<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, 1999
Commission file number 0-10619 Commission file number 333-34471-02
Hollywood Park, Inc. Hollywood Park Operating Company
(Exact Name of Registrant (Exact Name of Registrant as
as Specified in Its Charter) Specified in Its Charter)
Delaware Delaware
(State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation or Organization) Incorporation or Organization)
95-3667491 95-3667220
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
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 6, 1999: 26,053,289
<PAGE>
Hollywood Park, Inc.
Table of Contents
Part I
<TABLE>
<S> <C>
Item 1. Financial Information
Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998.......................... 1
Consolidated Statements of Operations for the three and six months ended
June 30, 1999 and 1998........................................................................ 2
Condensed Consolidated Statements of Cash Flows for the six months ended
June 30, 1999 and 1998........................................................................ 3
Condensed Notes to Consolidated Financial Statements........................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
General........................................................................................ 17
Results of Operations.......................................................................... 20
Liquidity and Capital Resources................................................................ 22
Item 3. Quantitative and Qualitative Disclosure About Market Risk....................................... 23
Part II
Item 4. Submission of Matters to a Vote of Security Holders............................................. 24
Item 5. Other Information............................................................................... 24
Item 6. Exhibits and Reports on Form 8K................................................................. 25
Other Financial Information..................................................................... 26
Signatures...................................................................................... 27
</TABLE>
<PAGE>
Item 1. Financial Information
- -----------------------------
Hollywood Park, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ --------------
(unaudited)
Assets (in thousands)
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 127,530 $ 43,934
Restricted cash 17,964 300
Short term investments 16,143 3,179
Other receivables, net 15,805 16,783
Prepaid expenses and other assets 20,979 15,207
Deferred tax assets 18,266 18,425
Current portion of notes receivable 2,320 2,320
---------- ----------
Total current assets 219,007 100,148
Notes receivable 12,987 17,852
Property, plant and equipment, net 597,553 602,912
Goodwill, net 95,585 97,098
Gaming license, Casino Magic Bossier City, net 35,645 36,446
Concession agreement, Casino Magic Argentina, net 7,117 7,591
Debt issuance costs, net 25,300 12,105
Other assets 15,682 17,187
---------- ----------
$1,008,876 $ 891,339
========== ==========
_______________________________________________________________________________________________________________
Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable $ 15,466 $ 20,970
Accrued interest 25,755 16,741
Other accrued liabilities 52,853 46,541
Accrued compensation 20,194 17,819
Gaming liabilities 8,998 8,913
Racing liabilities 17,045 2,395
Current portion of notes payable 8,312 11,564
---------- ----------
Total current liabilities 148,623 124,943
Notes payable, less current maturities 603,702 527,619
Deferred tax liabilities 1,565 400
Other liabilities 3,649 3,649
---------- ----------
Total liabilities 757,539 656,611
Minority interests 3,933 3,752
Stockholders' Equity:
Capital stock --
Preferred - $1.00 par value, authorized 250,000 shares;
none issued and outstanding in 1999 and 1998 0 0
Common - $0.10 par value, authorized 40,000,000 shares;
25,970,358 and 25,800,069 shares issued and outstanding in 1999 and 1998 2,597 2,580
Capital in excess of par value 220,651 218,375
Retained earnings 24,182 10,338
Accumulated other comprehensive loss (26) (317)
---------- ----------
Total stockholders' equity 247,404 230,976
---------- ----------
$1,008,876 $ 891,339
========== ==========
</TABLE>
- --------------------
See accompanying condensed notes to the consolidated financial statements.
1
<PAGE>
Hollywood Park, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 30,
----------------------------------- ---------------------------------
1999 1998 1999 1998
------------- ----------------- ------------ --------------
(in thousands, except per share data - unaudited)
Revenues:
<S> <C> <C> <C> <C>
Gaming $144,914 $ 59,357 $285,305 $114,706
Racing 28,962 26,845 38,741 36,714
Food and beverage 12,030 8,293 21,701 13,862
Hotel and recreational vehicle park 3,032 449 5,700 725
Truck stop and service station 4,546 3,723 7,534 6,546
Other income 6,045 4,458 12,546 8,729
-------- -------- -------- --------
199,529 103,125 371,527 181,282
-------- -------- -------- --------
Expenses:
Gaming 79,121 31,349 156,499 63,316
Racing 10,023 10,213 15,378 15,682
Food and beverage 14,108 10,023 25,763 17,536
Hotel and recreational vehicle park 1,526 160 2,866 287
Truck stop and service station 4,142 3,421 6,900 5,987
General and administrative 37,966 21,931 73,112 42,028
Other 4,823 1,839 7,277 3,575
Depreciation and amortization 13,835 6,494 27,202 13,049
Indiana pre-opening 802 93 1,509 93
REIT restructuring 0 0 0 469
-------- -------- -------- --------
166,346 85,523 316,506 162,022
-------- -------- -------- --------
Operating income 33,183 17,602 55,021 19,260
Interest expense, net 15,562 4,054 30,053 7,715
-------- -------- -------- --------
Income before minority interests and income taxes 17,621 13,548 24,968 11,545
Minority interests 679 0 1,137 0
Income tax expense 7,231 5,419 9,987 4,650
-------- -------- -------- --------
Net income $ 9,711 $ 8,129 $ 13,844 $ 6,895
======== ======== ======== ========
================================================================================ ==========================
Per common share:
Net income - basic $ 0.38 $ 0.31 $ 0.54 $ 0.26
Net income - diluted $ 0.37 $ 0.31 $ 0.54 $ 0.26
Number of shares - basic 25,871 26,285 25,836 26,281
Number of shares - diluted 26,129 26,428 25,836 26,771
</TABLE>
___________
See accompanying condensed notes to the consolidated financial statements.
2
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Hollywood Park, Inc.
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------------
1999 1998
---- ----
(in thousands - unaudited)
Cash flows from operating activities:
<S> <C> <C>
Net income $ 13,844 $ 6,895
Adjustments to reconcile net income to net cash provided
by (used for) operating activities:
Depreciation and amortization 27,202 13,049
Amortization of financing costs and bond premium 1,354 0
Increase in restricted cash (17,664) (5,771)
Increase in prepaid expenses and other assets (4,527) (1,681)
(Decrease) increase in accounts payable (5,504) 736
Increase in accrued interest 9,014 221
Increase in accrued liabilities 6,312 6,961
Increase in accrued compensation 2,375 1,303
Increase in racing liabilities 14,650 11,547
All other, net 3,657 (6,544)
-------- --------
Net cash provided by operating activities 50,713 26,716
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment, net (19,705) (26,407)
Receipts from sale of property, plant and equipment 679 596
Principal collected on notes receivable 4,744 1,027
Note receivable, HP Yakama investment 0 (7,636)
Purchase of short term investments (12,964) (3,430)
Payment to buy-out minority interest in Crystal Park LLC 0 (1,946)
--------- --------
Net cash used in investing activities (27,246) (37,796)
--------- --------
Cash flows from financing activities:
Proceeds from secured Bank Credit Facility 17,000 30,000
Payment of secured Bank Credit Facility (287,000) 0
Payment on notes payable (6,234) (2,382)
Redemption of Boomtown 11.5% First Mortgage Notes 0 (1,253)
Proceeds from issuance of 9.25% Notes 350,000 0
Common stock options exercised 1,672 1,045
Increase in debt issuance costs (15,309) 0
--------- --------
Net cash provided by financing activities 60,129 27,410
--------- --------
Increase in cash and cash equivalents 83,596 16,330
Cash and cash equivalents at beginning of the period 43,934 23,749
--------- --------
Cash and cash equivalents at the end of the period $ 127,530 $ 40,079
========= ========
</TABLE>
________
See accompanying condensed notes to the consolidated financial statements.
3
<PAGE>
Hollywood Park, Inc.
Condensed 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 company that owns and/or operates eight casinos, two pari-
mutuel horse racing facilities (one of which is the subject of a pending sale
transaction more fully described below), and two card club casinos at locations
in Nevada, Mississippi, Louisiana, California, Arizona and Argentina. Hollywood
Park owns and operates, through its Boomtown, Inc. ("Boomtown") subsidiary,
land-based, dockside and riverboat gaming operations in Verdi, Nevada ("Boomtown
Reno"), Biloxi, Mississippi ("Boomtown Biloxi") and Harvey, Louisiana ("Boomtown
New Orleans"), respectively. As of the Company's October 15, 1998 acquisition of
Casino Magic Corp. ("Casino Magic"), Hollywood Park owns and operates dockside
gaming casinos in the cities of Bay St. Louis and Biloxi, Mississippi ("Casino
Magic Bay St. Louis" and "Casino Magic Biloxi"); a dockside riverboat gaming
casino in Bossier City, Louisiana ("Casino Magic Bossier City"); and is a 51%
partner in two land-based casinos in Argentina ("Casino Magic Argentina").
Casino Magic's results of operations were not consolidated with the Company
prior to October 15, 1998, thus generating significant variances when comparing
the 1999 financial results with those of 1998. Hollywood Park also owns two card
club casinos in California, both located in the Los Angeles metropolitan area.
