. WEBSTER, a resident of the Commonwealth of Kentucky (together, the
"ASSIGNOR") to PINNACLE GAMING DEVELOPMENT CORP., a Colorado corporation
("ASSIGNEE").
RECITALS
--------
A. Assignor, as Buyers, and John Keeton and Dorothy Keeton (together, the
"SELLERS") entered into that certain Option Agreement, dated November 9, 1997
(the "OPTION AGREEMENT"), whereby Assignor has the right or option to purchase
and Sellers have the obligation to sell to Purchaser until December 31, 1998, or
until December 31, 1999 if the option is extended, or until such later time as
the parties may agree, certain real property located in Switzerland County,
Indiana, as more particularly described in the Option Agreement (the
"PROPERTY").
B. Assignor, together with William G. Diuguid, Sara T. Diuguid, J.R.
Showers, III and Carol A. Showers (collectively, the "LANDLORD") have entered
into that certain Amended and Restated Option Agreement with Assignee dated of
even date herewith, a copy of which is attached hereto as EXHIBIT A and
---------
incorporated herein by reference (the "PARCEL B OPTION AGREEMENT").
C. Assignor has agreed to assign all of its right, title and interest in
and to the Option Agreement to Assignee.
<PAGE>
D. Assignee has agreed to accept the assignment of all Assignor's right,
title and interest in and to the Option Agreement.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants, conditions,
provisions and agreements contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
1. Assignor does hereby assign to Assignee all of its right, title and
interest in and to the Option Agreement upon the same covenants, terms,
conditions and provisions as are contained therein, effective as of the earlier
date of (a) Assignee's exercise of the Parcel B Option Agreement, or (b) the
payment by Assignee of the First Option Extension Payment (as defined in the
Parcel B Option Agreement) to Landlord (the "ASSIGNMENT DATE").
2. Assignee does hereby accept the assignment of all Assignor's right,
title and interest in and to the Option Agreement and does hereby assume
Assignor's obligations thereunder.
3. In addition to the mutual covenants and agreements contained herein,
Assignee has contemporaneously herewith paid to Assignor Twenty Thousand Dollars
($20,000), the receipt and sufficiency of which is hereby acknowledged by
Assignor. In addition, Assignee agrees to pay Fifty Thousand Dollars ($50,000)
to Assignor upon the closing of the Property in accordance with the terms of the
Option Agreement or Assignee or its direct affiliate otherwise acquires the
Property.
4. Assignor hereby represents and warrants to Assignee that Assignor has
not heretofore assigned, conveyed, sold or granted any interest in the Option
Agreement and that the Option Agreement is in full force and effect and neither
party is in default thereunder.
5. In the event Assignee fails to extend the Option as set forth in the
Option Agreement, Assignee will promptly notify Assignor.
6. Assignor and Assignee agree to release each other, and their
respective agents, employees, representatives, members and successors (the
"RELATED PARTIES") from and against any claims, demands, causes of action,
losses, damages, liabilities, costs and expenses asserted against, or imposed
upon or incurred by the Related Parties (including attorneys' fees and
expenses), whether suit is instituted or not, (a) arising by reason or failure
of
<PAGE>
Assignor or Assignee to perform or fulfill any of their obligations under the
Option Agreement arising from and after the Assignment Date, or (b) arising out
of or in accordance with the execution of the Option Agreement or the
circumstances surrounding the execution of the Option Agreement.
7. This Assignment shall be binding upon and inure to the benefit of
Assignor and Assignee and their respective legal representatives, successors and
assigns.
8. This Assignment may be executed in any number of counterparts, each of
which when executed and delivered shall be of the same binding effect as an
original.
9. Concurrently with execution of this Agreement the parties shall cause
to be recorded in the real property records where the Property is located a
memorandum of the Assignment in form of EXHIBIT A attached hereto.
---------
IN WITNESS WHEREOF, Assignor and Assignee have executed this Assignment of
Option Agreement as of the day and year first written above.
[INTENTIONALLY BLANK]
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<PAGE>
ASSIGNOR SIGNATURE PAGE
-----------------------
"ASSIGNOR"
_____________________________________
Daniel Webster
_____________________________________
Marsha S. Webster
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<PAGE>
ASSIGNEE SIGNATURE PAGE
-----------------------
"ASSIGNEE"
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By:_______________________________
Robert F. List, Treasurer
EXHIBIT B
LEASE
-----
(PARCEL B)
THIS LEASE is entered into this ____ day of _________, 199_, by and
among DANIEL WEBSTER, a resident of the Commonwealth of Kentucky, MARSHA S.
WEBSTER, a resident of the Commonwealth of Kentucky, WILLIAM G. DIUGUID, a
resident of the Commonwealth of Kentucky, SARA T. DIUGUID, a resident of the
Commonwealth of Kentucky, J.R. SHOWERS, III, a resident of the State of Indiana
and CAROL A. SHOWERS, a resident of the State of Indiana (collectively, the
"LANDLORD"), and PINNACLE GAMING DEVELOPMENT CORP., a Colorado corporation
("TENANT").
RECITALS
--------
A. Landlord is the owner of certain unimproved real estate
located in Switzerland County, Indiana, as more particularly described in
EXHIBIT A attached hereto and made a part hereof (the "REAL ESTATE");
- ---------
B. Tenant desires to lease the Real Estate from Landlord for
the purpose of developing and operating thereon riverboat gaming and other
facilities;
C. Landlord is willing to lease the Real Estate to Tenant
for such purpose; and
D. Landlord and Tenant desire to set forth their agreement
with respect to the leasing of the Real Estate and certain other matters
affecting the Real Estate and such improvements;
NOW, THEREFORE, in consideration of the mutual covenants
contained herein, Landlord and Tenant agree as follows:
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<PAGE>
ARTICLE I
---------
DEFINITIONS
-----------
The following terms, when used in this Lease with initial capital
letters, have the following respective meanings:
"AFFILIATE" means any person or entity directly or indirectly
controlling, controlled by, or under common control with Tenant; and when used
with reference to an individual, includes any member of such person's immediate
family. For purposes of this definition, "control" when used with respect to
any specified person or entity means the power to direct the management and
policies of such person or entity, directly or indirectly, whether through the
ownership or control of fifty percent (50%) or more of the shares or other
equity or beneficial interest or power to vote the same, or by the partnership
or trust agreement or other instrument or contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"BASE RENT" has the meaning set forth in Section 4.01.
"CERTIFICATE" shall mean a Certificate of Suitability issued by the
Indiana Gaming Commission to operate a riverboat casino on the Ohio River from
Switzerland County, Indiana.
"CLOSING" has the meaning set forth in Section 7.01.
"COMMENCEMENT DATE" shall mean the earlier of: (a) the date two (2)
years after the Indiana Gaming Commission grants a Certificate to Tenant or its
Affiliate; or (b) the date on which the Improvements are placed in operation as
a riverboat gaming facility by Tenant or its Affiliate and is open to the public
for gaming.
"CONDEMNATION PROCEEDS" means the total aggregate award, including any
award for Landlord's fee simple title, in the event of a total taking or
Constructive Total Taking of the Leased Premises and Improvements.
"CONSTRUCTIVE TOTAL TAKING" means a taking of such scope that, in
Tenant's reasonable discretion, the remaining portion of the Leased Premises
and Improvements is insufficient to permit the restoration of the Improvements
so as to be suitable for the use permitted by Section 5.01.
"ENVIRONMENTAL COMPLAINT" has the meaning set forth in Section 5.04.
"ENVIRONMENTAL LAWS" means federal, state and local laws, statutes,
ordinances, rules or regulations, effective on or after the date of execution of
this Lease, relating to pollution or protection of the environment, including
laws or regulations relating to emissions, discharges, releases or threatened
releases of Hazardous Substances into the environment (including, without
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<PAGE>
limitation, ambient air, surface water, ground water or land) or otherwise
relating to the manufacture, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Substances or imposing standards of
conduct or liability concerning underground storage tanks. Such laws shall
include, but not be limited to, the Comprehensive Environmental Response,
Compensation and Liability Act, as amended, 42 U.S.C. (S) 9601, et seq.; the
-- ---
Resource Conservation and Recovery Act, as amended, 42 U.S.C. (S) 3251 et seq.;
-- ---
the Clean Air Act, as amended, 42 U.S.C. (S) 1857, et seq.; the Federal Water
-- ---
Pollution Control Act, as amended, 33 U.S.C. (S) 466 et seq.; and Indiana Code,
-- ---
Title 13 - Environment, as amended.
"EVENT OF DEFAULT" has the meaning set forth in Section 18.01.
"EXECUTION DATE" shall mean the date this Lease is executed by
Landlord and Tenant.
"EXTENSION TERM" has the meaning set forth in Section 3.02.
"GROSS GAMING WIN" shall mean the "adjusted gross receipts" as defined
in IC (S) 4-33-2-2 and reported to the Indiana Gaming Commission.
"HAZARDOUS DISCHARGE" has the meaning set forth in Section 6.04.
"HAZARDOUS SUBSTANCES" means (a) crude oil or any fraction thereof
that is liquid at standard conditions of temperature and pressure, (b) any
wastes, materials or substances that are radioactive, (c) any hazardous, toxic
or special wastes, materials, substances, constituents, pollutants or
contaminants (as defined by federal, state or local laws, statutes, ordinances,
rules or regulations,) or (d) any other substances subject to federal, state or
local regulation as potentially injurious to public health or welfare or the
environment.
"IMPROVEMENTS" means all buildings and related improvements, including
(without limitation) landscaping, driveways, walkways, surface parking lots,
golf courses, docking and mooring facilities and marina facilities, that are
hereafter located or constructed by Tenant on the Real Estate and/or in the Ohio
River in the vicinity of the Real Estate.
"INDEX" means the Consumer Price Index for Urban Wage Earners and
Clerical Workers (CPI-W) Specified for All Items - United States (1982-84=100)
published by the Bureau of Labor Statistics, United States Department of Labor;
provided, however, that if such Index ceases to be published or is converted to
a different standard or is otherwise revised, the Index shall be adjusted by any
then applicable conversion factor or, failing that, by using published price or
cost indices or published data which are as comparable as possible to the Index
prior to its termination or revision.
"INDIANA GAMING COMMISSION" means the commission established pursuant
to the Indiana Riverboat Gambling Law, as amended, IC 4-33, et seq.
-- ---
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<PAGE>
"LEASED PREMISES" has the meaning set forth in Section 2.01.
"LICENSE" shall mean an owner's license as defined in I.C. (S) 4-33-2-
15.
"LICENSE DATE" shall mean the date on which the Indiana Gaming
Commission grants a License to Tenant.
"MORTGAGE" or "MORTGAGE LOAN" means so-called permanent loans and
interim development or construction loans relating to and secured by a mortgage
lien on Tenant's leasehold interest in the Leased Premises (or any part thereof)
and/or the Improvements (or any part thereof) permitted under this Lease; and
also shall refer to and include loan agreements, assignments, security
agreements, financing statements and other documentation evidencing or securing
such loans. Except with the prior written consent of Landlord, no loan or
mortgage securing a loan by an Affiliate of Tenant shall be deemed to be a
Mortgage Loan or Mortgage for purposes of this Lease.
"MORTGAGEE" means the mortgagee or any assignee of the mortgagee under
any Mortgage Loan.
"ORIGINAL TERM" has the meaning set forth in Section 3.01.
"OTHER LEASE" shall mean that certain Lease dated ___________________,
between Tenant and The Webster Family Limited Partnership and The Diuguid Family
Limited Partnership, collectively as Landlord.
"OTHER LEASED PREMISES" shall mean the leased premises set forth in
the Other Lease.
"PURCHASE OPTION" has the meaning set forth in Section 7.01
"PURCHASE PRICE" has the meaning set forth in Section 7.02.
"REAL ESTATE TAXES" means and includes all ad valorem real property
taxes and assessments levied upon or with respect to (or, if any such levy is
upon or with respect to a parcel of real estate and improvements thereon of
which the Leased Premises is a part, then the portion thereof properly allocable
and relating to) the Leased Premises and Improvements (or any part thereof) and
all taxes, levies and charges which may be levied or imposed by any governmental
authority in replacement of, in lieu of, or in addition to ad valorem real
property taxes, in whole or in part, including but not limited to a state or
local option tax designed for property tax relief purposes, or a license or
franchise fee measured by rents received from the Leased Premises and
Improvements, or otherwise measured or based upon Tenant's or Landlord's
interest in the Leased Premises and Improvements.
-20-
<PAGE>
"RENT" has the meaning set forth in Section 4.05.
"TAXES" means all Real Estate Taxes, personal property taxes, special
and general assessments, water and sewer service charges, licenses and permit
fees, and other governmental impositions and charges of every kind and nature
whatsoever, extraordinary as well as ordinary, which may be assessed, levied, or
become due and payable with respect to, or become a lien on, the Leased Premises
or Improvements (or any part thereof).
"TERM" means the Original Term, together with all Extension Terms for
which Tenant has properly exercised an option to extend the term of this Lease
pursuant to Section 3.02.
"UNAVOIDABLE DELAY" means and includes any delay caused by reason of
strikes, lock-outs, labor troubles, inability to procure materials, failure of
power, fire or other casualty, "acts of God", restrictive governmental
authority, riots, insurrection, war, the act, or failure to act by the Indiana
Gaming Commission, or the act, failure to act, or default of the other party, or
other reason beyond the subject party's reasonable control and not avoidable by
reasonable diligence.
"UTILITY EXPENSES" means and includes all charges relating to the
providing of water, steam, heat, cooling, gas, electricity, light, sewer,
telephone, television, telecommunications, security, fire protection, trash
collection and other similar services furnished to all or any part of the Leased
Premises and Improvements during the Term.
ARTICLE II
----------
LEASED PREMISES
---------------
SECTION 2.01. LEASED PREMISES. Landlord hereby leases to Tenant and
------------ ---------------
Tenant hereby leases from Landlord, upon and subject to the terms, conditions,
covenants and provisions hereof, the Real Estate and all rights, interests, and
easements in any way now or hereafter appurtenant thereto, (the Real Estate and
such appurtenant rights, interests and easements are hereafter referred to
collectively as the "LEASED PREMISES").
SECTION 2.02. LEASEHOLD TITLE. The leasehold estate created by this
------------ ---------------
Lease and Tenant's rights hereunder are subject to the following:
(a) The lien of all Real Estate Taxes, all general and special
assessments and all other governmental dues, charges and impositions not
delinquent;
(b) All easements, restrictions, agreements, covenants and other
matters of record;
-21-
<PAGE>
(c) All rights of the public, the State of Indiana and any political
subdivision of the State of Indiana (including without limitation counties and
municipalities) in and to that part of the Real Estate (if any) taken or used
for highways, streets, rights-of-way and related purposes;
(d) All applicable zoning, building and land use and other
governmental restrictions, laws, ordinances, rules and regulations;
(e) All matters that would be discovered or disclosed by an accurate
inspection and Indiana Land Title Association minimum standard detail survey of
the Real Estate (including gaps (if any)); and
(f) Flowage easements for the Ohio River.
SECTION 2.03. COVENANT OF QUIET ENJOYMENT. Landlord covenants and
------------ ---------------------------
agrees that Tenant, upon paying the Rent to be paid by it as herein provided and
upon keeping, observing and performing all other covenants and agreements to be
kept, observed or performed by it hereunder, shall at all times during the Term
have the peaceable and quiet enjoyment and possession of the Leased Premises,
without hindrance from Landlord or anyone claiming under Landlord, subject to
matters to which this Lease is subject as provided in the foregoing Section
2.02.
SECTION 2.04. AS IS CONDITION. Tenant's acceptance of the Leased
------------ ---------------
Premises is AS IS, WHERE IS and without warranty of any kind as to condition,
fitness for Tenant's purposes or otherwise.
ARTICLE III
-----------
TERM
----
SECTION 3.01. TERM. The original term of this Lease (the "ORIGINAL
------------ ----
TERM") shall commence on the ninetieth (90th) day following the Execution Date
and, unless sooner terminated as provided in this Lease, shall end at 11:59 p.m.
Eastern Standard Time on the day before the fifth (5th) anniversary of the
License Date.
SECTION 3.02. EXTENSION OF TERM. The term of this Lease shall be
------------ -----------------
automatically extended for nine (9) consecutive periods of five (5) years each
(each such period being referred to herein as an "EXTENSION TERM") upon the
following conditions:
(a) Tenant shall be in full compliance with all terms, covenants and
conditions of this Lease on the last day of the Original Term or the Extension
Term then expiring (as applicable);
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<PAGE>
(b) Tenant shall have obtained from the Indiana Gaming Commission a
renewal of its License prior to the last day of the Original Term or the
Extension Term then expiring (as applicable); and
(c) Tenant shall not have given the Landlord notice of termination of
this Lease prior to the last day of the Original Term or the Extension Term then
expiring (as applicable).
SECTION 3.03. HOLDING OVER. In the event Tenant shall remain in
------------ ------------
possession of the Leased Premises with the consent of Landlord after the
expiration of the Term and without any extension thereof, Tenant shall be deemed
to be occupying the Leased Premises as a tenant from month-to-month at a monthly
rental equal to one hundred fifteen percent (115%) of one-twelfth of the Base
Rent payable by Tenant for the last twelve months of the Term and subject to all
other covenants, terms and conditions of this Lease insofar as the same shall be
applicable to a month-to-month tenancy. Such month-to-month tenancy shall be
terminable by either party upon thirty (30) days written notice to the other
given as of and prior to the end of any calendar month.
ARTICLE IV
----------
RENT
----
SECTION 4.01. BASE RENT. Commencing on the Commencement Date and
------------ ---------
throughout the Term thereafter, Tenant shall pay to Landlord annual rent in an
amount equal to One Hundred Thousand Dollars ($100,000) (the "BASE RENT").
SECTION 4.02. PAYMENTS OF RENT. The Base Rent shall be payable, in
------------ ----------------
arrears, in monthly installments, commencing on the Commencement Date and
continuing on the fifteenth (15th) day of each calendar month thereafter during
the Term. If the Commencement Date is a day other than the first day of a
calendar month, the first monthly installment of the Base Rent shall be prorated
on a daily basis using for purposes of such proration the number of days which
would have been in such first monthly installment period if the Commencement
Date had been the first day of the calendar month. The monthly installment
payment to Landlord on account of the Base Rent shall be equal to one twelfth
(1/12) of the Base Rent for such calendar year or partial calendar year.
SECTION 4.03. CREDIT FOR CERTIFICATE PAYMENT. Landlord shall credit
------------ ------------------------------
the sum of Twenty-Five Thousand Dollars ($25,000), fifty percent (50%) of the
nonrefundable payment paid by Tenant to Landlord upon the award the Certificate
to Tenant or its Affiliate pursuant to that certain Option to Lease Agreement
between Tenant and Landlord pursuant to which this Lease is executed, against
the first installments of Base Rent due under this Lease.
SECTION 4.04. CREDIT FOR LICENSE PAYMENT. Landlord shall credit the
------------ --------------------------
sum of Twenty-Five Thousand Dollars ($25,000), fifty percent (50%) of the
nonrefundable payment paid
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<PAGE>
by Tenant to Landlord upon the award the License to
Tenant or its Affiliate pursuant to that certain Option to Lease Agreement
between Tenant and Landlord pursuant to which this Lease is executed, against
the first installments of Base Rent due under this Lease.
SECTION 4.05. RENT DEFINED. The term "RENT" as used herein shall
------------ ------------
mean and include Base Rent and all additional sums, charges or amounts of
whatever nature to be paid by Tenant to Landlord in accordance with the
provisions of this Lease, whether or not such sums, charges or amounts are
referred to as rent. All payments of Rent shall be made to Landlord at
Landlord's address for notice hereunder, or at such other place or to such other
person, firm or corporation as Landlord shall designate by notice to Tenant.
Rent shall be paid (i) without relief from valuation and appraisement laws, (ii)
without notice, demand, offset, deduction or counterclaim and (iii) with costs
of collection and reasonable attorneys' fees.
SECTION 4.06. RENT TO BE NET TO LANDLORD. It is the intention of the
------------ --------------------------
parties that the Rent payable hereunder shall be net to Landlord and that all
costs, expenses and obligations of every kind and nature whatsoever relating to
the Leased Premises and Improvements shall be paid by Tenant.
SECTION 4.07. INTEREST. Any Rent not paid within fifteen (15) days
------------ --------
after the same is due shall bear interest from the date payment is due until
paid in full at the rate of four percent (4%) per annum above the rate announced
or published as such from time to time by Bank One, Indianapolis, N.A., or any
successor thereof, as its "prime rate."
ARTICLE V
---------
USE OF LEASED PREMISES
----------------------
SECTION 5.01. PERMITTED USES. Tenant shall initially use and occupy
------------ --------------
the Leased Premises for the purpose of constructing thereon the Improvements
described in Tenant's riverboat owner's license application filed with the
Indiana Gaming Commission. After the completion of the Improvements, Tenant
shall continually use and operate such Improvements for the purposes for which
such Improvements were designed and shall continually use and operate the Leased
Premises for uses reasonably required for, or complementary to, the use and
operation of such Improvements. Without limiting the generality of the
foregoing, the Leased Premises shall at all times during the Term be used as the
site where Tenant's riverboat(s) moor for purposes of embarking passengers for
and disembarking passengers from gambling excursions. Tenant shall cause the
gaming and other related facilities operated from the Leased Premises to be
operated in a first class manner and to be open for business to the public
during such hours and on such dates that are commercially reasonable and
customary in the riverboat gaming industry.
SECTION 5.02. COMPLIANCE WITH LAWS, INSURANCE POLICIES. During the
------------ ----------------------------------------
Term, Tenant, at its expense, shall observe and comply with all applicable
federal, state and local statutes, laws, ordinances, rules and regulations
(including, without limitation, the Americans with
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<PAGE>
Disabilities Act and all Environmental Laws), with all orders and requirements
of all governmental authorities, and with all orders, rules and regulations of
the National Board of Fire Underwriters, the Indiana Board of Fire Underwriters,
or any other body or bodies exercising similar functions, affecting the Leased
Premises, or any part thereof, or the construction of the Improvements or the
use or manner of use of the Leased Premises and Improvements. Tenant, at its
expense, shall have the right to contest by appropriate legal proceedings, the
validity or application of any statute, law, ordinance, rule, regulation, order
or requirement of the nature referred to in this Section 5.02. If compliance
with any such statute, law, ordinance, rule, regulation, order or requirement
legally may be delayed pending the prosecution of any such proceeding, Tenant
may delay such compliance until a final determination of such proceeding. Tenant
shall take all actions, and not fail to take any actions, required or reasonably
necessary to obtain and thereafter maintain a License that allows Tenant to own
and operate a riverboat casino on the Ohio River from Switzerland County,
Indiana.
SECTION 5.03. NEGATIVE COVENANTS. Tenant shall not (a) commit or
------------ ------------------
permit any waste to the Leased Premises or the Improvements, (b) cause or permit
any nuisance (public or private) to occur or exist in or on the Leased Premises
or Improvements, or (c) permit the use of the Leased Premises or Improvements
for any lewd or lascivious purpose.
-25-
<PAGE>
SECTION 5.04. HAZARDOUS SUBSTANCES.
------------ --------------------
(a) Landlord makes no representations or warranties, express or
implied, concerning the presence or absence of (i) Hazardous Substances on,
under or about the Leased Premises or (ii) any contamination of the soil,
surface water or ground water on, under or about the Leased Premises by
Hazardous Substances. Tenant, at its expense and prior to the commencement of
any excavation or filling of the Leased Premises or the construction of any
Improvements on the Leased Premises, shall conduct such environmental
assessments and environmental testing and sampling as Tenant deems necessary to
identify the presence of any Hazardous Substances on, under or about the Leased
Premises or the presence of contamination of the soil, surface water or ground
water on, under or about the Leased Premises by Hazardous Substances. If such
environmental assessments, testing and/or sampling disclose the presence of any
Hazardous Substances on, under or about the Leased Premises or contamination of
the soil, surface water or ground water on, under or about Leased Premises by
Hazardous Substances, Tenant, at its expense, shall remove or remediate such
Hazardous Substances or contamination to the extent required by, and in a manner
that complies with, all applicable Environmental Laws before proceeding with any
excavation or filling of the Leased Premises or the construction of any
Improvements thereon. If and to the extent requested by Landlord, Tenant shall
provide Landlord with copies of (i) all environmental assessments and reports of
any environmental testing and sampling with respect to the Leased Premises, (ii)
all written recommendations from environmental consultants or engineers for the
removal or remediation of any Hazardous Substances on, under or about the Leased
Premises or the remediation of any contamination of the soil, surface water or
ground water on, under or about the Leased Premises by Hazardous Substances, and
(iii) all documents filed with or issued by any governmental authority relating
to the foregoing.