The Hollywood Park-Casino is operated by the Company, and located on the same
property as the Hollywood Park Race Track. The Crystal Park Hotel and Casino
(the "Crystal Park Casino") is owned by the Company and is leased to an
unaffiliated operator. The Company's premier thoroughbred racing facilities
include the Hollywood Park Race Track, which the Company has owned for over 60
years, and Turf Paradise, Inc. ("Turf Paradise"), located in Phoenix, Arizona.
The Hollywood Park Race Track and Hollywood Park-Casino are subject to pending
sales to Churchill Downs, Inc. (see Note 2). The Company is in the initial
construction stages of a hotel and casino resort in Indiana (the "Belterra
Resort and Casino"-see Note 3).
The financial information included herein has been prepared in conformity with
generally accepted accounting principles as reflected in Hollywood Park's
consolidated Annual Report on Form 10-K, as filed with the Securities and
Exchange Commission, for the year ended December 31, 1998. 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
1998 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 include
the accounts of Hollywood Park, Inc. and its subsidiaries. All inter-company
transactions have been eliminated.
Gaming License In May 1996, Casino Magic acquired Crescent City Capital
Development Corp., which included the Louisiana state gaming license to conduct
the gaming operations of Casino Magic Bossier City. Casino Magic allocated a
portion of the purchase price to the Louisiana state gaming license, which is
being amortized on a straight line basis, over twenty-five years.
4
<PAGE>
Concession Agreement In December 1994, Casino Magic acquired a twelve-year
concession agreement to operate the two Casino Magic Argentina casinos, and
capitalized the costs related to obtaining the concession agreement. The costs
are being amortized on a straight line basis, over the twelve-year life of the
concession agreement.
Goodwill The majority of goodwill is being amortized over 40 years, with the
balance being amortized over fifteen to twenty years.
Racing Revenues and Expenses The Company recorded pari-mutuel revenues,
admissions, food and beverage and other racing income associated with racing on
a daily basis, except for prepaid admissions, which were recorded ratably over
the racing season. Expenses associated with racing revenues were charged against
income in those periods in which racing revenues were recognized. Other expenses
were recognized as they occurred throughout the year.
Gaming Revenue and Promotional Allowances Gaming revenues at the Boomtown and
Casino Magic properties consisted of the difference between gaming wins and
losses, or net win from gaming activity, and at the Hollywood Park-Casino
consisted of fees collected from patrons on a per seat or per hand basis.
Revenues in the accompanying statements of operations exclude the retail value
of food and beverage, hotel rooms and other items provided to patrons on a
complimentary basis. The estimated cost of providing these promotional
allowances (which is included in gaming expenses) during the three months ended
June 30, 1999 and 1998, was $10,790,000 and $3,571,000, respectively and for the
six months ended June 30, 1999 and 1998 was $22,226,000 and $7,477,000,
respectively. The amounts for the three and six months ended June 30, 1998 are
exclusive of the promotional allowances for Casino Magic.
Comprehensive Income Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income ("SFAS 130") 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 gains as other comprehensive income in the
accompanying financial statements. Comprehensive income was computed as follows:
<TABLE>
<CAPTION>
For the three months ended
June 30,
-----------------------------------------
1999 1998
-------------- -----------------
<S> <C> <C>
(in thousands, unaudited)
Net income $9,711 $8,129
Other comprehensive income:
Unrealized gain on securities 273 8
-------------- --------------
Comprehensive income $9,984 $8,137
============== ==============
<CAPTION>
For the six months ended
June 30,
------------------------------------------
1999 1998
------------------- ------------------
(in thousands, unaudited)
<S> <C> <C>
Net income $13,844 $6,895
Other comprehensive income:
Unrealized gain on securities 291 83
--------------- --------------
Comprehensive income $14,135 $6,978
=============== ==============
</TABLE>
5
<PAGE>
Capitalized Interest During the three and six months ended June 30, 1999, the
Company capitalized interest related to construction projects of approximately
$135,000 and $846,000, respectively. 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.
Earnings Per Share Basic earnings per share were computed by dividing net
income attributable to common shareholders 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 exercise of
stock options.
Restricted Cash Restricted cash as of June 30, 1999 and December 31, 1998, was
for amounts due to horsemen for purses, stakes and awards.
Cash Flows Cash and cash equivalents consist of certificates of deposit and
investment grade commercial paper issued by major corporations and financial
institutions that are highly liquid and have original maturities of up to one
year, and maturities, from the balance sheet date, of three months or less. Cash
equivalents are carried at cost, which approximates market value.
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.
Reclassifications Certain reclassifications have been made to the 1998
balances to be consistent with the 1999 financial statement presentation.
Note 2 - Sale of California Race Track and Casino
On May 6, 1999, the Company announced that it had entered into a definitive
agreement with Churchill Downs, Inc. ("Churchill Downs") to sell for cash both
the Hollywood Park Race Track and Hollywood Park-Casino. Churchill Downs will
acquire 240 acres of the Company's 378 acres of real estate related to the
Hollywood Park racing operations. Churchill Downs will lease the Hollywood Park-
Casino to the Company for an annual lease payment of $3,000,000 and the Company
expects to sub-lease the card club casino to an unaffiliated third party
operator.
The sales prices of the Hollywood Park Race Track and Hollywood Park-Casino,
totaling $140,000,000, are to be agreed upon prior to the closing of the
transaction. Based upon preliminary estimates, the Company believes the pre-tax
net gain (after selling expenses, write-off of related goodwill and certain
sale-leaseback accounting adjustments) will be between $42,000,000 and
$46,000,000. Federal and state income taxes related to these transactions are
expected to approximate $25,000,000.
The sales are expected to close on August 31, 1999, however, there are no
assurances that the sales transactions will be completed.
Revenues for the six months ended June 30, 1999, for Hollywood Park Race Track
and Hollywood Park-Casino were $34,212,000 and $29,015,000, respectively.
Operating income for the six months ended June 30, 1999, for Hollywood Park Race
Track and Hollywood Park-Casino was $8,809,000 and $3,567,000, respectively.
(See the Company's Annual Report on Form 10K for the years ended 1998, 1997 and
1996 for additional financial results and a description of these businesses.) In
the event the proposed sales transactions to Churchill Downs are completed, such
revenues and operating income will not continue. The Company expects to receive
net rental income (in excess of the lease payment to Churchill Downs) for the
card club casino from the operator.
6
<PAGE>
Note 3 - Belterra Resort and Casino
In September 1998, the Indiana Gaming Commission approved the Company to receive
the last available license to conduct riverboat gaming operations on the Ohio
River in Indiana for the Belterra Resort and Casino. Hollywood Park owns 97% of
the Belterra Resort and Casino, with the remaining 3% held by a non-voting local
partner.
On July 14, 1999, the Company broke ground on the Belterra Resort and Casino,
which will be located in the city of Vevay, in Switzerland County, which is
approximately 35 miles southwest of Cincinnati, Ohio and will be the gaming site
most readily accessible to major portions of northern and central Kentucky,
including the city of Lexington.
The Company plans to spend approximately $165,000,000 in construction costs
(including land but excluding capitalized interest, pre-opening expenses,
organizational expenses and community grants) on the Belterra Resort and Casino,
which will feature a cruising riverboat containing over 1,800 gaming positions,
a 300 plus room hotel, several restaurants, retail areas, a 1,000 seat
entertainment facility, structured parking and a complete spa facility, as well
as an 18-hole championship golf course. The project is scheduled to open in late
summer 2000. All pre-opening costs for the Belterra Resort and Casino are being
expensed as they are incurred.
Note 4 - Acquisition of Casino Magic Corp.
On October 15, 1998, Hollywood Park acquired Casino Magic, Inc. (the "Casino
Magic Merger"). Hollywood Park paid cash of approximately $80,904,000 for Casino
Magic's common stock. At the date of the acquisition, Hollywood Park had
purchased 792,900 common shares of Casino Magic on the open market, at a total
cost of approximately $1,615,000. Hollywood Park paid $2.27 per share for the
remaining 34,929,224 shares of Casino Magic common stock outstanding.
The Casino Magic Merger was accounted for under the purchase method of
accounting for a business combination. The Company has performed a preliminary
purchase price allocation and will finalize this allocation in 1999. The
purchase price of the Casino Magic Merger was allocated to identifiable assets
acquired and liabilities assumed based on their estimated fair values at the
date of acquisition. Assets acquired and liabilities assumed were, when
necessary, written up or down to their fair market values based on financial
analyses, which considered the impact of general economic, financial and market
conditions. The Casino Magic Merger generated approximately $43,284,000 of
excess acquisition cost over the recorded value of the net assets acquired, all
of which was allocated to goodwill, and is being amortized over 40 years. The
amortization of this goodwill is not deductible for income tax purposes.
Note 5 - Short Term Investments
At June 30, 1999, short term available for sale investments consisted of
investments in equity securities of approximately $3,666,000 (inclusive of an
unrealized gain of approximately $1,270,000) and commercial paper of
$12,477,000. The commercial paper consists of investment grade instruments
issued by major corporations and financial institutions that are highly liquid
and have original maturities of up to one year, and maturities, from the balance
sheet date, of between three months and one year. Commercial paper held as short
term investments are carried at cost, which approximates market value.
At December 31, 1998, short term available for sale investments consisted of
investments in equity securities of approximately $3,179,000 (inclusive of an
unrealized gain of approximately $407,000).