(b) Tenant shall not place or install any underground storage
tanks on the Leased Premises. Tenant shall not permit any Hazardous Substances
to be placed, held or located on or at the Leased Premises, other than Hazardous
Substances of a nature and in amounts normally present in or on, or used in
connection with the operation of, commercial and retail facilities of the type
constructed on the Leased Premises. Tenant shall not permit any Hazardous
Substances to be disposed of or released upon the Leased Premises. To the extent
any Hazardous Substances permitted to be placed, held, or located on or at the
Leased Premises are regulated by any Environmental Laws, Tenant shall place,
hold, locate or dispose of such Hazardous Substances in strict compliance with
such applicable law.
(c) If Tenant has knowledge of or receives any notice of (i) the
release, spill, discharge or emission of any Hazardous Substance from the Leased
-26-
<PAGE>
Premises into the environment (including, without limitation, ambient air,
surface water, groundwater or land (a "HAZARDOUS DISCHARGE") or (ii) any
inquiry, complaint, order, citation or notice with regard to the presence of any
Hazardous Substances on or under the Leased Premises or a Hazardous Discharge
from the Leased Premises (an "ENVIRONMENTAL COMPLAINT") from any person or
entity, including (without limitation) the United States Environmental
Protection Agency and the Indiana Department of Environmental Management or any
successor agency, Tenant shall give immediate notice thereof to Landlord
disclosing full details of the Hazardous Discharge or Environmental Complaint,
as applicable.
(d) Tenant shall indemnify and hold harmless Landlord, its
affiliated entities, and their respective officers, directors, agents and
employees from and against all damages, liability, losses, fines, penalties,
costs and expenses, including (but not limited to) court costs, attorneys' fees
and costs of removal or remediation of any Hazardous Substances or any
contamination of soil, surface water or ground water by Hazardous Substances,
arising out of, resulting from or in any way connected with (i) any breach or
default by Tenant in the observance or performance of its covenants under the
foregoing paragraphs (a) or (b), (ii) any violation of any Environmental Laws
pertaining to the Leased Premises or Improvements or any activity thereon by
Tenant or anyone else (other than Landlord) during the Term, (iii) any
Environmental Complaint, whether meritorious or not, arising from any act or
omission of Tenant or anyone else (other than Landlord) during the Term or (iv)
any Hazardous Discharge occurring during the Term. Tenant's indemnification
obligations hereunder shall be in addition to any and all other obligations and
liabilities Tenant may have to Landlord at law or in equity, including, without
limitation, the obligation Tenant has to indemnify and hold Landlord harmless
under that certain Option to Lease Agreement between Tenant and Landlord
pursuant to which this Lease is executed. Tenant's indemnification obligations
hereunder shall survive the expiration or earlier termination of the Term and
any transfer by Landlord of title to the Leased Premises.
(e) Tenant, for itself and, to the extent permitted by law, for
and on behalf of its successors, assigns, licensees and subtenants, hereby
waives and releases any and all causes of action, claims or demands of
whatsoever kind or nature that Tenant or its successors, assigns, licensees or
subtenants now have or hereafter may have against Landlord, its affiliated
entities, and their respective officers, directors, agents and employees,
including (without limitation) claims for contribution for costs of the removal
or remediation of Hazardous Substances on, under or about the Leased Premises or
the remediation of any contamination of the soil, surface water or ground water
on, under or about the Leased Premises by Hazardous Substances, arising out of
or in connection with, resulting from or in any way related to the presence of
Hazardous Substances on, under or about the Leased
-27-
<PAGE>
Premises or any contamination of the soil, surface water or ground water
on, under or about the Leased Premises by Hazardous Substances.
ARTICLE VI
----------
RIGHT OF FIRST REFUSAL
----------------------
During the Term of this Lease, Tenant shall have the right of first
refusal concerning the purchase of the Leased Premises on the terms hereinafter
set forth. If at any time during the Term, Landlord shall receive a bona fide
offer, other than at public auction, from a third person (who does not have the
power of eminent domain) for the purchase of the Leased Premises, which offer
Landlord shall desire to accept, Landlord shall promptly deliver to Tenant a
copy of such offer, and Tenant may, within sixty (60) business days thereafter,
elect to purchase the Leased Premises on the same terms as those set forth in
such offer. If Tenant shall not accept such offer within the time specified
therefor and the Landlord shall close upon the sale of the Leased Premises
pursuant to the terms of such third party offer, the right of refusal shall
cease to exist, but this Lease shall continue otherwise on all of the other
terms, covenants and conditions of this Lease. This right of first refusal
shall be inapplicable to a transfer by way of sale, gift or devise, including a
trust, to or for a party related to Landlord or an Affiliate of Landlord, or to
any transfer from one such related or affiliated party to another, but shall
apply to any such transfer to a unrelated or non affiliated third party. If the
Leased Premises shall be conveyed to the Tenant under this right of first
refusal, any prepaid Rent shall be apportioned and applied on account of the
purchase price.
ARTICLE VII
-----------
PURCHASE OPTION
---------------
SECTION 7.01 OPTION TO PURCHASE. So long as this Lease is then in
------------ ------------------
full force and effect and Tenant is not in default hereunder, Tenant shall have
the option to purchase the Leased Premises on, or after, the twentieth (20th)
anniversary of the Commencement Date (the "PURCHASE OPTION") provided that
Tenant notify Landlord of its exercise of the Purchase Option and Tenant
specifies a time and place for closing (the "CLOSING").
SECTION 7.02 PURCHASE PRICE. The purchase price to be paid by Tenant
------------ --------------
to Landlord for the Leased Premises, together with the Other Leased Premises,
shall be Thirty Million Dollars ($30,000,000), subject to adjustments provided
for in this Lease (the "PURCHASE PRICE"). The Purchase Price shall be adjusted
by the percentage increase in the Index from the most recently published Index
prior to the Commencement Date and the most recently published Index prior to
the date that Tenant exercises the Purchase Option; provided, that the Purchase
Price shall never be less than Thirty Million Dollars ($30,000,000). The
portion of the Purchase Price payable to Landlord and allocated to the Leased
Premises is Three Million Dollars ($3,000,000).
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SECTION 7.03 OPTIONS EXERCISED CONCURRENTLY. Tenant shall not
------------ ------------------------------
exercise the option set forth in this Article VII unless Tenant shall
concurrently exercise the purchase option set forth in the Other Lease.
SECTION 7.04 ITEMS DELIVERED AT CLOSING. At the Closing, Landlord
------------ --------------------------
shall convey title to the Leased Premises to Tenant by limited/special warranty
deed subject only to matters existing on the date of Tenant's title insurance
policy in place as of the date of Closing and matters caused or created by
Tenant.
SECTION 7.05 MISCELLANEOUS ITEMS AND COSTS. Rent shall be prorated
------------ -----------------------------
as of the date of the Closing. At the Closing, Landlord shall provide Tenant
with a suitable affidavit satisfying the requirements of the Internal Revenue
Code relating to withholding of a portion of the Purchase Price in the event of
a purchase from a foreign person.
Landlord shall promptly upon request prepare, execute and deliver such
further documents, and shall promptly obtain beneficiary statements and similar
certificates and perform such other acts as shall from time to time be
reasonably required in effecting the Closing and conveying, assigning,
transferring and confirming unto Tenant the Leased Premises and the rights to be
conveyed or assigned.
ARTICLE VIII
------------
ASSIGNMENT AND ENCUMBRANCES
---------------------------
SECTION 8.01. ASSIGNMENT AND SUBLEASES. Except as hereafter
------------ ------------------------
expressly provided in this Section 8.01 or in Section 15.02, Tenant shall not
assign, sell or transfer this Lease or title to the Improvements or any interest
therein or sublease or lease all or any part of the Leased Premises and/or
Improvements without the prior written consent of Landlord, which consent may
not be unreasonably withheld, conditioned or delayed so long as Tenant remains
fully liable for the obligations under the terms of the Lease. Notwithstanding
the foregoing, Tenant shall have the right to assign, sell or transfer this
Lease or title to the Improvements or any interest therein to: (i) any entity
whose share of stock are publicly traded on a national stock exchange, or (ii)
any entity having a net worth of not less than One Hundred Million Dollars
($100,000,000). In no event shall Tenant assign or transfer this Lease or title
to the Improvements to any person or entity that does not hold a riverboat
owner's license for Switzerland County, Indiana. Any assignment or transfer by
operation of law (voluntary or involuntary), merger, conversion or
reorganization, any assignment or transfer to a receiver or trustee in any
federal or state bankruptcy, insolvency or other proceeding shall constitute an
assignment or transfer for purposes of this Lease. Any change in control of
Tenant or of any entity controlling shall not constitute an assignment or
transfer for purposes of this Lease. For purposes of this Section 8.01,
"control" means the power to direct the management and policies of Tenant,
directly or indirectly, whether through the ownership or control of fifty
percent (50%) or more of the shares or other equity or beneficial interest or
power to vote the same, or by the partnership or trust agreement or other
instrument or contract or otherwise; and
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the term "controlling" has the meaning correlative to the foregoing. The
foregoing restrictions of this Section 7.01 shall not apply to an assignment or
transfer by reason of foreclosure or a deed in lieu of foreclosure to any
Mortgagee or to an assignment or transfer by reason of condemnation or deed in
lieu of condemnation to any condemning authority. In addition, Tenant shall be
entitled to sublease retail space in the Improvement in the ordinary course of
business without the requirement of any consent of Landlord.
SECTION 8.02. ENCUMBRANCES. Except for Mortgages meeting the
------------ ------------
requirements of Section 15.02, Tenant shall have no right to mortgage, pledge or
otherwise encumber its interest under this Lease or the Leased Premises and/or
Improvements, or any part thereof, without the prior written consent of
Landlord, which consent may be granted or withheld in Landlord's sole
discretion.
SECTION 8.03. GENERAL. The consent by Landlord under the foregoing
------------ -------
Sections 8.01 or 8.02 to any assignment, sale, transfer, letting or encumbrance
shall not constitute a waiver of the requirement of consent to any subsequent
assignment, sale, transfer or letting or encumbrance. No assignment or transfer
by Tenant permitted hereby shall operate as a release of Tenant from its
obligations hereunder, and Tenant shall remain jointly and severally liable with
such assignee or transferee for the continuing obligations of the Tenant
hereunder. Any purported assignment, sale, transfer, or letting in violation of
this Article VII shall be void and of no force and effect.
ARTICLE IX
----------
TAXES AND UTILITY EXPENSES
--------------------------
SECTION 9.01. PAYMENT OF TAXES AND UTILITY EXPENSES. Tenant shall
------------ -------------------------------------
pay and discharge punctually, as and when the same shall become due and payable
(except as otherwise provided in Section 9.02):
(a) all Taxes which are assessed with respect to the Leased Premises
and the Improvements, or any part thereof, or any appurtenances or equipment
thereon owned by or leased to Tenant for any calendar year (or part thereof)
within the Term, together with all interest and penalties thereon. Real Estate
Taxes assessed for the calendar year in which the Term commences and ends shall
be prorated and paid as provided in Section 9.02; and
(b) all Utility Expenses commencing with the Commencement Date.
Tenant shall be deemed to have complied with the covenants of this
Section 8.01 if payment of Taxes and Utility Expenses shall have been made
either within any period allowed by applicable law before the same shall become
a lien upon the Leased Premises or Improvements; or, if the Tax or Utility
Expense constitutes a lien before it is due and payable, then, before any
penalty
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or interest is assessed with respect thereto. Tenant shall furnish
Landlord with satisfactory evidence of payment of Real Estate Taxes and any
other payment hereunder if requested to do so by Landlord in writing.
Notwithstanding anything in this Section 8.01 to the contrary, in the
event the Leased Premises and Improvements (or any part thereof) are assessed
for Real Estate Tax purposes as part of a larger parcel that is owned by
Landlord, Tenant shall pay to Landlord on or before ten (10) days prior to the
date the Real Estate Taxes with respect to such larger parcel are due and
payable by Landlord (i) Tenant's proportionate share (determined on the basis of
acreage) of the Real Estate Taxes assessed for land with respect to such larger
parcel for land and (ii) the Real Estate Taxes assessed with respect to the
Improvements; and Landlord shall, following receipt of such payment from Tenant,
pay the Real Estate Taxes for such larger parcel.
SECTION 9.02. PRORATION OF REAL ESTATE TAXES. Real Estate Taxes
------------ ------------------------------
assessed for the calendar years in which the Term commences and ends shall be
prorated based upon the number of days within each such calendar year as shall
fall within the Term. Landlord shall reimburse Tenant for Landlord's pro rata
share of the Real Estate Taxes assessed for the calendar year in which the Term
commences promptly upon receipt by Landlord of satisfactory evidence of the
payment of such Real Estate Taxes by Tenant. Tenant shall pay on the date of
termination of this Lease all Real Estate Taxes due and payable during the
calendar year in which the Term ends and Tenant's pro rata share of Real Estate
Taxes assessed for the calendar year in which the Term ends. If the amount of
such Real Estate Taxes is not then determined, the most recently available tax
rates and assessed valuations shall be used in determining the amount to be paid
under this Section 9.02.
SECTION 9.03. RIGHT TO CONTEST. Tenant shall have the right to
------------ ----------------
contest all Taxes and Utility Expenses referred to in Section 9.01 by
appropriate legal proceedings, or in such other manner as it may deem
appropriate. Such legal proceedings shall include any and all appropriate
appeals or other proceedings and appeals from orders, judgments or decrees so
long as the same are sufficient to prevent a foreclosure sale. Tenant shall
conduct all such proceedings at its expense. Landlord, in its capacity as the
fee simple owner of the Real Estate, shall execute all documents reasonably
required for such proceedings. Tenant shall reimburse Landlord for any costs or
expenses incurred by Landlord in connection therewith. Notwithstanding the
foregoing, Tenant shall pay any such Taxes or Utility Expenses prior to the time
the Leased Premises or Improvements (or any part thereof) shall become subject
to sale upon foreclosure of the lien therefor.
SECTION 9.04. DISTRIBUTION OF OVERPAYMENT. If there shall be any
------------ ---------------------------
refunds or rebates on account of Taxes or Utility Expenses paid by Tenant under
the provisions of this Lease, such refund or rebate shall belong to Tenant,
whether or not received by Landlord during the Term; provided, however, that in
the event of a refund or rebate resulting from the contest of Real Estate Taxes,
Landlord shall be entitled to its proportionate share of such refund or rebate
if the Real Estate Taxes were assessed on a larger parcel owned by Landlord of
which the Leased Premises and/or Improvements are a part. Any refunds so
received by Landlord shall be deemed to be received by Landlord in trust for
Tenant and shall be paid to Tenant forthwith. Landlord will, upon request of
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Tenant, sign any receipts which may be necessary to secure the payment of any
such refund or rebate.
SECTION 9.05. SEPARATE ASSESSMENTS. If the Leased Premises is part
------------ --------------------
of a larger parcel that is owned by Landlord, Landlord shall make such
application as may be necessary or appropriate to obtain separate tax
assessments for the Leased Premises and Improvements. Tenant shall reimburse
Landlord for any costs or expenses incurred by Landlord in connection therewith.
ARTICLE X
---------
MAINTENANCE AND REPAIRS
-----------------------
Tenant shall at all times during the Term, at its expense, keep and
maintain or cause to be kept and maintained the Leased Premises and Improvements
in a first class, clean and safe condition and repair and in compliance with all
applicable federal, state and local statutes, laws, ordinances, rules and
regulations and all applicable orders and requirements of governmental
authorities, including (without limitation) the making of all necessary
structural repairs and replacements. Landlord shall not be required to furnish
any services or facilities or to make any improvements, repairs or alterations
in or to the Leased Premises or the Improvements during the Term.
ARTICLE XI
----------
MECHANICS' LIENS; INDEMNIFICATION
---------------------------------
SECTION 11.01. MECHANICS' LIENS. Tenant shall promptly after the
------------- ----------------
filing thereof discharge of record, at Tenant's expense, any mechanics',
materialmen's or other lien, or notice of intention to file any such lien, filed
against the Leased Premises or Improvements or any part thereof or interest
therein; provided that Tenant shall have the right to contest the validity of
any such lien in any manner permitted by law so long as Tenant (a) shall provide
to Landlord, title insurance, an indemnity, bond or other assurance or security
reasonably satisfactory to Landlord; and (b) shall thereafter diligently proceed
to cause such lien or notice of intention to file a lien to be removed and
discharged. If Tenant shall fail to so discharge, or to seek to discharge, any
such lien or notice of intention to file a lien, then Landlord may, but shall
not be obligated to, discharge the same, either by paying the amount claimed to
be due, or by procuring the discharge of such lien by depositing in court a bond
for the amount claimed or in such other manner as is or may be permitted by law,
and Tenant shall reimburse and indemnify Landlord in respect thereto.
SECTION 11.02. INDEMNIFICATION BY TENANT. Subject to the provisions
------------- -------------------------
of Section 12.05 and regardless of whether or not caused or alleged to be caused
by the several, joint, concurrent or comparative negligence, but not sole
negligence, of Landlord, Tenant shall, at its sole cost and expense, indemnify
and save harmless Landlord against and from any and all liability,
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damages, losses, fines, penalties, costs and expenses (including, but not
limited to, court costs and attorneys' fees) arising out of, resulting from or
in any way connected with: (a) Tenant's possession, use or control of the Leased
Premises or Improvements or any part thereof during the Term, (b) any condition
of the Leased Premises or Improvements or any part thereof during the Term, (c)
any breach or default on the part of Tenant in the performance of any covenant
or agreement to be observed or performed by Tenant pursuant to the terms of this
Lease, (d) any willful or negligent act or omission of Tenant, or any of its
agents, contractors, licensees, subtenants or its or their employees, customers
or invitees, or (e) any accident, injury to or death of persons or damage to
property whatsoever in or about the Leased Premises or Improvements or any part
thereof during the Term. In case any claim, action or proceeding covered by the
preceding indemnification provisions shall be brought against Landlord, Tenant,
upon written notice from Landlord, shall defend such action or proceeding with
counsel acceptable to Landlord.
Tenant's indemnification obligations hereunder shall be in addition to
any and all other obligations Tenant may have to Landlord at law or in equity
and shall survive the expiration or earlier termination of the Term and any
transfer by Landlord of title to the Leased Premises.
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ARTICLE XII
-----------
INSURANCE
---------
SECTION 12.01. LIABILITY INSURANCE. Tenant shall maintain and keep
------------- -------------------
in force at all times during the Term, with an insurance company or companies
licensed to do business in the State of Indiana and otherwise acceptable to
Landlord (a) comprehensive general public liability insurance covering any and
all claims for injuries to or death of persons or damage to property occurring
in or upon the Leased Premises and Improvements and having initial minimum
levels of combined coverage for bodily injury (including death resulting
therefrom) and property damage, including umbrella coverage, of not less than
Ten Million Dollars ($10,000,000.00), for each occurrence and on an annual
aggregate basis and (b) workmen's compensation and employer's liability
insurance in such amounts as shall be required by law from time to time, but in
no event less than One Hundred Thousand Dollars ($100,000) per accident.
Tenant's comprehensive general public liability insurance shall have extensions
of coverage to include blanket contractual liability for written and oral
contracts (including Tenant's indemnification obligations hereunder), broad form
property damage and premises operations (including explosion, collapse and
underground coverage). In addition, Tenant shall maintain or cause its
contractor(s) or construction manager to maintain products and completed
operations coverage through the period ending two (2) years after completion of
construction of the Improvements. Each policy referred to in this Section 11.01
shall name Landlord as an additional insured, as well as Tenant's contractor(s)
and/or construction manager during the period of construction of any
Improvements and during any period in which construction, alteration or
substantial repair work is being performed on or to the Leased Premises or
Improvements (or any part thereof). Such liability insurance may be provided by
a single policy or combination of underlying policies, with the balance provided
by an excess or umbrella liability policy; provided such excess or umbrella
insurance complies with all other requirements of this Lease with respect to
such insurance.
SECTION 12.02. PROPERTY INSURANCE. During the Term, Tenant shall
------------- ------------------
keep the Improvements insured with an insurance company licensed to do business
in the State of Indiana and otherwise acceptable to Landlord for the benefit of
Landlord and Tenant, as their respective interests may appear, against loss or
damage by fire or other casualty (including earthquake, to the extent customary
and available at reasonable costs) covered by a customary extended coverage
endorsement, in an amount equal to one hundred percent (100%) of the replacement
cost thereof and providing for and having a deductible in an amount not
exceeding One Hundred Thousand Dollars ($100,000). In addition during the
period of construction of the Improvements (or during any period in which
construction, alteration or substantial repair work is being performed on or to
the Leased Premises or Improvements (or any part thereof), Tenant shall maintain
in force builder's all risk coverage, with fire and extended coverages. Such
builder's all risk coverage may be written as an endorsement to the casualty
insurance required by the first sentence of this Section 11.02 and shall protect
the interests of Landlord and Tenant's construction manager and/or contractors
and subcontractors as their respective interests may appear. Notwithstanding
the foregoing, Tenant shall at all times maintain such insurance in an amount
sufficient to meet all co-insurance requirements
34
<PAGE>
under such insurance policy. Landlord shall not carry any insurance concurrent
in coverage and contributing in the event of loss with any insurance required to
be furnished by Tenant hereunder, if the effect of such separate insurance would
be to reduce the protection or the payment to be made under Tenant's insurance.
SECTION 12.03. PROOF OF INSURANCE. Tenant shall deliver copies of
------------- ------------------
the insurance policies showing the coverages required by this Article XI to
Landlord within thirty (30) days after the Commencement Date but in all events
prior to the commencement of any excavation or filling of the Real Estate or the
construction of any Improvements, and thereafter a copy of each replacement
policy shall be provided not less than thirty (30) days prior to the expiration
of the policy being replaced. Each such policy referred to in this Article XII
shall contain a provision providing that the policy shall not be canceled, not
renewed or materially amended without thirty (30) days prior written notice to
Landlord.
SECTION 12.04. ADJUSTMENT IN INSURANCE. If by reason of changed
------------- -----------------------
conditions or by reason of experience Landlord reasonably determines that the
insurance amounts referred to in the foregoing Section 12.01 are inadequate,
Tenant shall, at the request of Landlord, increase the amounts of such insurance
carried to the extent appropriate for a like facility under like circumstances.
In the event that it shall become customary for lessees of similar premises to
maintain types or coverages of insurance other than those required to be
maintained by Tenant under this Article XII, Tenant shall maintain such other
types of coverages of insurance upon the written request of Landlord so long as
such types or coverages of insurance can be obtained by Tenant at reasonable
cost.
SECTION 12.05. WAIVER OF SUBROGATION. Tenant and Landlord waive all
------------- ---------------------
rights against each other and against those for whom the other is legally liable
for all losses covered by insurance provided under this Article XI to the extent
the limits of such insurance are adequate to cover such losses, it being the
intent of this provision to allocate all risk of such loss to such insurance;
provided, however, that this waiver shall not be effective if it would preclude
- -------- -------
or prejudice the right of Landlord or Tenant to recover under such insurance
policy. If the policies of insurance provided for under this Article XI require
an endorsement to provide for continued coverage where there is a waiver of
subrogation, Tenant shall cause such policies to be so endorsed.
SECTION 12.06. INSURANCE PROCEEDS. The proceeds of all policies of
------------------
insurance on the Improvements maintained pursuant to Section 11.02 remaining
after any required payment to any Mortgagee shall be used as a trust fund toward
the repair, replacement or rebuilding of the Improvements. Accordingly, all
insurance proceeds paid to Tenant and/or Landlord under such policies shall be
deemed to be received and held by such party in trust for the payment of the
costs of repairing, replacing and rebuilding the Improvements. All such
insurance proceeds so received shall be deposited by such party with the first
Mortgagee or if there is no Mortgagee with a banking or similar institution
approved by Landlord, to be held and disbursed by such Mortgagee or institution
for the payment of the costs of repairing, replacing and rebuilding the
Improvements in the manner and upon the conditions customarily applicable to
construction loans. If the insurance
35
<PAGE>
proceeds shall exceed the cost of repairing, replacing or rebuilding the
Improvements, the balance remaining after payment of such costs shall be the
property of and shall be paid to Tenant. The institution so holding and
disbursing the insurance proceeds may deduct from any insurance proceeds
deposited with it the amount of its charges for the performance of its services
and any reasonable expenses incurred by it in connection therewith.
Landlord shall cooperate fully with Tenant in collecting such
insurance proceeds and shall execute and deliver, as requested by Tenant, any
and all proofs, receipts, releases and other instruments as may be appropriate
for such purpose.
SECTION 12.07. GENERAL PROVISIONS. In the event Tenant shall fail or
------------- ------------------
refuse to obtain any insurance required by this Article XI, Landlord, in
addition to any other rights Landlord may have under this Lease or at law or in
equity, shall have the right to obtain such insurance. The cost of such
insurance shall constitute additional Rent payable by Tenant to Landlord
immediately upon demand.