7
<PAGE>
Note 6 - Property, Plant and Equipment
Property, plant and equipment held as of June 30, 1999, (including those held
pending a sale to Churchill Downs, see Note 2) and December 31, 1998, consisted
of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------------- ---------------------
(unaudited)
(in thousands)
<S> <C> <C>
Land and land improvements $141,412 $141,536
Buildings 433,101 393,200
Equipment 191,240 174,270
Vessels 76,614 76,605
Construction in progress 5,273 46,297
--------------------- ---------------------
847,640 831,908
Less accumulated depreciation 250,087 228,996
--------------------- ---------------------
$597,553 $602,912
===================== =====================
</TABLE>
Note 7 - Long Term Debt
Notes payable as of June 30, 1999, and December 31, 1998, consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
--------------------- ---------------------
(unaudited)
(in thousands)
<S> <C> <C>
Secured notes payable, Bank Credit Facility $ 0 $270,000
Hollywood Park Unsecured 9.25% Notes 350,000 0
Hollywood Park Unsecured 9.5% Notes 125,000 125,000
Casino Magic 13% Notes (a) 120,750 121,685
Secured notes payable, other 13,564 16,569
Unsecured notes payable 2,435 5,288
Capital lease obligations 265 641
----------------------- ---------------------
612,014 539,183
Less current maturities 8,312 11,564
----------------------- ---------------------
$603,702 $527,619
======================= =====================
</TABLE>
(a) Includes a write up to fair market value (net of amortization),
as of the October 15, 1998, acquisition of Casino Magic, of
$7,875,000 and $8,810,000 as of June 30, 1999, and December 31,
1998, respectively, as required under the purchase accounting
method of accounting for a business combination.
Secured Notes Payable, Bank Credit Facility On October 14, 1998, the Company
executed the Amended and Restated Reducing Revolving Loan Agreement with a bank
syndicate led by Bank of America National Trust and Savings Association NT&SA
("Bank of America") (the "Bank Credit Facility") for up to $300,000,000, with an
option to increase this amount to $375,000,000. On June 8, 1999 the Company
executed Amendment No. 1 (the "Amendment") to the Bank Credit Facility. The
Amendment adjusted key financial measurement ratios and clarified certain
definitions in light of the pending sale of the Hollywood Park Race Track and
Hollywood Park-Casino to Churchill Downs (see Note 2) and the increased
construction activity at the Belterra Resort and Casino (see Note 3). In
addition, effective May 22, 1999, the Amendment reduced the commitment to
$200,000,000 with an option to increase this amount to $300,000,000. The Bank
Credit Facility also provides for sub-facilities for letters of credit up to
$30,000,000, and swing line loans of up to $10,000,000.
8
<PAGE>
Unsecured 9.25% Notes In February 1999, Hollywood Park issued $350,000,000
aggregate principal amount of Series A 9.25% Senior Subordinated Notes due 2007
(the "Series A Notes"). On May 6, 1999, the Company completed a registered
exchange offer for the Series A Notes, pursuant to which all $350,000,000
principal amount of the Series A Notes were exchanged by the holders for
$350,000,000 aggregate principal amount of Series B 9.25% Senior Subordinated
Notes due 2007, of the Company (the "Series B Notes"), which were registered
under the Securities Act on Form S-4. The Series A Notes and the Series B Notes
are collectively referred to as the "9.25% Notes".
The 9.25% Notes are redeemable, at the option of the Company, in whole or in
part, on or after February 15, 2003, at a premium to face amount, plus accrued
interest, as follows: (a) February 15, 2003 at 104.625%; (b) February 15, 2004
at 103.083%; (c) February 15, 2005 at 101.542%; and (d) February 15, 2006 and
thereafter at 100%. The 9.25% Notes are unsecured obligations of Hollywood Park,
guaranteed by all other material restricted subsidiaries of Hollywood Park
excluding certain Casino Magic subsidiaries, principally Casino Magic of
Louisiana, Corp. (Casino Magic Bossier City) and the Casino Magic Argentina
subsidiaries.
In February 1999, Hollywood Park received net proceeds of approximately
$339,900,000 from the 9.25% Note offering. Of these proceeds, Hollywood Park
used $287,000,000 to repay all outstanding borrowings under the Bank Credit
Facility. The remaining proceeds were invested in short-term investments and are
expected to be used to fund Hollywood Park's capital expenditures, retire other
debt and for other corporate purposes.
The indenture governing the 9.25% Notes contains certain covenants limiting the
ability of the Company and its restricted subsidiaries to incur additional
indebtedness, issue preferred stock, pay dividends or make certain
distributions, repurchase equity interests or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates, sell assets,
issue or sell equity interests in its subsidiaries, or enter into certain
mergers and consolidations.
Unsecured 9.5% Notes In August 1997, Hollywood Park and Hollywood Park
Operating Company (a wholly owned subsidiary of Hollywood Park) co-issued
$125,000,000 aggregate principal amount of 9.5% Notes. The 9.5% Notes are
redeemable, at the option of Hollywood Park and Hollywood Park Operating
Company, in whole or in part, on or after August 1, 2002, at a premium to face
amount, plus accrued interest, as follows: (a) August 1, 2002 at 104.75%; (b)
August 1, 2003 at 102.375%; (c) August 1, 2004 at 101.188%; and (d) August 1,
2005 and thereafter at 100%. The 9.5% 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 excluding certain Casino Magic subsidiaries, principally
Casino Magic of Louisiana, Corp. (Casino Magic Bossier City) and the Casino
Magic Argentina subsidiaries.
On January 29, 1999, Hollywood Park received the required number of consents to
modify selected covenants associated with the 9.5% Notes. Among other things,
the modifications lowered the required minimum consolidated coverage ratio for
debt assumption to 2.00:1.00 and increased the size of Hollywood Park's allowed
borrowings under the Bank Credit Facility. The Company paid a consent fee of
$50.00 per $1,000 principal amount of the 9.5% Notes, as well as other costs, or
a total cost of approximately $6,781,000, inclusive of transaction related
expenses.
The indenture governing the 9.5% Notes contains certain covenants that, among
other things, limit the ability of Hollywood Park, Hollywood Park Operating
Company and their restricted subsidiaries to incur additional indebtedness and
issue preferred stock, pay dividends or make other distributions, repurchase
equity interests or subordinated indebtedness, create certain liens, enter into
certain transactions with affiliates, sell assets, issue or sell equity
interests in their respective subsidiaries or enter into certain mergers and
consolidations.
9
<PAGE>
Casino Magic 13% Notes In August 1996, Casino Magic of Louisiana, Corp. (owner
of Casino Magic Bossier City), a wholly owned subsidiary of Jefferson Casino
Corporation, which is a wholly owned subsidiary of Casino Magic, issued
$115,000,000 in aggregate principal amount of 13% First Mortgage Notes (the
"Casino Magic 13% Notes"), with contingent interest at 5% of Casino Magic
Bossier City's adjusted consolidated cash flow (as defined under the indenture
governing these notes). Although no contingent interest has previously been paid
to note holders (as the adjusted fixed charge coverage ratio as defined had not
previously been met), contingent interest of $1,298,000 (as calculated for the
twelve month period ended June 30, 1999) is expected to be paid in connection
with the scheduled interest payment due on August 15, 1999. As of June 30, 1999
contingent interest of $2,760,000 has been accrued, which amount represents the
accrued contingent interest since the notes were issued in 1996.
The Casino Magic 13% Notes are secured by a first priority lien and security
interest in substantially all of the assets of Casino Magic Bossier City, and
Jefferson Casino Corporation guarantees the Casino Magic 13% Notes, and the
guarantee is secured by all of the assets of Jefferson Casino Corporation
including all of the capital stock of Casino Magic of Louisiana, Corp. The
Casino Magic 13% Notes are redeemable, in whole or in part, on or after August
15, 2000, at a premium to face amount, plus accrued interest, as follows: (a)
August 15, 2000, at 106.5%; (b) August 15, 2001, at 104.332%; and (c) August 15,
2002, and thereafter at 102.166%.
The indenture governing the Casino Magic 13% Notes contains certain covenants
limiting the ability of Casino Magic of Louisiana, Corp. and its subsidiaries to
engage in any line of business other than the current gaming operations of
Casino Magic Bossier City and incidental related activities, to borrow funds or
otherwise become liable for additional debt, to pay dividends, issue preferred
stock, make investments and certain types of payments, to grant liens on its
property, enter into mergers or consolidations, or to enter into certain
specified transactions with affiliates.
Note 8 - Stock Option Compensation
Gaming Executive Options As discussed in the Annual Report on Form 10K, on
September 10, 1998, the Company granted 817,500 stock options (625,000 at an
exercise price of $10.1875 and 192,500 at an exercise price of $18.00) outside
of the Company's 1993 and 1996 Stock Option Plans to four gaming executives that
were hired on January 1, 1999. Of these grants, 613,125 (420,625 at an exercise
price of $10.1875 and 192,500 at an exercise price of $18.00) were made subject
to shareholder approval, which approval was granted at the shareholder meeting
held May 25, 1999 (the "Measurement Date"). Accounting Principles Board Opinion
No. 25 requires that compensation be determined as of the Measurement Date based
on the excess of the quoted market price over the exercise price of the stock
and charged over the service period of the executives in their employment
agreements or option vesting period, whichever is shorter. Compensation related
to these options for the six months ended June 30, 1999 was $621,000. There will
be an additional monthly charge of approximately $35,000 until the shorter of,
when the options are fully vested, or the executives are no longer employees.
Director Options and Proposed New Interpretation of APB Opinion No. 25 The
Financial Accounting Standards Board ("FASB") issued an Exposure Draft on March
31, 1999 in connection with a proposed new interpretation of APB Opinion No. 25.
The FASB Exposure Draft proposes that independent members of an entity's board
of directors are not employees and therefore stock compensation granted to
independent directors is excluded from the scope of APB Opinion No. 25. The FASB
has proposed that the effective date would be the issuance date of the new
interpretation (expected to be in September 1999) and that the interpretation
would cover events occurring after December 15, 1998.
10
<PAGE>
On December 16, 1998, the Company granted 16,000 stock options to independent
members of its board of directors at $8.75 per share. If the Exposure Draft is
adopted in its present form, the Company will charge to expense the value of the
16,000 options granted to the independent members of its board of directors in
the quarter of adoption of the Exposure Draft.
Note 9 - Litigation
On May 9, 1999, a bus owned and operated by Custom Bus Charters, Inc. was
involved in an accident in New Orleans, Louisiana while en route to Casino Magic
in Bay St. Louis, Mississippi. To date, multiple deaths and numerous injuries
are attributed to this accident and the Company's subsidiaries, Casino Magic
Corp. and/ or Mardi Gras Casino Corp., together with several other defendants,
have been named in thirty (30) lawsuits, each seeking unspecified damages due to
the deaths and injuries sustained in this accident. While the Company cannot
predict the outcome of the litigation, the Company believes Casino Magic is not
liable for any damages arising from this accident and the Company and its
insurers intend to vigorously defend these actions.
The Company is party to a number of other pending legal proceedings, though
management does not expect the outcome of such proceedings, either individually
or in the aggregate, will have a material effect on Hollywood Park's financial
position or results of operations.
11
<PAGE>
Note 10 - Consolidating Condensed Financial Information
Hollywood Park's subsidiaries (excluding non-material subsidiaries) have fully
and unconditionally guaranteed the payment of all obligations under the 9.25%
Notes and the 9.5% Notes. Separate financial statements and other disclosures
regarding the subsidiary guarantors are not included herein because management
has determined that such information is not material to investors. In lieu
thereof, the Company includes the following:
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the three and six months ended June 30, 1999 and 1998 and balance sheets as
of June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
Hollywood
Park
Operating (b) (c)
Hollywood Co. (a) Wholly Non Wholly
Park, Inc. (Co-Obligor Wholly Owned Owned Consolidating
Guarantor 9.5% Notes/ Owned Non- Non- And Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
Obligor) 9.25% Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------- ------------- ------------- -------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet
- --------------
As of June 30, 1999
Current assets $ 95,324 $25,481 $ 72,924 $ 19,488 $ 5,790 $ 0 $ 219,007
Property, plant and
Equipment, net 64,243 20,611 421,101 90,144 1,454 0 597,553
Other non-current assets 50,560 0 38,238 39,189 7,123 57,206 192,316
Investment in subsidiaries 314,039 17,895 171,157 0 0 (503,091) 0
Inter-company 267,053 25,997 324,369 6,384 0 (623,803) 0
-------- ------- ---------- -------- ------- ----------- ----------
$791,219 $89,984 $1,027,789 $155,205 $14,367 ($1,069,688) $1,008,876
======== ======= ========== ======== ======= =========== ==========
Current liabilities $ 32,871 $27,880 $ 67,169 $ 19,013 $ 2,162 ($472) $ 148,623
Notes payable, long term 482,389 178 8,243 112,892 0 0 603,702
Other non-current
liabilities 1,068 0 21,984 (9,454) 3,353 (11,737) 5,214
Inter-company 27,487 27,919 543,323 17,582 7,492 (623,803) 0
Minority interest 0 0 5,967 0 0 (2,034) 3,933
Equity (deficit) 247,404 34,007 381,103 15,172 1,360 (431,642) 247,404
-------- ------- ---------- -------- ------- ----------- ----------
$791,219 $89,984 $1,027,789 $155,205 $14,367 ($1,069,688) $1,008,876
======== ======= ========== ======== ======= =========== ==========
Statement of Operations
- -----------------------
For the three months
ended June 30, 1999
Revenues:
Gaming $ 12,398 $ 0 $ 93,496 $ 33,721 $ 5,299 $ 0 $144,914
Racing 0 25,831 3,131 0 0 0 28,962
Food and beverage 1,537 0 9,507 641 345 0 12,030
Equity in subsidiaries 27,138 194 22,163 0 0 (49,495) 0
Other 1,055 536 11,248 777 7 0 13,623
-------- ------- -------- -------- ------- -------- --------
42,128 26,561 139,545 35,139 5,651 (49,495) 199,529
-------- ------- -------- -------- ------- -------- --------
Expenses:
Gaming 6,550 0 50,278 20,898 1,395 0 79,121
Racing 0 8,694 1,329 0 0 0 10,023
Food and beverage 2,589 0 10,382 759 378 0 14,108
Administrative and other 6,636 5,222 30,888 4,952 1,561 0 49,259
Depreciation and
amortization 1,130 1,029 8,844 2,065 395 372 13,835
-------- ------- -------- -------- ------- -------- --------
16,905 14,945 101,721 28,674 3,729 372 166,346
-------- ------- -------- -------- ------- -------- --------
Operating income (loss) 25,223 11,616 37,824 6,465 1,922 (49,867) 33,183
Interest expense 8,992 2,180 (84) 4,541 (67) 0 15,562
-------- ------- -------- -------- ------- -------- --------
Income (loss) before
minority interest and taxes 16,231 9,436 37,908 1,924 1,989 (49,867) 17,621
Minority interests 0 0 0 0 0 679 679
Income tax expense 6,485 0 0 0 746 0 7,231
-------- ------- -------- -------- ------- -------- --------
Net income (loss) $ 9,746 $ 9,436 $ 37,908 $ 1,924 $ 1,243 ($50,546) $ 9,711
======== ======= ======== ======== ======= ========= ========
</TABLE>
12
<PAGE>
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the three and six months ended June 30, 1999 and 1998 and balance sheets
as of June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
Hollywood
Park
Operating (b) (c)
Hollywood Co. (a) Wholly Non Wholly
Park, Inc. (Co-Obligor Wholly Owned Owned Consolidating
Guarantor 9.5% Notes/ Owned Non- Non- And Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
Obligor) 9.25% Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
---------- ------------ ------------ ------------ ------------ ------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
- -----------------------
For the six months
ended June 30, 1999
Revenues:
Gaming $ 24,254 $ 0 $184,715 $66,119 $10,217 $ 0 $285,305
Racing 0 29,673 9,068 0 0 0 38,741
Food and beverage 2,763 0 16,964 1,289 685 0 21,701
Equity in subsidiaries 42,003 56 44,275 0 0 (86,334) 0
Other 2,349 1,451 20,321 1,583 76 0 25,780
-------- ------- -------- ------- ------- --------- --------
71,369 31,180 275,343 68,991 10,978 (86,334) 371,527
-------- ------- -------- ------- ------- --------- --------
Expenses:
Gaming 13,050 0 99,697 40,957 2,795 0 156,499
Racing 0 11,586 3,792 0 0 0 15,378
Food and beverage 5,018 0 18,570 1,495 680 0 25,763
Administrative and other 12,540 8,727 57,749 9,634 3,014 0 91,664
Depreciation and
amortization 2,251 2,059 17,428 3,954 767 743 27,202
-------- ------- -------- ------- ------- --------- --------
32,859 22,372 197,236 56,040 7,256 743 316,506
-------- ------- -------- ------- ------- --------- --------
Operating income (loss) 38,510 8,808 78,107 12,951 3,722 (87,077) 55,021
Interest expense 15,874 5,432 (315) 9,129 (67) 0 30,053
-------- ------- -------- ------- ------- --------- --------
Income (loss) before
minority interest and taxes 22,636 3,376 78,422 3,822 3,789 (87,077) 24,968
Minority interests 0 0 0 0 0 1,137 1,137
Income tax expense 8,728 0 10 0 1,249 0 9,987
-------- ------- -------- ------- ------- --------- --------
Net income (loss) $ 13,908 $ 3,376 $ 78,412 $ 3,822 $ 2,540 ($88,214) $ 13,844
======== ======= ======== ======= ======= ========= ========
Statement of Cash Flows:
- -----------------------
For the six months
ended June 30, 1999
Net cash provided by
operating activities $ 4,895 $ 7,553 $ 21,069 $ 15,798 $ 1,398 $ 0 $ 50,713
Net cash used in investing
activities (10,429) (770) (14,739) (1,079) (229) 0 (27,246)
Net cash provided by
(used in) financing
activities 70,009 (5,770) 3,545 (7,655) 0 0 60,129
</TABLE>