ARTICLE XIII
------------
DESTRUCTION
-----------
SECTION 13.01. TENANT'S OBLIGATION TO REPAIR. If at any time during
------------- -----------------------------
the Term the Improvements shall be destroyed or damaged by fire or other cause,
Tenant shall cause the same to be repaired, replaced or rebuilt within a period
of time which, under all prevailing circumstances, shall be reasonable, subject
to Unavoidable Delays. In the repair, replacement or rebuilding of any
Improvements hereunder, Tenant shall repair, replace or rebuild the Improvements
so damaged or destroyed to their condition immediately before such damage or
destruction, subject to all then applicable laws, ordinances, rules or
regulations of any governmental authority affecting the same. If the insurance
proceeds payable in respect of any such damage or destruction, less any cost of
collection and any less amounts required to be paid to any Mortgagee, shall be
insufficient to pay the entire cost of such repair, replacement or rebuilding,
Tenant shall provide for the deficiency. In such event, the time within which
Tenant shall be required to commence and complete its obligations hereunder
shall include a reasonable time to obtain and close the necessary commitments
for equity or mortgage financing to cover the deficiency.
SECTION 13.02. NO RENT ABATEMENT. In no event shall Rent or other
------------- -----------------
charges due hereunder abate in the event of such damage or destruction.
36
<PAGE>
ARTICLE XIV
-----------
CONDEMNATION
------------
SECTION 14.01. TOTAL CONDEMNATION. If at any time during the Term
------------- ------------------
there shall be a total taking or a Constructive Total Taking of the Leased
Premises and Improvements (or any part thereof) in condemnation proceedings or
by any right of eminent domain or by a conveyance in lieu thereof, this Lease
shall terminate on the date of such taking and the Rent payable by Tenant
hereunder shall be prorated and paid to the date of such taking.
SECTION 14.02. PROCEEDS OF TOTAL CONDEMNATION. In the event of any
------------- ------------------------------
such total taking or Constructive Total Taking and the termination of this
Lease, the Condemnation Proceeds shall be paid to Chicago Title Insurance
Company, or such other entity mutually agreeable to Landlord and Tenant, as
trustee (the "TRUSTEE"), but shall be applied by Trustee in the following order
of priority:
(a) First, to the Mortgagees in the order of priority of such
Mortgages to the extent of unpaid principal amounts of such Mortgages, but
only to the extent such unpaid principal amount represents loan proceeds
that were used for the constructing and equipping of Improvements and all
replacements thereof or the refinancing thereof, and all accrued and unpaid
interest thereon and all costs, expenses and advances pursuant thereto and
all advances made by such Mortgagee for the benefit of the Leased Premises
and Improvements and the continued use and operation thereof;
(b) Second, to the payment of costs and expenses, including (without
limitation) court costs and reasonable attorneys' fees, incurred by
Landlord and Tenant in connection with such taking;
(c) Third, to Landlord in an amount equal to the value of the Real
Estate determined as if unencumbered by this Lease and unimproved;
(d) Fourth, to Landlord in an amount equal to the then present value
of the Base Rent which would have been due and payable to Landlord during
the Original Term or the applicable Extension Term if such total taking or
Constructive Total Taking had not occurred; and
(e) Any remaining balance shall be paid to Tenant.
Nothing herein contained shall impair the right of Tenant to the full award,
compensation or damages payable as an award for loss of business or for moving
expenses, as long as such award shall not reduce the amount of the award
otherwise recoverable by Landlord from the condemning authority.
37
<PAGE>
SECTION 14.03. PARTIAL CONDEMNATION. In the event of a taking that
------------- --------------------
is less than a Constructive Total Taking, this Lease shall not terminate or be
affected in any way, except as provided in Section 14.04. The Condemnation
Proceeds in such event shall be paid to Trustee and applied by the Trustee, to
the extent available (following any required payments to Mortgagees), in the
following order of priority:
(a) First, to the payment of costs and expenses, including (without
limitation) reasonable attorneys' fees, incurred by Landlord and Tenant in
connection with such taking;
(b) The balance of the Condemnation Proceeds shall be payable in trust
to the first Mortgagee or if there is no Mortgagee to a banking or similar
institution approved by Landlord to be disbursed by such Mortgagee or
institution for payment of the costs of repairing, replacing or rebuilding
the Improvements in the manner then reasonably feasible as required by
Section 14.04;
(c) The Condemnation Proceeds, if any, remaining after repair,
replacement or rebuilding shall be paid to Tenant, except to the extent of
an equitable portion of the Condemnation Proceeds allocable by agreement of
Landlord and Tenant to Landlord on account of any taking of fee title to
any portion of the Real Estate.
SECTION 14.04. RESTORATION. In the event of a taking that is less
------------- -----------
than a Constructive Total Taking, Tenant shall proceed with due diligence,
subject to Unavoidable Delays, to repair, replace or rebuild the remaining
Improvements to their former condition as may be reasonably possible. If the
Condemnation Proceeds are insufficient to pay the entire cost of such repair,
replacement or rebuilding, Tenant shall pay any such deficiency.
SECTION 14.05. TEMPORARY CONDEMNATION. If, at any time during the
------------- ----------------------
Term, the whole or any part of the Leased Premises or Improvements or Tenant's
interest therein under this Lease shall be taken in condemnation proceedings or
by any right of eminent domain for temporary use or occupancy, the foregoing
provisions of this Article XIV shall not apply, and, except to the extent that
Tenant may be prevented from so doing pursuant to the terms of the order of the
condemning authority, Tenant shall perform and observe all of the other terms,
covenants, conditions and obligations hereof to be performed and observed by it,
as though such taking had not occurred. In the event of any such taking of the
character referred to in this Section 14.05, Tenant shall be entitled to receive
the entire amount of the Condemnation Proceeds paid for such taking, whether
paid by way of damages, rent, costs of moving or restoration or otherwise,
unless such period of temporary use or occupancy shall extend beyond the
expiration of the Term, in which case the Condemnation Proceeds shall be
apportioned between Landlord and Tenant as of the date of expiration of the
Term. Upon the expiration of any such period of temporary use or occupancy
during the Term, Tenant shall, at its expense, restore the Improvements as
nearly as may be
38
<PAGE>
reasonably possible to the condition in which the same were immediately prior to
such taking. If such period of temporary use or occupancy shall extend beyond
the expiration of the Term, any portion of the Condemnation Proceeds received by
Tenant as compensation for the cost of restoration of the Improvements shall be
paid by Tenant to Landlord on the date of termination of this Lease, and Tenant
shall be thereby relieved of the obligation to perform such restoration.
SECTION 14.06. RENT ADJUSTMENT. In the event of a taking of the
------------- ---------------
character referred to in Section 14.03, this Lease shall terminate as to the
portion of the Leased Premises so taken. No such partial taking shall affect
the Rent payable hereunder unless (i) the taking includes or affects leasable or
other income producing space, or (ii) the taking has or will have, in Tenant's
reasonable judgment, an adverse effect upon the operations of the Leased
Premises or Improvements. In either of such events, upon the request of Tenant
(and payment to Landlord of the payment, if any, agreed upon pursuant to Section
14.03), the Base Rent payable for the balance of the Term of this Lease shall be
equitably and proportionately reduced from the date of such taking. If Landlord
and Tenant cannot agree upon the amount of such reduction in Base Rent (or
payment out of Condemnation Proceeds pursuant to Section 14.03), they shall be
determined on a consistent basis by an independent appraiser with M.A.I.
credentials selected by agreement of Landlord and Tenant or, in the absence of
agreement on a single appraiser, by an independent appraiser with M.A.I.
credentials selected by agreement of the appraisers appointed (one each) by
Landlord and Tenant. Until the amount of the reduction in the Base Rent has
been determined, Tenant shall continue to pay Landlord the Base Rent provided
for herein. Upon determination of the reduction in Base Rent, Tenant shall be
entitled to credit the amount by which any Base Rent theretofore paid by Tenant
for such period exceeds the amount of the Base Rent for such period as so
reduced against the first installments of Base Rent thereafter payable under the
Lease; provided, however, that if at the time of such determination the Term has
ended or such credit exceeds the amount of all future installments of Base Rent
payable hereunder, Landlord shall pay to Tenant an amount equal to such excess
upon demand.
SECTION 14.07. RIGHTS TO APPEAR. Landlord, Tenant and any Mortgagee
------------- ----------------
shall have the right to participate in any condemnation proceeding for the
purpose of protecting their rights hereunder, and in this connection,
specifically and without limitation, to introduce evidence to establish the
value of or damage to the Real Estate, the Leased Premises and/or the
Improvements (or any part thereof).
ARTICLE XV
----------
MORTGAGES
---------
SECTION 15.01. FEE TITLE NOT SUBORDINATED. Nothing herein shall be
------------- --------------------------
deemed to constitute a subordination of Landlord's fee simple title in the Real
Estate to any Mortgage or to require Landlord to execute any Mortgage or
agreement or instrument or take any action to effect any such subordination.
39
<PAGE>
SECTION 15.02. LEASEHOLD MORTGAGES.
------------- -------------------
(a) Without the requirement of any consent of Landlord, Tenant
shall have the right to mortgage its entire interest under this Lease and
in and to the Improvements.
The execution and delivery of any such Mortgage shall not be
deemed to constitute an assignment or transfer of this Lease, nor shall the
holder of any such Mortgage be deemed (prior to a foreclosure judgment and
the taking of possession as hereinafter provided) an assignee or transferee
of this Lease so as to require such holder to assume the performance of any
of the terms, covenants or conditions on the part of Tenant to be performed
hereunder. Tenant shall give prompt notice to Landlord of the execution and
delivery of a Mortgage meeting the requirements of this Section 15.02 and
shall furnish it with conformed copies thereof.
(b) Notwithstanding anything contained in this Lease to the
contrary, no purchaser or transferee at any foreclosure sale or other
transfer authorized by law or this Lease shall acquire any right, title or
interest in or to this Lease, the Leased Premises or the Improvements
unless (i) said purchaser or transferee shall, in the instrument
transferring the same or immediately after acquiring the same, assume and
agree to keep, observe and perform all of the terms, covenants and
provisions of this Lease on the part of the Tenant to be kept, observed and
performed (including the obligation to cure defaults arising prior to such
assumption curable by the payment of money or otherwise reasonably
susceptible of being cured) and shall therein agree that no further or
additional mortgage or assignment of this Lease shall be made, except as
provided in this Article XIV and (ii) a duplicate-original of said
assumption agreement, duly executed and acknowledged by said purchaser or
transferee, shall be delivered to Landlord promptly following the
consummation of such sale or transfer.
SECTION 15.03. NOTICES AND RIGHTS ON TENANT'S DEFAULT. If Tenant or
------------- ---------------------------------------
a Mortgagee shall provide to Landlord a copy of any such Mortgage, together with
written notice specifying the name and address of the Mortgagee, Landlord agrees
that so long as any such Mortgage shall remain unsatisfied of record or until
written notice of satisfaction is given by the Mortgagee to Landlord, the
provisions of this Article XV shall apply. Following any such notification
specifying the name and address of a Mortgagee:
(a) Landlord shall give such Mortgagee notice of each notice given to
Tenant under this Lease (such notice to be given in the same manner as
provided in the following Article XXV for notices to a party to this Lease)
at such Mortgagee's last address for notice provided to Landlord as
provided above. No such notice to Tenant shall be effective unless notice
thereof is so given to all such Mortgagee(s).
40
<PAGE>
Landlord shall have no obligation to give notice to a Mortgagee at any
address other than such Mortgagee's last address for notice provided to
Landlord.
(b) Such Mortgagee(s) shall have the right, until forty-five (45) days
after the later of (i) expiration of Tenant's applicable cure period, or
(ii) receipt of its copy of any such notice as is given to Tenant, to
remedy or cause to be remedied the Event of Default which is the basis of
the notice; and Landlord shall accept performance by such Mortgagee as
performance by Tenant.
(c) In case of an Event of Default by Tenant under this Lease, other
than an Event of Default susceptible of being cured solely by the payment
of money, Landlord shall take no action to effect a termination of this
Lease by service of a notice or otherwise without first giving to such
Mortgagee(s) a reasonable time, under prevailing circumstances, within
which either: (i) to obtain possession of the Leased Premises and
Improvements (including possession by a receiver) and to cure such Event of
Default, in the case of an Event of Default that is susceptible of being
cured when such Mortgagee has obtained possession of the Leased Premises
and Improvements; or (ii) to institute and complete foreclosure proceedings
or otherwise acquire Tenant's estate under this Lease, in the case of an
Event of Default which is not so susceptible of being cured by such
Mortgagee upon obtaining possession. The provisions of this clause (c) of
this Section 15.03 are conditioned on the Mortgagee delivering to Landlord,
within the forty-five (45) day period specified in clause (b) above, an
instrument agreeing that it will attempt with due diligence to obtain
possession of the Leased Premises and Improvements, and that upon obtaining
possession of the Leased Premises and Improvements, whether through
foreclosure or otherwise, it will cure such Event of Default (other than an
Event of Default described in Article XVIII).