13
<PAGE>
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the three and six months ended June 30, 1999 and 1998 and balance sheets
as of June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
Hollywood
Park
Operating (b) (c)
Hollywood Co. (a) Wholly Non Wholly
Park, Inc. (Co-Obligor Wholly Owned Owned Consolidating
Guarantor 9.5% Notes/ Owned Non- Non- And Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
Obligor) 9.25% Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------- ------------- ------------- -------------- ------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
- ------------------------
For the three months
ended June 30, 1998
Revenues:
Gaming $11,713 $ 0 $33,404 $14,240 $ 0 $ 0 $ 59,357
Racing 0 24,084 2,761 0 0 0 26,845
Food and beverage 1,236 0 5,734 1,323 0 0 8,293
Equity in subsidiaries 17,545 292 (5,018) 0 0 (12,819) 0
Inter-company 0 0 1,345 0 0 (1,345) 0
Other 1,010 588 6,241 791 0 0 8,630
------- ------- ------- ------- ----- --------- --------
31,504 24,964 44,467 16,354 0 (14,164) 103,125
------- ------- ------- ------- ----- --------- --------
Expenses:
Gaming 6,719 0 17,393 7,237 0 0 31,349
Racing 0 8,890 1,323 0 0 0 10,213
Food and beverage 2,389 0 6,002 1,632 0 0 10,023
Administrative and other 4,953 5,211 12,822 4,365 93 0 27,444
Depreciation and
amortization 1,082 987 3,469 900 0 56 6,494
------- ------- ------- ------- ----- --------- --------
15,143 15,088 41,009 14,134 93 56 85,523
------- ------- ------- ------- ----- --------- --------
Operating income (loss) 16,361 9,876 3,458 2,220 (93) (14,220) 17,602
Interest expense 957 3,125 (122) 94 0 0 4,054
Inter-company interest 0 0 0 1,345 0 (1,345) 0
------- ------- ------- ------- ----- --------- --------
Income (loss) before taxes 15,404 6,751 3,580 781 (93) (12,875) 13,548
Income tax expense 7,217 0 (1,798) 0 0 0 5,419
------- ------- ------- ------- ----- --------- --------
Net income (loss) $ 8,187 $ 6,751 $ 5,378 $ 781 $ (93) ($12,875) $ 8,129
======= ======= ======= ======= ===== ========= ========
Statement of Operations
- -----------------------
For the six months
ended June 30, 1998
Revenues:
Gaming $23,117 $ 0 $63,319 $28,270 $ 0 $ 0 $114,706
Racing 0 27,872 8,842 0 0 0 36,714
Food and beverage 2,299 0 9,077 2,486 0 0 13,862
Equity in subsidiaries 16,280 236 (1,339) 0 0 (15,177) 0
Inter-company 0 0 2,701 0 0 (2,701) 0
Other 1,897 1,466 11,166 1,471 0 0 16,000
------- ------- ------- ------- ----- --------- --------
43,593 29,574 93,766 32,227 0 (17,878) 181,282
------- ------- ------- ------- ----- --------- --------
Expenses:
Gaming 13,461 0 34,972 14,883 0 0 63,316
Racing 0 11,781 3,901 0 0 0 15,682
Food and beverage 4,751 0 9,713 3,072 0 0 17,536
Administrative and other 9,520 8,759 24,999 8,599 93 0 51,970
REIT restructuring 469 0 0 0 0 0 469
Depreciation and
amortization 2,207 1,988 6,999 1,782 0 73 13,049
------- ------- ------- ------- ----- --------- --------
30,408 22,528 80,584 28,336 93 73 162,022
------- ------- ------- ------- ----- --------- --------
Operating income (loss) 13,185 7,046 13,182 3,891 (93) (17,951) 19,260
Interest expense 1,548 6,183 (201) 185 0 0 7,715
Inter-company interest 0 0 0 2,701 0 (2,701) 0
------- ------- ------- ------- ----- --------- --------
Income (loss) before taxes 11,637 863 13,383 1,005 (93) (15,250) 11,545
Income tax expense 4,640 0 10 0 0 0 4,650
------- ------- ------- ------- ----- --------- --------
Net income (loss) $ 6,997 $ 863 $13,373 $ 1,005 ($93) ($15,250) $ 6,895
======= ======= ======= ======= ===== ========= ========
</TABLE>
14
<PAGE>
Hollywood Park, Inc.
Consolidating Condensed Financial Information
For the three and six months ended June 30, 1999 and 1998 and balance sheets
as of June 30, 1999 and December 31, 1998
<TABLE>
<CAPTION>
Hollywood
Park
Operating (b) (c)
Hollywood Co. (a) Wholly Non Wholly
Park, Inc. (Co-Obligor Wholly Owned Owned Consolidating
Guarantor 9.5% Notes/ Owned Non- Non- And Hollywood
(Parent Guarantor Guarantor Guarantor Guarantor Eliminating Park, Inc.
Obligor) 9.25% Notes) Subsidiaries Subsidiaries Subsidiaries Entries Consolidated
----------- ------------ ------------- ------------- ------------- -------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
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 $ 0 ($15,177) $ 26,716
Net cash used in
investing activities (13,152) (938) (22,694) (1,012) 0 0 (37,796)
Net cash provided by
(used in) financing
activities 29,942 0 (2,886) 354 0 0 27,410
Balance Sheet
- -------------
As of December 31, 1998
Current assets $ 14,820 $ 2,574 $ 69,790 $ 17,726 $15,046 ($19,808) $100,148
Property, plant and
equipment, net 85,870 1,953 421,380 92,218 1,491 0 602,912
Other non-current assets 41,365 4,196 31,275 53,452 7,591 50,400 188,279
Investment in subsidiaries 279,442 17,839 174,141 0 0 (471,422) 0
Inter-company 252,556 144,569 303,855 0 5,012 (705,992) 0
-------- -------- ---------- -------- ------- ----------- --------
$674,053 $171,131 $1,000,441 $163,396 $29,140 ($1,146,822) $891,339
======== ======== ========== ======== ======= =========== ========
Current liabilities $ 11,048 $ 12,547 $ 75,529 $ 29,266 $ 5,604 ($9,051) $124,943
Notes payable, long term 279,018 125,228 10,042 118,349 0 (5,018) 527,619
Other non-current
liabilities 5,889 0 13,396 2,727 7,532 (25,495) 4,049
Inter-company 147,122 23,323 564,207 0 21,549 (756,201) 0
Minority interest 0 0 4,366 0 0 (614) 3,752
Equity 230,976 10,033 332,901 13,054 (5,545) (350,443) 230,976
-------- -------- ---------- -------- ------- ----------- --------
$674,053 $171,131 $1,000,441 $163,396 $29,140 ($1,146,822) $891,339
======== ======== ========== ======== ======= =========== ========
</TABLE>
(a) All of the subsidiaries mentioned in this footnote (a) became wholly owned
subsidiaries of the Company at different points in time, in some cases,
during the periods presented. All of such subsidiaries were guarantors on
both the 9.5% Notes and the 9.25% Notes. The following subsidiaries were
treated as guarantors for all periods presented: Turf Paradise, Inc.,
Hollywood Park Food Services, Inc., Hollywood Park Fall Operating Company,
and with respect to the 9.25% Notes, Hollywood Park Operating Company (it
is a co-obligor on the 9.5% Notes), HP Casino, Inc., HP/Compton, Inc., HP
Yakama, Inc., and HP Consulting, Inc., Boomtown, Inc., Boomtown Hotel &
Casino, Inc., Bay View Yacht Club, Inc., Louisiana I Gaming, Louisiana
Gaming Enterprises, Inc., and Boomtown Hoosier, Inc. The following
subsidiaries were treated as guarantors for periods beginning on October
15, 1998, when the Casino Magic Merger was consummated: Casino Magic Corp.,
Mardi Gras Casino Corp., Biloxi Casino Corp., Bay St. Louis Casino Corp.,
Casino Magic Finance Corp., Casino Magic American Corp., and Casino One
Corporation. Crystal Park Hotel and Casino Development Company, LLC and
Mississippi I Gaming L.P. were treated as wholly owned guarantors for
periods beginning in January 1998 and October 1998, respectively, when the
Company acquired the outstanding minority interests therein and they became
wholly owned subsidiaries.
(b) The following wholly owned subsidiaries were not guarantors on either the
9.5% Notes or the 9.25% Notes and became subsidiaries of the Company on
October 15, 1998, when the Casino Magic Merger was consummated: Jefferson
Casino Corporation, Casino Magic of Louisiana, Corp., and Casino Magic
Management Services, Corp.
(c) The following non-wholly owned subsidiaries were not guarantors on either
the 9.5% notes or the 9.25% Notes and became subsidiaries of the Company on
October 15, 1998, when the Casino Magic Merger was consummated: Casino
Magic Neuquen S.A. and its subsidiary, Casino Magic Support Services S.A.
(d) The following majority owned subsidiaries of the Company were guarantors on
both the 9.5% Notes and the 9.25% Notes and became subsidiaries on June 30,
1997, when the Boomtown Merger was consummated: Mississippi I Gaming, L.P.
and Indiana Ventures LLC and its wholly owned subsidiaries, Switzerland
County Development Corp. and Pinnacle Gaming Development Corp. Mississippi
I Gaming, L.P., a guarantor subsidiary, became a wholly owned subsidiary in
October 1998. In addition, Crystal Park Hotel and Casino Development
Company, LLC, a guarantor subsidiary, was a majority owned subsidiary until
January 1998, when it became a wholly owned subsidiary.
15
<PAGE>
Note 11- Subsequent Events
On July 22, 1999, the Company announced its intention to submit an application
for the fifteenth and final gaming license to be issued by the Louisiana State
Gaming Board (the "Gaming Control Board"). The Gaming Control Board has
indicated it will accept applications for such license from August 15 through
November 15, 1999, and thereafter select the applicant to whom the license is to
be issued, if an acceptable proposal is submitted. The Company's application
will be submitted during such time frame. Such application will seek approval to
operate a new riverboat casino, hotel and golf course resort complex in Lake
Charles, Louisiana.
In connection with such submittal, Hollywood Park has entered into an option
agreement with the Lake Charles Harbor and Terminal District (the "District") to
lease a 225-acre parcel from the District upon which such resort complex would
be constructed. The resort complex is anticipated to be similar in size and
scope to the Belterra Resort and Casino that is under construction in Indiana
(see Note 3). The Company estimates the cost of such project to be approximately
$150,000,000.
16
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
-----------------------------------------------------------------------
of Operations
-------------
Forward Looking Statements and Risk Factors 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 complete the sale transactions with Churchill Downs Incorporated;
the failure to complete the sale transaction with Home Depot (discussed below);
the failure to complete or successfully operate planned expansion projects
(including the Belterra Resort and Casino); the failure to obtain adequate
financing to meet strategic goals; possible Year 2000 issues (discussed below);
the failure to adequately integrate Casino Magic into Hollywood Park's
operations; the failure to obtain or retain gaming licenses or regulatory
approvals; increased competition (particularly in Mississippi and Louisiana) by
casino operators who have more resources and have built or are building newer
and larger hotel casino resorts; severe weather conditions; the failure to meet
Hollywood Park's debt service obligations; and the saturation of, or other
adverse changes in, the gaming markets in which the Company 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, 1998, and the Company's Form S-4 Registration Statement dated
March 26, 1999.
Pending Sale of Hollywood Park Race Track and Hollywood Park-Casino On May 6,
1999, the Company announced that it had entered into a definitive agreement with
Churchill Downs, Inc. ("Churchill Downs") to sell for cash both the Hollywood
Park Race Track and Hollywood Park-Casino. Churchill Downs will acquire 240
acres of the Company's 378 acres of real estate related to the Hollywood Park
racing operations. Churchill Downs will lease the Hollywood Park-Casino to the
Company for an annual lease payment of $3,000,000 and the Company expects to
sub-lease the card club casino to an unaffiliated third party operator.
The sales prices of the Hollywood Park Race Track and Hollywood Park-Casino,
totaling $140,000,000, are to be agreed upon prior to the closing of the
transaction. Based upon preliminary estimates, the Company believes the pre-tax
net gain (after selling expenses, write-off of related goodwill and certain
sale-leaseback accounting adjustments) will be between $42,000,000 and
$46,000,000. Federal and state income taxes related to these transactions are
expected to approximate $25,000,000.
The sales are expected to close on August 31, 1999, however, there are no
assurances that the sales transactions will be completed.
Revenues for the six months ended June 30, 1999, for Hollywood Park Race Track
and Hollywood Park-Casino were $34,212,000 and $29,015,000, respectively.
Operating income for the six months ended June 30, 1999, for Hollywood Park Race
Track and Hollywood Park-Casino was $8,809,000 and $3,567,000, respectively.
(See the Company's Annual Report on Form 10K for the years ended 1998, 1997 and
1996 for additional financial results and a description of these businesses.)
In the event the proposed sales transactions to Churchill Downs are completed,
such revenues and operating income will not continue. The Company expects to
receive net rental income (in excess of the lease payment to Churchill Downs)
for the card club casino from the operator.
17
<PAGE>
Proposed Expansion in Louisiana On July 22, 1999, the Company announced its
intention to submit an application for the fifteenth and final gaming license to
be issued by the Louisiana State Gaming Board (the "Gaming Control Board"). The
Gaming Control Board has indicated it will accept applications for such license
from August 15 through November 15, 1999, and thereafter select the applicant to
whom the license is to be issued, if an acceptable proposal is submitted. The
Company's application will be submitted during such time frame. Such application
will seek approval to operate a new riverboat casino, hotel and golf course
resort complex in Lake Charles, Louisiana.
In connection with such submittal, Hollywood Park has entered into an option
agreement with the Lake Charles Harbor and Terminal District (the "District") to
lease a 225-acre parcel from the District upon which such resort complex would
be constructed. The resort complex is anticipated to be similar in size and
scope to the Belterra Resort and Casino that is under construction in Indiana
(see Note 3 of the Condensed Notes to Consolidated Financial Statements). The
Company estimates the cost of such project to be approximately $150,000,000.
Pending Land Sale On July 15, 1999, the Company announced it had entered into
an agreement with Home Depot, Inc. to sell 42 acres at the Inglewood, California
location for $13 per square foot in cash. The sale is expected to close within
six months. The Company anticipates a gain, after taxes, will be recorded on
this transaction when it is completed.
Casino Magic Acquisition On October 15, 1998, Hollywood Park acquired Casino
Magic, Inc. (the "Casino Magic Merger"). Hollywood Park paid cash of
approximately $80,904,000 for Casino Magic's common stock. At the date of the
acquisition, Hollywood Park had purchased 792,900 common shares of Casino Magic
on the open market, at a total cost of approximately $1,615,000. Hollywood Park
paid $2.27 per share for the remaining 34,929,224 shares of Casino Magic common
stock outstanding.
The Casino Magic Merger was accounted for under the purchase method of
accounting for a business combination. The Company has performed a preliminary
purchase price allocation and will finalize this allocation in 1999. The
purchase price of the Casino Magic Merger was allocated to identifiable assets
acquired and liabilities assumed based on their estimated fair values at the
date of acquisition. Assets acquired and liabilities assumed were, when
necessary, written up or down to their fair market values based on financial
analyses, which considered the impact of general economic, financial and market
conditions. The Casino Magic Merger generated approximately $43,284,000 of
excess acquisition cost over the recorded value of the net assets acquired, all
of which was allocated to goodwill, and is being amortized over 40 years. The
amortization of this goodwill is not deductible for income tax purposes.
Belterra Resort and Casino In September 1998, the Indiana Gaming Commission
approved the Company to receive the last available license to conduct riverboat
gaming operations on the Ohio River in Indiana for the Belterra Resort and
Casino. Hollywood Park owns 97% of the Belterra Resort and Casino, with the
remaining 3% held by a non-voting local partner.
On July 14, 1999, the Company broke ground on the Belterra Resort and Casino,
which will be located in the city of Vevay, in Switzerland County, which is
approximately 35 miles southwest of Cincinnati, Ohio and will be the gaming site
most readily accessible to major portions of northern and central Kentucky,
including the city of Lexington.
The Company plans to spend approximately $165,000,000 (of which at June 30,
1999, $2,000,000 had been spent) in construction costs (including land but
excluding capitalized interest, pre-opening expenses, organizational expenses
and community grants) on the Belterra Resort and Casino, which will feature a
cruising riverboat containing over 1,800 gaming positions, a 300 plus room
hotel, several restaurants, retail areas, a 1,000 seat entertainment facility,
structured parking and a complete spa facility, as well as an 18-
18
<PAGE>
hole championship golf course. The project is scheduled to open in late summer
2000. All pre-opening costs for the Belterra Resort and Casino are being
expensed as they are incurred.
California Card Clubs By law, a corporation may operate a gambling enterprise
only if every officer, director and shareholder holds a state gambling license.
Only 5% or greater shareholders of a publicly traded racing association,
however, must hold a state gambling license. As a practical matter, therefore,
public corporations that are not qualified racing associations may not operate
gambling enterprises in California. As a result, the Crystal Park Hotel and
Casino, located on and within property owned by a subsidiary of the Company, is
leased to, and operated by, an unrelated third party. Since the Company is a
publicly trading racing association, by law it may operate the Hollywood Park-
Casino located in Inglewood, California adjacent to the Hollywood Park Race
Track. Should the Company consummate the transaction with Churchill Downs, it
will no longer be a publicly traded racing association and will no longer be
permitted under current law to operate Hollywood Park-Casino; it is anticipated
that the Company will leaseback the Hollywood Park-Casino from Churchill Downs
and then sublease it to an unaffiliated third party (see Note 2 of the Condensed
Notes to Consolidated Financial Statements).
By law, a California card club may neither bank card games nor offer certain of
the familiar games permitted in Nevada and other traditional gambling
jurisdictions, and thus does not participate in the wagers made or in the
outcome of any of the games played.
Year 2000 The Company is continuing to evaluate and resolve any potential
impact of the Year 2000 problem on the processing of date-sensitive information
by its information systems, and the information systems of vendors upon whom the
Company is dependent. The Year 2000 problem exists because computer systems and
applications were historically designed to use two digit fields (rather than
four) to designate a year, and date sensitive systems may not properly recognize
2000, which could result in miscalculations or system failures.