(d) Such Mortgagee shall not be required to continue possession or
continue foreclosure proceedings under clause (c) of this Section if the
particular Event of Default has been cured.
(e) Landlord's right to terminate this Lease by reason of any Event of
Default described in Article XVIII shall end, with respect to such Event of
Default, on the date such Mortgagee or any purchaser at the foreclosure
sale or by assignment in lieu thereof shall obtain possession of the Leased
Premises as successor to Tenant (whether or not under a new lease);
provided that Landlord has not, prior to such date, validly exercised its
right to terminate this Lease, and provided that any purchaser or
transferee upon foreclosure or assignment in lieu thereof complies with the
provisions of Section 15.02(b).
(f) Notwithstanding anything to the contrary contained in this Lease,
if Landlord shall purport to terminate this Lease for any reason prior to
the last day of
41
<PAGE>
the Term, Landlord shall enter into a new lease for the Leased Premises
with any Mortgagee, or its designee, for the remainder of what would have
been the Term of this Lease in the absence of such purported termination,
effective as of the date and time of such purported termination, at the
Rent and upon the same terms, covenants and conditions contained herein,
and Landlord, simultaneously with the execution and delivery of such new
lease, shall assign and turn over to the tenant named therein the monies
and subleases, if any, then being held by Landlord pursuant to this Lease,
which Tenant would have been entitled to but for such purported
termination, and said new tenant shall assume such subleases without
recourse to Landlord, provided that:
(i) such Mortgagee shall make written request for such new lease
within sixty (60) days after the date of such purported termination;
and
(ii) such Mortgagee shall pay or cause to be paid to Landlord on
the commencement date of the term of the new lease, all installments
of Rent that at such time are or would have been due and unpaid
through such commencement date under this Lease but for such purported
termination and shall cure all uncured Events of Default of Tenant
under this Lease that are curable by the payment of money or otherwise
reasonably susceptible of being cured by such Mortgagee; and shall pay
or cause to be paid to Landlord on that date all expenses, including
reasonable attorneys' fees, reasonable management fees and court costs
and disbursements incurred by Landlord in connection with any such
default and purported termination as well as in connection with the
execution and delivery of such new lease, less the net income
collected by Landlord from the date of such purported termination of
this Lease to the commencement date of such new lease, any excess of
such net income over the total of said sums and expenses to be applied
by Landlord to the payment of the Rent thereafter becoming due under
such new lease.
In the event two or more Mortgagees each exercise their rights
hereunder and there is a conflict that renders it impossible to comply with
all such requests, the Mortgagee whose leasehold Mortgage would be senior
in priority if there were a foreclosure shall prevail. If all of the
foregoing conditions shall be satisfied, the purported termination shall be
deemed ineffective and void ab initio, so that the new lease shall be
-- ------
deemed to be a continuation of this Lease for all purposes under applicable
law. If such conditions shall not be met, the Lease shall be deemed to have
terminated upon the expiration of the sixty (60) day period provided for in
the foregoing clause (i) of this paragraph (f).
42
<PAGE>
(g) In the event any Mortgagee pays any Rent or other sums due
hereunder which relate to periods other than during its actual ownership of
the leasehold estate, such Mortgagee shall be subrogated to any and all
rights which Tenant may assert against Landlord with respect to such period
for which such Rent or other sums were paid.
(h) No surrender or cancellation of this Lease (other than a
termination by Landlord in compliance with the conditions of this Article
XV) shall be effective without written approval of the Mortgagee(s); nor
shall the acquisition of both the fee and leasehold estates in the Leased
Premises in one entity be deemed to effect a merger thereof without the
express written consent of the owner/lessee and all Mortgagees at the time
said fee and leasehold estates are so acquired by one entity.
SECTION 15.04. NO OBLIGATION TO CURE. Nothing herein contained shall
------------- ---------------------
require any Mortgagee to cure or undertake to cure any default of Tenant, unless
and until such Mortgagee elects to exercise any right under Section 15.03 as to
which such cure or undertaking to cure is a condition.
SECTION 15.05. MODIFICATION OF LEASE. If in connection with
------------- ---------------------
obtaining a Mortgage from a prospective Mortgagee, such Mortgagee shall request
reasonable modifications in this Lease as a condition to the making of such
Mortgage Loan, Landlord will execute an agreement in recordable form so
modifying this Lease, provided that such modifications do not adversely affect
Landlord hereunder.
SECTION 15.06. EXCLUSION. The rights contained in this Article XV
------------- ---------
and elsewhere in this Lease with respect to Mortgagees shall not apply to any
Mortgagee who shall fail to give Landlord written notice of its identity and
address.
SECTION 15.07. NOTICES TO LANDLORD. Tenant shall provide to Landlord
------------- -------------------
written notice of any material default by Tenant as to which Tenant receives
notice pursuant to any Mortgage; and Tenant shall attempt in good faith to
obtain the agreement of any Mortgagee to accept any cure tendered by Landlord
(without obligation of Landlord to undertake any such cure) of any such material
Mortgage default.
43
<PAGE>
ARTICLE XVI
-----------
SPECIFIC PERFORMANCE
--------------------
In addition to any other rights that Tenant or Landlord may have under
this Lease, if the other fails or refuses to execute, acknowledge and deliver
any instrument or instruments or to take any other action (other than an action
solely involving the payment of any sum of money) required to effectuate the
provisions of this Lease within the time period required by this Lease or, if no
time period therefor is specified in this Lease, within any reasonable time
period specified in any request from the other party, then from and after the
date fifteen (15) days after the date of delivery of a final written demand to
the other party requesting such execution, acknowledgment and delivery or other
action, the requesting party shall be entitled to specific performance,
declaratory relief, or such other remedies at law or equity which may be
appropriate to effectuate the provisions of this Lease.
ARTICLE XVII
------------
LANDLORD'S RIGHT OF ENTRY
-------------------------
Tenant shall permit Landlord and its authorized representatives, upon
reasonable prior notice, to enter the Leased Premises and Improvements for the
purpose of (a) inspecting the same, (b) showing the same to prospective
purchaser's of Landlord's title to the Leased Premises or to prospective
tenant's of the Leased Premises, or (c) performing any work in the Leased
Premises that may be necessary by reason of Tenant's failure to perform any such
work or to commence the same within ten (10) days after written notice from
Landlord (or without notice in case of emergency). Nothing herein shall imply
any duty on the part of Landlord to do any such work, and performance thereof by
Landlord shall not constitute a waiver of Tenant's default in failing to perform
the same. Landlord shall not be liable for inconvenience, annoyance,
disturbance, loss of business or other damage to Tenant or any subtenant or
licensee of Tenant by reason of performing any such work, and the obligations of
Tenant under this Lease shall not be affected thereby.
ARTICLE XVIII
-------------
DEFAULTS
--------
SECTION 18.01. EVENTS OF DEFAULT. Each of the following events, if
------------- -----------------
not remedied as hereinafter provided, shall be deemed an "Event of Default":
(a) The occurrence of any event set forth in Article XX, as therein
provided;
44
<PAGE>
(b) Tenant's failure to pay any installment of Rent within thirty (30)
days of the due date thereof;
(c) Tenant's failure to perform any other covenant or agreement herein
contained on Tenant's part to be kept or performed and the continuance of
such failure for a period of thirty (30) days after notice in writing to
Tenant from Landlord specifying the nature of such failure;
(d) Tenant obtains a License for Switzerland County, Indiana and such
License shall be cancelled, terminated or revoked or shall have expired and
not be renewed, and Tenant shall not have assigned this Lease with the
consent of Landlord, which consent will not be unreasonably withheld,
conditioned or delayed, to any other person or entity that holds a License
for Switzerland County, Indiana within one (1) year after the date of such
cancellation, termination, revocation or expiration; or
(e) In the event Tenant abandons its efforts to obtain the License.
Upon the occurrence of any Event of Default, Landlord may, at its option, give
to Tenant a written notice of its election to end the Term of this Lease upon a
date specified in such notice, which date shall be not less than forty-five (45)
days after the date of delivery to Tenant of such notice by Landlord.
Simultaneously with the sending of any notice of default or termination to
Tenant, Landlord shall send a copy of such notice to Mortgagees, as required by
Section 15.03.
SECTION 18.02. EXTENSIONS. If Landlord gives notice at any time of a
------------- ----------
default of a nature that cannot be cured within the thirty (30) day period
provided in Section 18.01(c), then such default shall not be deemed an Event of
Default so long as Tenant, following notice from Landlord, proceeds to cure the
default as soon as reasonably possible and continues to take all reasonable
steps necessary to complete the same within a period of time which, under all
prevailing circumstances, shall be reasonable. In addition, no Event of Default
shall be deemed to have occurred if and so long as Tenant shall be delayed in or
prevented from curing the same within the applicable cure period by Unavoidable
Delay.
SECTION 18.03. REMEDIES. Upon any Event of Default pursuant to
------------- --------
Section 18.01, or at any time thereafter so long as the same is not cured,
Landlord may, in addition to and without prejudice to any other rights and
remedies Landlord shall have under this Lease or at law or in equity, (a) cure
any such Event of Default and collect the cost thereof from Tenant upon demand
or (b) reenter the Leased Premises and Improvements and recover possession
thereof (subject in each case to the rights of Mortgagees provided in Article
XV) in the manner prescribed by law, or (c) terminate this Lease. In case of
any such reentry and recovery of possession, Landlord may, subject to Article
XV:
(i) collect all rents, proceeds and profits of the Leased Premises
and Improvements and operate the same for its own account, and relet the
Leased
45
<PAGE>
Premises and Improvements or any part thereof, either in the name of
Landlord or otherwise, for a term or terms which may, at Landlord's option,
be less than or exceed the then remaining Term of this Lease; and/or
(ii) terminate this Lease.
During any period of possession hereunder, Landlord, at Landlord's option, may
complete such construction, alterations, repairs, and/or replacements of in the
Leased Premises and Improvements as Landlord, in Landlord's reasonable judgment,
considers advisable and necessary; and the making of such alterations, repairs
and/or replacements shall not operate or be construed to release Tenant from
liability hereunder.
ARTICLE XIX
-----------
TENANT'S RIGHT TO TERMINATION
-----------------------------
Tenant shall have the right to terminate this Lease if any of the
following occur, or fail to occur, as the case may be: (i) on or before ninety
(90) days after the Execution Date Tenant is unable to obtain an acceptable, in
Tenant's reasonable discretion, title insurance policy, survey, environmental
assessment report or required permits covering the Leased Premises on or before
such date; (ii) on or before the Commencement Date Tenant has not obtained a
License and Tenant is not in default under this Lease; or (iii) it becomes
illegal under applicable local, state or federal law for the Tenant and all
other entities to operate a riverboat casino on the Ohio River in connection
with the Leased Premises, and there are no appeals, proceedings or actions
pending that would invalidate or have the affect of invalidating such law.
ARTICLE XX
----------
BANKRUPTCY AND INSOLVENCY
-------------------------
SECTION 20.01. CERTAIN EVENTS OF DEFAULT SPECIFIED. If during the
------------- -----------------------------------
Term:
(a) Tenant shall be adjudicated a bankrupt or adjudged to be
insolvent;
(b) A receiver or trustee shall be appointed for Tenant's property and
affairs, unless such appointment shall be vacated within ninety (90) days
of its entry;
(c) Tenant shall make an assignment for the benefit of creditors;
(d) A petition shall be filed proposing the adjudication of Tenant as
a bankrupt or insolvent or the reorganization of Tenant or an arrangement
by Tenant with its creditors whether pursuant to the United States
Bankruptcy Code or any
46
<PAGE>
similar federal or state proceedings, unless such petition is filed by a
party other than Tenant and is withdrawn or is dismissed within ninety (90)
days after the date of filing; or
(e) Any execution or attachment shall be issued against Tenant or any
of Tenant's property, whereby the Leased Premises or Improvements shall be
taken or occupied or attempted to be taken or occupied by someone other
than Tenant, unless such attachment is a prejudgment attachment that is set
aside within ninety (90) days after the issuance of the same;
then, subject to Section 20.02, an Event of Default hereunder shall be deemed to
have occurred so that the provisions of Article XVIII hereof shall become
effective; and Landlord shall have the rights and remedies provided for therein
in addition to all other legal remedies available to Landlord.