Hollywood Park has established a Year 2000 project team composed of individuals
from each business unit and each corporate function to identify and mitigate
Year 2000 issues, with respect to the Company's information systems, products,
facilities, suppliers and customers.
Internal Computer Systems The Company believes that its various financial
reporting software and associated hardware are Year 2000 compatible. The
Company has identified the following software and hardware applications that
have been or will need to be upgraded or replaced at a cumulative estimated cost
of $1,500,000 (of which, approximately $800,000 has been spent as of June 30,
1999): (a) point of sale cash register systems; (b) personal computer networks;
and (c) gaming patron player tracking systems. This cost estimate is based on
numerous assumptions, including the assumption that the Company has already
identified the most significant Year 2000 issues. There can be no guarantee
that these assumptions are accurate, and actual results could differ materially
from those anticipated.
External Computer Systems Both the Hollywood Park and the Turf Paradise Race
Tracks lease pari-mutuel wagering software and associated hardware, though from
different providers, which are essential to operations. The Year 2000 project
team met with each provider of the pari-mutuel wagering systems during the six
months ended June 30, 1999 and each provider assured the Company their systems
were Year 2000 compatible at such time. The Company does not have an alternative
software system to handle pari-mutuel wagering, and if the pari-mutuel wagering
service providers have mis-led the Company regarding their Year 2000 readiness,
or discover unanticipated Year 2000 issues, this would have a materially adverse
effect on the Company's operations.
The Company cannot be assured that its Year 2000 program will be effective, or
that estimates about timing and costs of completing the Year 2000 program will
be accurate, or that third party suppliers will timely resolve any or all Year
2000 problems with their systems. Any failure of a third party supplier to
timely resolve their Year 2000 issues could result in material disruption of the
Company's business. Such disruption
19
<PAGE>
could have a materially adverse effect on Hollywood Park's business, financial
condition and results of operations.
Results of Operations
On October 15, 1998, Hollywood Park acquired Casino Magic, and accounted for the
acquisition under the purchase method of accounting for a business combination.
As required under the rules of the purchase method of accounting for a business
combination, Casino Magic's results of operations were not consolidated with
those of Hollywood Park, prior to the acquisition date, thus generating
significant variances when comparing 1999's financial results with those of
1998.
The Company's results of operations are impacted by the overall cyclical nature
of its business, including the effects of fewer gaming patrons during the winter
months at its hotel and casino operations and the live racing operations at its
race track facilities in California and Arizona. Accordingly, the results of
operations for the three and six months ended June 30, 1999 and 1998 are not
indicative of the results of operations for a full year.
Three months ended June 30, 1999 compared to the three months ended June 30,1998
- --------------------------------------------------------------------------------
Total revenues for the three months ended June 30, 1999, increased by
$96,404,000, or 93.5%, as compared to the three months ended June 30, 1998.
Approximately $86,594,000 of the increase was due to the timing of the Casino
Magic acquisition. Gaming revenues increased by $85,557,000, or 144.1%, with
$80,381,000 of the increase due to the timing of the Casino Magic acquisition
and the balance primarily due to increases at Boomtown Reno and Boomtown New
Orleans. Gaming revenues at Boomtown Reno increased by $1,921,000, primarily
due to the new marketing programs supporting the expanded hotel and casino
operations (the new hotel opened in December 1998). Gaming revenues at Boomtown
New Orleans increased by $2,948,000, primarily due to the continued growth from
the new larger riverboat placed in service in February 1998. Racing revenues
increased by $2,117,000, or 7.9%, primarily due to increased revenues at the
Hollywood Park Race Track (which is subject to a pending sale) generated from
legislation, which became effective January 1, 1999, increasing simulcasting
revenues and reducing state license fees. Food and beverage sales increased by
$3,737,000, or 45.1%, with $2,829,000 of the increase due to the timing of the
Casino Magic acquisition and the balance of the increase attributed primarily to
increases at Boomtown Reno and Boomtown Biloxi. At Boomtown Reno, food and
beverage revenues increased by $401,000, consistent with the overall growth from
the marketing programs for the hotel and casino operations. At Boomtown Biloxi,
food and beverage revenues increased by $375,000, primarily due to the increase
in the number of patrons visiting the property. Hotel and recreational vehicle
park revenues increased by $2,583,000, with $2,090,000 of the increase due to
the timing of the Casino Magic acquisition and the balance due to the hotel
expansion at Boomtown Reno. Truck stop and service station revenue increased by
$823,000, or 22.1%, primarily due to increased fuel prices at Boomtown Reno.
Other income increased by $1,587,000, or 35.6%, with $1,294,000 due to the
timing of the Casino Magic acquisition and the balance primarily due to the
Great Escape arcade which opened in July 1998 at Boomtown New Orleans.
Total operating expenses for the three months ended June 30, 1999, increased by
$80,823,000, or 94.5%, as compared to the three months ended June 30, 1998.
Approximately $71,463,000 of the increase was due to the timing of the Casino
Magic acquisition. Gaming expenses increased $47,772,000, or 152.4%, with
$47,037,000 of the increase due to the timing of the Casino Magic acquisition,
and the balance primarily due to a decrease at Boomtown Reno and an increase at
Boomtown New Orleans. Boomtown Reno gaming expenses declined by $504,000,
primarily due to a reduction in customer bus and airline junket programs and
revised marketing programs for the casino operations. Gaming expenses at
Boomtown New Orleans increased by $1,635,000, consistent with the increase in
gaming revenues. Food and beverage expenses increased by $4,085,000, or 40.8%,
with $3,082,000 of the increase due to the timing of the Casino Magic
acquisition, and the balance a result of the corresponding increases in food and
beverage sales at each of the Boomtown properties. Hotel and recreational
vehicle park increased $1,366,000, with $1,026,000 of the
20
<PAGE>
increase due to the timing of the Casino Magic acquisition, and the balance due
to the hotel expansion at Boomtown Reno. Truck stop and service station expenses
increased by $721,000, or 21.1%, primarily due to increases in fuel costs at
Boomtown Reno. General and administrative expenses increased by $16,035,000, or
73.1%, with $11,696,000 of the increase due to the timing of the Casino Magic
acquisition. The balance of the increase in general and administrative expenses
is primarily due to certain non-recurring compensation costs, including the
stock options granted to four member of the gaming management team and severance
costs. Other expenses increased by $2,984,000, or 162.3%, including an increase
of $2,944,000 due to the timing of the Casino Magic acquisition. Depreciation
and amortization expenses increased by $7,341,000, or 113.0%, with $5,678,000 of
the increase due to the timing of the Casino Magic acquisition and the balance
due to the depreciation on the expansion projects at Boomtown Reno and Boomtown
New Orleans. Pre-opening costs for the Belterra Resort and Casino increased by
$709,000 consistent with the increasing development of the project. REIT
restructuring costs decreased by $469,000 as the Company abandoned its pursuit
of the restructuring. Net interest expense increased by $11,508,000, or 283.9%,
with $4,774,000 of the increase primarily due to the timing of the Casino Magic
acquisition and the balance due primarily to the 9.25% Notes issued in February
1999. Interest income was approximately $1,313,000 for the three months ended
June 30, 1999.
Six months ended June 30, 1999 compared to the six months ended June 30, 1998
- -----------------------------------------------------------------------------
Total revenues for the six months ended June 30, 1999, increased by
$190,245,000, or 104.9%, as compared to the six months ended June 30, 1998.
Approximately $173,547,000 of the increase was due to the timing of the Casino
Magic acquisition. Gaming revenues increased by $170,599,000, or 148.7% with
$160,693,000 of the increase due to the timing of the Casino Magic acquisition
and the balance primarily due to increases at Boomtown Reno and Boomtown New
Orleans. Gaming revenues at Boomtown Reno increased by $1,971,000, primarily
due to the new marketing programs related to hotel and casino expansion project,
while gaming revenues at Boomtown New Orleans increased by $5,627,000, primarily
due to the continued growth from the new larger riverboat placed in service in
February 1998. Racing revenues increased by $2,027,000, or 5.5%, primarily due
to increased revenues during the quarter ended June 30, 1999 at the Hollywood
Park Race Track (which is subject to a pending sale) generated from legislation
passed in September 1998, effective January 1, 1999. Food and beverage sales
increased by $7,839,000, or 56.6%, with $5,701,000 of the increase due to the
timing of the Casino Magic acquisition and the balance of the increase
attributed primarily to increases at Boomtown Reno and Boomtown Biloxi. At
Boomtown Reno, food and beverage revenues increased by $865,000, primarily due
to the hotel and casino expansion project, which opened in December 1998. At
Boomtown Biloxi, food and beverage revenues increased by $737,000, primarily due
to the increase in the number of patrons visiting the property. Hotel and
recreational vehicle park revenues increased by $4,975,000, with $4,219,000 of
the increase due to the timing of the Casino Magic acquisition and the balance
due primarily to the hotel expansion at Boomtown Reno. Truck stop and service
station revenue increased by $988,000, or 15.1%, primarily due to increased fuel
prices at Boomtown Reno. Other income increased by $3,817,000, or 43.7%, with
$2,934,000 due to the timing of the Casino Magic acquisition and the balance
primarily due to the Great Escape arcade which opened in July 1998 at Boomtown
New Orleans.