SECTION 20.02. PRESERVATION OF LEASEHOLD ESTATE. Notwithstanding
------------- --------------------------------
anything to the contrary contained in Article XIX, upon the occurrence of an
Event of Default pursuant to this Article XX, then (in addition to any rights of
Mortgagees under Article XV) if the Rent due and payable hereunder shall
continue to be paid and the other covenants and agreements of this Lease on
Tenant's part to be kept and performed shall continue to be kept and performed,
no Event of Default shall be deemed to have occurred and the provisions of
Article XVIII shall not become effective.
ARTICLE XXI
-----------
UTILITY EASEMENTS
-----------------
Upon request of Tenant, Landlord shall grant easements at locations
and in scope reasonably acceptable to Landlord as may be required by public
utility companies or governmental authorities as a condition to providing any
utility services necessary or appropriate for the use and operation of the
Leased Premises and Improvements as permitted by this Lease.
ARTICLE XXII
------------
SURRENDER
---------
47
<PAGE>
SECTION 22.01. SURRENDER OF LEASED PREMISES. Tenant shall surrender
------------- ----------------------------
the Leased Premises and Improvements to Landlord at the expiration or earlier
termination of the Term or of Tenant's right to possession hereunder, without
delay, in good order, condition and repair except for reasonable wear and tear
after the last necessary repair, replacement, or rebuilding made by Tenant, with
all leasehold improvements necessary for the continued operation of the
Improvements for the purposes for which such Improvements were designed, free
and clear of all liens and encumbrances except the liens for taxes and
assessments not then due and payable, and without any payment or allowance
whatever by Landlord for the Improvements. For purposes of this Article XXII
leasehold improvements shall include (without limitation) floor coverings
(excluding area rugs), wall coverings, ceilings, lighting systems and fixtures,
plumbing fixtures and other mechanical systems, equipment and facilities and
built-in installations. Leasehold improvements do not include trade fixtures,
trade equipment, kitchen equipment, furniture, inventory and similar movable
personal property.
SECTION 22.02. DEMOLITION OF IMPROVEMENTS. Notwithstanding the
------------- --------------------------
provisions of Sections 22.01 or 22.03, Landlord shall have the right to require
that Tenant demolish and remove all or certain designated Improvements from the
Leased Premises upon the expiration of the Term. Such election by Landlord
shall be made by written notice from Landlord to Tenant given within thirty (30)
days after Tenant provides written notice to Landlord in accordance with the
provisions of Section 22.03. In the event of such election by Landlord, Tenant
shall commence and complete such demolition or removal at Tenant's expense and
shall grade and seed the Leased Premises following such demolition and removal
within a reasonable time after the expiration of the Term. Before commencing
any demolition or removal, Tenant shall furnish to Landlord surety bonds
insuring completion of the demolition and removal as required by this Section.
In the event that Tenant shall fail fully and properly to complete such
demolition and removal within a reasonable time after the expiration of the
Term, Landlord shall be entitled to complete the same, and the costs thereof
incurred by Landlord shall be payable by Tenant to Landlord as additional Rent;
provided, however, that if such demolition and removal cannot be completed by
Tenant within a reasonable time after the expiration of the Term because of
Unavoidable Delay, the Term shall be extended by a period of time commensurate
with such Unavoidable Delay so as to permit Tenant an opportunity to complete
its demolition and removal.
SECTION 22.03. REMOVAL OF IMPROVEMENTS. Notwithstanding the
------------- -----------------------
provisions of Sections 22.01 or 22.02, Tenant shall have the right to remove any
or all leasehold improvements, personal property or Improvements from the Leased
Premises as of the expiration of the Term. Tenant shall provide Landlord with a
written notice within thirty (30) days after the termination or expiration of
this Lease specifying the leasehold improvements, personal property and
Improvements that it intends to remove from the Leased Premises.
SECTION 22.04. PERSONAL PROPERTY NOT REMOVED. Any personal property
------------- -----------------------------
of Tenant which shall remain in or upon the Leased Premises as of the date
Tenant has surrendered possession of the Leased Premises shall be deemed to have
been abandoned by Tenant, and at the option of Landlord, such property: (a)
shall be retained by Landlord as its property; (b) shall be disposed of
48
<PAGE>
by Landlord in such manner as Landlord shall determine, without accountability
to any person; or (c) shall be promptly removed by Tenant, at Tenant's expense,
upon written request from Landlord. Landlord shall not be responsible for any
loss or damage occurring to any property owned by Tenant or any licensee or
sublessee of Tenant.
SECTION 22.05. GRANT OF RECIPROCAL EASEMENTS. In the event that, at
------------- -----------------------------
the time of the expiration or earlier termination of the Term, Tenant or an
Affiliate of Tenant owns real estate adjacent to the Real Estate on which are
constructed driveways or walkways providing access to any Improvements or any
other facilities essential to the reasonable, economic use of the Improvements,
Tenant shall grant or cause its Affiliate to grant Landlord such easements
appurtenant to the Real Estate as Landlord shall reasonably request providing
for the continued use of such driveways, walkways and/or facilities in
connection with the Improvements in the manner the same were used prior to the
expiration or earlier termination of the Term. Such easements may require
Landlord to contribute to the cost of maintenance and repair of such driveways,
walkways and/or facilities upon terms reasonable and appropriate under the
prevailing circumstances.
SECTION 22.06. SURVIVAL OF TERMS. The terms of this Article XXII
------------- -----------------
shall survive any termination of this Lease.
ARTICLE XXIII
-------------
NO WAIVER
---------
Failure of Landlord or Tenant to complain of any act or omission on
the part of the other party, however long the same may continue, shall not be
deemed to be a waiver by said party of any of its rights hereunder. No waiver
by Landlord or Tenant at any time, express or implied, of any breach of any
provision of this Lease shall be deemed a waiver of a breach of any other
provision of this Lease or a consent to any subsequent breach of the same or any
other provision. No acceptance by Landlord of any partial payment shall
constitute an accord or satisfaction, and such partial payment shall only be
deemed a part payment on account.
49
<PAGE>
ARTICLE XXIV
------------
LANDLORD'S LIABILITY
--------------------
SECTION 24.01. ASSIGNMENT BY LANDLORD. Subject to the provisions of
-------------- -----------------------
Article VI above, Landlord may transfer or assign its interest in this Lease and
title to the Leased Premises to any person or entity without the requirement of
any consent by Tenant. In the event of the transfer or assignment of Landlord's
interest in this Lease and title to the Leased Premises and the assumption by
such transferee or assignee of all duties and obligations for the performance or
observance of any covenants or agreements to be performed or observed by
Landlord hereunder, only the transferee or assignee shall be responsible for the
performance or observance of such covenants or agreements thereafter under this
Lease. It is the intent of this Section 24.01 that the provisions of this Lease
shall be binding on Landlord, its successors and assigns, only during and in
respect of their respective periods of ownership.
SECTION 24.02. LIMITATION ON RIGHT OF RECOVERY AGAINST LANDLORD.
-------------- -------------------------------------------------
Notwithstanding anything to the contrary contained in this Lease, there shall be
absolutely no personal liability on Landlord, or any successor or assign of
Landlord, with respect to the terms, covenants and provisions of this Lease, and
Tenant shall look solely to the interest of the Landlord, its successors and
assigns, in the Leased Premises for the satisfaction of each and every remedy of
Tenant in the event of any breach by Landlord (or by such successor or assign)
of any of the terms, covenants and provisions of this Lease to be observed or
performed by Landlord hereunder, such exculpation of personal liability to be
absolute and without any exception whatsoever.
ARTICLE XXV
-----------
FORCE MAJEURE
-------------
In the event that Landlord or Tenant shall be delayed, hindered in, or
prevented from the performance of any act required hereunder by reason of
Unavoidable Delay, then performance of such act shall be excused for the period
of the Unavoidable Delay and the period for the performance of any such act
shall be extended for a period equivalent to the period of the Unavoidable
Delay.
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<PAGE>
ARTICLE XXVI
------------
NOTICES
-------
No notice, approval, consent or other communication authorized or
required by this Lease shall be effective unless the same shall be in writing.
Any such communication shall be deemed given when either (a) hand delivered,
with signed receipt obtained therefor, (b) sent postage prepaid by United States
registered or certified mail, return receipt requested, directed or addressed in
each case to the other party at its address set forth below, or such other
address as either party may designate by notice given from time to time in
accordance with this Article XXVI, or (c) sent by nationally recognized
overnight courier service with all charges prepaid or billed to sender, directed
or addressed in each case to the other party at its address set forth below, or
such other address as either party may designate by notice given from time to
time in accordance with this Article XXVI; and (d) delivered or sent in the same
manner to any Mortgagee entitled to a copy of such notice pursuant to Section
15.03.
The address for notices to Landlord is:
Dan's Marina
Mile 530, Ohio River & Craig's Creek
Warsaw, Kentucky 41095
Attention: Daniel Webster
The address for notices to Tenant is:
Pinnacle Gaming Development Corp.
Post Office Box 399
Verdi, Nevada 89439
Attention: Robert F. List
ARTICLE XXVII
-------------
CERTIFICATES
------------
Either party shall, without charge, at any time and from time to time
hereafter, within fifteen (15) days after written request of the other, certify
by written instrument duly executed and acknowledged to any mortgagee or
purchaser, or proposed mortgagee or proposed purchaser, or any other person,
firm or corporation specified in such request:
(a) As to whether this Lease has been supplemented or amended, and if
so, the substance and manner of such supplement or amendment;
51
<PAGE>
(b) As to the validity and force and effect of this Lease, in
accordance with its tenor as then constituted;
(c) As to the existence of any default hereunder on the part of the
other party to this Lease;
(d) As to the existence of any offsets, counterclaims or defenses
thereto on the part of such other party;
(e) As to the commencement and expiration dates of the Term; and
(f) As to any other matters as may reasonably be so requested.
Any certificate referred to in this Article XXVII may be relied upon
by the party requesting it and any other person, firm or corporation to whom the
same may be exhibited or delivered, and the contents of such certificate shall
be binding on the party executing same.
ARTICLE XXIX
------------
GENERAL
-------
SECTION 29.01. GOVERNING LAW. This Lease and the performance hereof
------------- -------------
shall be governed, interpreted, construed and enforced by and in accordance with
the laws of the State of Indiana.
SECTION 29.02. PARTIAL INVALIDITY. If any term, covenant, condition
------------- ------------------
or provision of this Lease, or the application thereof to any person or
circumstance, shall at any time or to any extent be held invalid, illegal or
unenforceable, the remainder of this Lease, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid, illegal or unenforceable, shall not be affected thereby, and this Lease
shall be construed as if the invalid, illegal or unenforceable provision was not
included herein.
SECTION 29.03. MEMORANDUM OF LEASE. The parties shall, at the
------------- -------------------
request of either of them, promptly execute and deliver duplicate originals of
an instrument, in recordable form, which will constitute a memorandum of this
Lease, setting forth a description of the Leased Premises, the term of this
Lease and any other portions thereof.
SECTION 29.04. REMOTE VESTING. This Lease and all rights and
------------- --------------
interests created hereby are intended to comply in all respects with applicable
common or statutory law, including the common law Rule Against Perpetuities or
analogous statutory restrictions. Therefore, any provision of this Lease that
shall be construed by a final, non-appealable judicial determination to create
or permit to arise any interest in the Leased Premises that may vest in the
future in any person shall be deemed to prohibit the creation of such interest
from and after the date that is twenty-one
52
<PAGE>
(21) years after the death of the survivor of the now living lawful descendants
of any of the persons who are attorneys practicing with the firm of Baker &
Daniels in Indianapolis, Indiana, as of the date of this Lease.
SECTION 29.05. INTERPRETATION. Wherever herein the singular number
------------- --------------
is used, the same shall include the plural, and the masculine gender shall
include the feminine and neuter genders, and vice versa, as the context shall
require. The section headings used herein are for reference and convenience
only and shall not enter into the interpretation hereof. This Lease may be
executed in several counterparts, each of which shall be an original, but all of
which shall constitute one and the same instrument.
SECTION 29.06. ENTIRE AGREEMENT. This Lease and that certain Option
------------- ----------------
to Lease Agreement between Landlord and Tenant pursuant to which this Lease is
executed constitute the entire agreement of the parties with respect to the
leasing of the Leased Premises by Tenant from Landlord, and there are no
representations, understanding or agreements between the parties that are not
set forth herein or therein. This Lease may not be modified except by a written
instrument signed by Tenant and Landlord.
SECTION 29.07. PARTIES. Except as herein otherwise expressly
------------- -------
provided, the covenants, conditions and agreements contained in this Lease shall
bind and inure to the benefit of Landlord and Tenant and their respective
successors and assigns.
SECTION 29.08. CONSTRUCTION OF AGREEMENT. Landlord and Tenant have
------------- -------------------------
participated fully in the negotiation and preparation of this Lease.
Accordingly, this Lease shall not be construed more strictly against any one of
the parties hereto.
SECTION 29.09. ATTORNEYS' FEES. Tenant shall pay the costs and
------------- ---------------
attorneys' fees incurred by Landlord in obtaining possession of the Leased
Premises after default of Tenant or upon the expiration or earlier termination
of the Term. The nonprevailing party shall pay the reasonable costs and
attorneys' fees incurred by the prevailing party in successfully enforcing
against the nonprevailing party any covenant or agreement of this Lease.
SECTION 29.10. AUTHORITY. Landlord and Tenant each represent and
------------- ---------
warrant to the other, respectively, that (a) such party has the power and
authority to execute and deliver this Lease and to observe and perform the
respective covenants to be observed by them hereunder, (b) that the undersigned
person executing this Lease on such party's behalf has been fully empowered and
duly authorized by all necessary action of such party to execute and deliver
this Lease for and on behalf of such party, and (c) this Lease is the legal,
valid and binding obligation of such party.
53
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Lease as of the day and year first above written.
[INTENTIONALLY BLANK]
54
<PAGE>
LANDLORD SIGNATURE PAGE
LANDLORD:
__________________________________
Daniel Webster
__________________________________
Marsha Webster
__________________________________
William G. Diuguid
__________________________________
Sara T. Diuguid
__________________________________
J.R. Showers, III
__________________________________
Carol A. Showers
<PAGE>
TENANT SIGNATURE PAGE
TENANT:
PINNACLE GAMING DEVELOPMENT CORP.,
a Colorado corporation
By: __________________________________
Robert F. List, Treasurer
<PAGE>
EXHIBIT 10.52
AMENDMENT NO. 3 TO
REDUCING REVOLVING LOAN AGREEMENT
This Amendment No. 3 to Reducing Revolving Loan Agreement (this
"Amendment") is entered into with reference to the Reducing Revolving Loan
Agreement dated as of March 27, 1997 among Hollywood Park, Inc. ("Borrower"),
the Banks party thereto, Bank of Scotland, Bankers Trust Company and Societe
Generale, as Co-Agents, and Bank of America National Trust and Savings
Association, as Managing Agent as heretofore amended, (the "Loan Agreement").
Capitalized terms used but not defined herein are used with the meanings set
forth for those terms in the Loan Agreement.
Borrower and the Managing Agent, acting with the consent of the Requisite
Banks pursuant to Section 11.2 of the Loan Agreement, agree as follows:
----
1. Section 6.14. Section 6.14 of the Loan Agreement is amended by
------------ ----
striking the figures "$40,000,000" in clause (f) thereof and substituting in
-
their place the figures "$60,000,000".
1. Section 6.15. Section 6.15 of the Loan Agreement is amended by
------------ ----
striking the figures "$40,000,000" in clause (l) thereof and substituting in
-
their place the figures "$60,000,000."
1. Retroactive Effect. The amendments made to Sections 6.14 and 6.15 set
------------------ ---- ----
forth above shall be retroactive to March 31, 1998.
1. Representation and Warranty. Borrower represents and warrants that,
---------------------------
as of the date hereof and giving effect to this Amendment, no Default or Event
of Default exists.
1. Conditions Precedent. The effectiveness of this Amendment is
--------------------
conditioned upon the receipt by the Managing Agent of the following documents,
each properly executed by a Responsible Official of each party thereto and dated
as of the date hereof:
<PAGE>
(a) Counterparts of this Amendment executed by all
parties hereto;
(b) Written consent of the Requisite Banks as
required under Section 11.2 of the Loan Agreement in
----
the form of Exhibit A to this Amendment; and
(c) Written consent of the Subsidiary Guarantors
in the form of Exhibit B to this Amendment.
1. Confirmation. In all respects, the terms of the Loan Agreement (as
------------
amended hereby) are hereby confirmed.
IN WITNESS WHEREOF, Borrower and the Managing Agent have executed this
Amendment as of June 12, 1998 by their duly authorized representatives.
HOLLYWOOD PARK, INC.
By: /s/ G. Michael Finnigan
-------------------------
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION
As Managing Agent
By: /s/ Janice Hammond
------------------
Janice Hammond
Vice President
-2-
<PAGE>
Exhibit A to Amendment
CONSENT OF BANK
---------------
Reference is hereby made to that certain Reducing Revolving Loan Agreement
dated as of March 27, 1997 among Hollywood Park, Inc. ("Borrower"), the Banks
party thereto, Bank of Scotland, Bankers Trust Company and Societe Generale, as
Co-Agents, and Bank of America National Trust and Savings Association, as
Managing Agent (as heretofore amended, the "Loan Agreement").
The undersigned Bank hereby consents to the execution and delivery of
Amendment No. 3 to Reducing Revolving Loan Agreement by the Managing Agent on
its behalf, substantially in the form of the most recent draft thereof presented
to the undersigned Bank.
Dated: June 8, 1998
Bank of America
- ---------------
[Name of Institution]
By: /s/ Jon Varnell
---------------------
Jon Varnell Managing Director
- --------------------------------
[Printed Name and Title]
-3-
<PAGE>
Exhibit A to Amendment
CONSENT OF BANK
---------------
Reference is hereby made to that certain Reducing Revolving Loan Agreement
dated as of March 27, 1997 among Hollywood Park, Inc. ("Borrower"), the Banks
party thereto, Bank of Scotland, Bankers Trust Company and Societe Generale, as
Co-Agents, and Bank of America National Trust and Savings Association, as
Managing Agent (as heretofore amended, the "Loan Agreement").
The undersigned Bank hereby consents to the execution and delivery of
Amendment No. 3 to Reducing Revolving Loan Agreement by the Managing Agent on
its behalf, substantially in the form of the most recent draft thereof presented
to the undersigned Bank.
Dated: June 4, 1998
Bank of Scotland
- ----------------
[Name of Institution]
By: /s/ Annie Chin Tat
------------------------
Annie Chin Tat, Senior Vice President
- ----------------------------------------
[Printed Name and Title]
-4-
<PAGE>
Exhibit A to Amendment
CONSENT OF BANK
---------------
Reference is hereby made to that certain Reducing Revolving Loan Agreement
dated as of March 27, 1997 among Hollywood Park, Inc. ("Borrower"), the Banks
party thereto, Bank of Scotland, Bankers Trust Company and Societe Generale, as
Co-Agents, and Bank of America National Trust and Savings Association, as
Managing Agent (as heretofore amended, the "Loan Agreement").
The undersigned Bank hereby consents to the execution and delivery of
Amendment No. 3 to Reducing Revolving Loan Agreement by the Managing Agent on
its behalf, substantially in the form of the most recent draft thereof presented
to the undersigned Bank.
Dated: June 11, 1998
Bankers Trust Company
- ---------------------
[Name of Institution]
By: /s/ David J. Bell
-----------------------
David Bell, Vice President
- -----------------------------
[Printed Name and Title]
-5-
<PAGE>
Exhibit A to Amendment
CONSENT OF BANK
---------------
Reference is hereby made to that certain Reducing Revolving Loan Agreement
dated as of March 27, 1997 among Hollywood Park, Inc. ("Borrower"), the Banks
party thereto, Bank of Scotland, Bankers Trust Company and Societe Generale, as
Co-Agents, and Bank of America National Trust and Savings Association, as
Managing Agent (as heretofore amended, the "Loan Agreement").
The undersigned Bank hereby consents to the execution and delivery of
Amendment No. 3 to Reducing Revolving Loan Agreement by the Managing Agent on
its behalf, substantially in the form of the most recent draft thereof presented
to the undersigned Bank.
Dated: June __, 1998
First National Bank of Commerce
- -------------------------------
[Name of Institution]
By: /s/ Louis Bollers
-----------------------
Louis Bollers, Senior Vice President
- --------------------------------------
[Printed Name and Title]
-6-
<PAGE>
Exhibit A to Amendment
CONSENT OF BANK
---------------
Reference is hereby made to that certain Reducing Revolving Loan Agreement
dated as of March 27, 1997 among Hollywood Park, Inc. ("Borrower"), the Banks
party thereto, Bank of Scotland, Bankers Trust Company and Societe Generale, as
Co-Agents, and Bank of America National Trust and Savings Association, as
Managing Agent (as heretofore amended, the "Loan Agreement").
The undersigned Bank hereby consents to the execution and delivery of
Amendment No. 3 to Reducing Revolving Loan Agreement by the Managing Agent on
its behalf, substantially in the form of the most recent draft thereof presented
to the undersigned Bank.
Dated: June 10, 1998
Societe Generale
- ----------------
[Name of Institution]
By: /s/ Alex Kim
------------------
Alex Kim, Vice President
- --------------------------
[Printed Name and Title]
-7-
<PAGE>
Exhibit B to Amendment
CONSENT OF SUBSIDIARY GUARANTORS
--------------------------------
Reference is hereby made to that certain Reducing Revolving Loan Agreement
dated as of March 27, 1997 among Hollywood Park, Inc. ("Borrower"), the Banks
party thereto, Bank of Scotland, Bankers Trust Company and Societe Generale, as
Co-Agents, and Bank of America National Trust and Savings Association, as
Managing Agent (as heretofore amended, the "Loan Agreement").
Each of the undersigned Subsidiary Guarantors hereby consents to Amendment
No. 3 to the Loan Agreement in the form executed by Borrower and confirms that
the Subsidiary Guaranty and all Collateral Documents to which it is a party
remain in full force and effect.
Dated: June __, 1998
"Guarantors"
HOLLYWOOD PARK OPERATING COMPANY, HOLLYWOOD PARK FOOD SERVICES, INC.,
a Delaware corporation a California corporation
By: /s./ G. M. Finnigan By: /s./ G. M. Finnigan
Title: CFO Title: CFO
HOLLYWOOD PARK FALL OPERATING CO.,
a Delaware corporation
By: ./s/ G. M. Finnigan
Title: CFO
-8-
<PAGE>
HP/COMPTON, INC.,
a California corporation
By: /s/ G. M. Finnigan
Title: CFO
HP YAKIMA, INC., TURF PARADISE, INC.,
a Delaware corporation an Arizona corporation
By: /s/ G. Michael Finnigan By: /s/ G. Michael Finnigan
Title: CFO Title: CFO
CRYSTAL PARK HOTEL BOOMTOWN, INC.,
AND CASINO a Delaware corporation
DEVELOPMENT COMPANY,
LLC, a California limited By: /s/ G. Michael Finnigan
liability company
By: HP/COMPTON, INC.,
a California corporation, Title: CFO
its managing member
By: /s/ G. Michael Finnigan
Title: CFO
BOOMTOWN HOTEL & MISSISSIPPI-I GAMING, L.P.,
-9-
<PAGE>
CASINO, INC., a Mississippi limited partnership
a Nevada corporation
By: /s/ G. Michael Finnigan By: BAYVIEW YACHT CLUB, INC.,
Title: CFO a Mississippi corporation,
its general partner
By: /s/ G. Michael Finnigan
Title: CFO
BAYVIEW YACHT CLUB, INC., LOUISIANA-I GAMING, L.P.,
a Mississippi corporation a Louisiana partnership in commendam
By: /s/ G. M. Finnigan By: LOUISIANA GAMING
ENTERPRISES, INC.,
Title: CFO general partner
By: /s/ G. M. Finnigan
Title: CFO
By: LOUISIANA GAMING
ENTERPRISES, INC.,
a Louisiana corporation
By: /s/ G. M. Finnigan
Title: CFO
--------------------
-10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000356213
<NAME> HOLLYWOOD PARK, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 40,079,000
<SECURITIES> 3,514,000
<RECEIVABLES> 29,647,000
<ALLOWANCES> 810,000
<INVENTORY> 0
<CURRENT-ASSETS> 91,561,000
<PP&E> 444,901,000
<DEPRECIATION> (145,449,000)
<TOTAL-ASSETS> 477,187,000
<CURRENT-LIABILITIES> 79,221,000
<BONDS> 161,904,000
0
0
<COMMON> 2,629,000
<OTHER-SE> 226,749,000
<TOTAL-LIABILITY-AND-EQUITY> 477,187,000
<SALES> 13,862,000
<TOTAL-REVENUES> 181,282,000
<CGS> 17,536,000
<TOTAL-COSTS> 148,973,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 150,000
<INTEREST-EXPENSE> 4,650,000
<INCOME-PRETAX> 11,545,000
<INCOME-TAX> 4,650,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,895,000
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