Total operating expenses for the six months ended June 30, 1999, increased by
$154,484,000, or 95.3%, as compared to the six months ended June 30, 1998.
Approximately $151,722,000 of the increase was due to the timing of the Casino
Magic acquisition. Gaming expenses increased $93,183,000, or 147.2%, including
an increase of $93,324,000 due to the timing of the Casino Magic acquisition,
and an increase of $2,782,000 at Boomtown New Orleans offset by a decrease at
Boomtown Reno. The increase in gaming expenses at Boomtown New Orleans is
consistent with the increase in gaming revenues. Boomtown Reno gaming expenses
declined by $2,507,000, due to a reduction in customer junket programs and
revised marketing programs for the casino operations. Food and beverage
expenses increased by $8,227,000, or 46.9%, with $5,997,000 of the increase due
to the timing of the Casino Magic acquisition, and the balance primarily a
result of the corresponding increases in food and beverage sales at each of the
Boomtown properties. Hotel and recreational vehicle park increased $2,579,000,
with $1,999,000 of the increase due to the timing of the
21
<PAGE>
Casino Magic acquisition, and the balance due to the hotel expansion at Boomtown
Reno. Truck stop and service station expenses increased by $913,000, or 15.2%,
primarily due to increases in fuel costs at Boomtown Reno. General and
administrative expenses increased by $31,084,000, or 74.0%, with $24,541,000 of
the increase due to the timing of the Casino Magic acquisition. The balance of
the increase in general and administrative expenses is due to costs associated
with various expansion costs and certain non-recurring compensation costs,
including the stock options granted the gaming management team and severance
costs related to the Casino Magic Merger. Other expenses increased by
$3,702,000, or 103.6%, with $3,625,000 of the increase due to the timing of the
Casino Magic acquisition. Depreciation and amortization expenses increased by
$14,153,000, or 108.5%, with $12,580,000 of the increase due to the timing of
the Casino Magic acquisition and the balance primarily due to the depreciation
on the expansion projects at Boomtown Reno and Boomtown New Orleans. Pre-opening
costs for the Belterra Resort and Casino increased by $1,416,000 consistent with
the increasing development of the project. REIT restructuring costs decreased by
$469,000 as the Company abandoned its pursuit of the restructuring. Net interest
expense increased by $22,338,000, or 289.5%, with $9,656,000 of the increase due
to the timing of the Casino Magic acquisition and the balance primarily due to
borrowings on the Bank Credit Facility and the 9.25% Notes issued in February
1999.
Liquidity and Capital Resources
Hollywood Park's principal source of liquidity as of June 30, 1999, was cash and
cash equivalents of $127,530,000. Cash and cash equivalents increased by
$83,596,000 during the six months ended June 30, 1999. Net cash of $50,713,000
was provided by operating activities. Net cash of $27,246,000 was used in
investing activities, with cash of $19,705,000 used for capital improvements and
$12,964,000 used to purchase short term investments. Net cash of $60,129,000
was provided by financing activities. In February 1999, the Company issued the
9.25% Notes, for net proceeds of approximately $339,900,000, of which
$287,000,000 was used to repay the Bank Credit Facility.
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.
Net cash of $37,796,000 was used in investing activities, of which $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.
Bank Credit Facility On October 14, 1998, the Company executed the Amended and
Restated Reducing Revolving Loan Agreement with a bank syndicate led by Bank of
America National Trust and Savings Association NT&SA ("Bank of America") (the
"Bank Credit Facility"). On June 8, 1999, the Company executed Amendment No. 1
(the "Amendment") to the Bank Credit Facility. The Amendment adjusted key
financial measurement ratios and clarified certain definitions in light of the
pending sale of the Inglewood facilities to Churchill Downs and the anticipated
completion of the Belterra Resort and Casino. In addition, effective May 22,
1999, the Amendment changed the Bank Credit Facility to $200,000,000 with an
option to increase this to $300,000,000. The Bank Credit Facility also provides
for sub-facilities for letters of credit up to $30,000,000, and swing line loans
of up to $10,000,000.
9.25% Notes In February 1999, Hollywood Park issued $350,000,000 aggregate
principal amount of Series A 9.25% Senior Subordinated Notes due 2007 (the
"Series A Notes"). On May 6, 1999, the Company completed a registered exchange
offer for the Series A Notes, pursuant to which all $350,000,000 principal
amount of the Series A Notes were exchanged by the holders for $350,000,000
aggregate principal amount of Series B 9.25% Senior Subordinated Notes due 2007,
of the Company (the "Series B Notes"), which were registered under the
Securities Act on Form S-4. The Series A Notes and the Series B Notes are
collectively referred to as the "9.25% Notes".
22
<PAGE>
The 9.25% Notes are redeemable, at the option of the Company, in whole or in
part, on or after February 15, 2003, at a premium to face amount, plus accrued
interest, as follows: (a) February 15, 2003 at 104.625%; (b) February 15, 2004
at 103.083%; (c) February 15, 2005 at 101.542%; and (d) February 15, 2006 and
thereafter at 100%. The 9.25% Notes are unsecured obligations of Hollywood
Park, guaranteed by all other material restricted subsidiaries of Hollywood Park
excluding certain Casino Magic subsidiaries, principally Casino Magic of
Louisiana, Corp. (Casino Magic Bossier City) and the Casino Magic Argentina
subsidiaries.
In February 1999, Hollywood Park received net proceeds of approximately
$339,900,000 from the 9.25% Note offering. Of these proceeds, Hollywood Park
used $287,000,000 to repay all outstanding borrowings under the Bank Credit
Facility. The remaining proceeds were invested in short-term investments and
are expected to be used to fund Hollywood Park's capital expenditures.
The indenture governing the 9.25% Notes contains certain covenants limiting the
ability of the Company and its restricted subsidiaries to incur additional
indebtedness, issue preferred stock, pay dividends or make certain
distributions, repurchase equity interests or subordinated indebtedness, create
certain liens, enter into certain transactions with affiliates, sell assets,
issue or sell equity interest in its subsidiaries, or enter into certain mergers
and consolidations.
Other Information As of June 30, 1999, the Company has invested approximately
$3,666,000 (inclusive of an unrealized gain of approximately $1,270,000) in
equity securities, which are presently being held as available-for-sale, as well
as $12,477,000 in investment grade commercial paper with maturities between
three months and one year from the balance sheet date.
Capital Commitments The Company was approved to receive the last available
gaming license to own and operate a riverboat casino on the Ohio River in
Indiana. The Belterra Resort and Casino is expected to cost approximately
$165,000,000 (including land but excluding capitalized interest, pre-opening
expenses, organizational expenses and community grants) and is expected to be
completed in the third quarter of 2000. At June 30, 1999, approximately
$2,000,000 has been spent for this project. The Company believes that proceeds
from the sales transactions with Churchill Downs, the unused Bank Credit
Facility, the available cash and short term investments, and available future
cash flow will be sufficient to fund the construction of the Belterra Resort and
Casino; however, there can be no assurance that additional funds will not be
required to complete anticipated projects.
General Hollywood Park is continually evaluating future growth opportunities
in the gaming industry, as well as the sale of other assets not employed in the
gaming industry. Hollywood Park expects that funding for the Belterra Resort and
Casino, payment of interest on the 9.5% Notes, 9.25% Notes and the Casino Magic
13% Notes, payment of notes payable, and normal and necessary capital
expenditure needs will come from existing cash and cash equivalent balances
generated from operating activities, proceeds from the sales transactions with
Churchill Downs and borrowings from the unused 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, 1999, Hollywood Park did not hold any investments in market risk
sensitive instruments of the type described in Item 305 of Regulation S-K.
23
<PAGE>
Part II
Other Information
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
At an Annual Meeting of Stockholders, held May 25, 1999, the Company's
stockholders approved the following:
Proposal One: Proposal to elect nine (9) directors.
<TABLE>
<CAPTION>
Nominee For votes Against votes
------- ---------- -------------
<S> <C> <C>
R.D. Hubbard 24,065,628 246,444
Robert T. Manfuso 24,075,791 236,281
James L. Martineau 24,075,831 236,241
Gary G. Miller 24,075,340 236,732
Michael Ornest 24,076,262 235,810
Timothy J. Parrott 24,078,559 233,513
Lynn P. Reitnouer 24,079,566 232,506
Herman Sarkowsky 24,079,518 232,554
Marlin Torguson 24,078,459 233,613
</TABLE>
Proposal Two: Proposal to approve stock options granted to Paul R. Alanis, J.
Michael Allen, Loren S. Ostrow and Cliff Kortman.
<TABLE>
<S> <C>
For votes 21,543,893
Against votes 2,630,590
Abstain votes 137,589
Broker non-votes 0
</TABLE>
Proposal Three: Proposal to approve and adopt the amendment and restatement of
Hollywood Park's Directors Deferred Compensation Plan.
<TABLE>
<S> <C>
For votes 23,484,487
Against votes 663,835
Abstain votes 163,750
Broker non-votes 0
</TABLE>
Item 5. Other Information
- -------------------------
On April 1, 1999, Bruce C. Hinckley was appointed Senior Vice President, Chief
Financial Officer and Treasurer.
24
<PAGE>
Item 6.a Exhibits
- -----------------
Exhibit
Number
- ------
10.41* Asset Purchase Agreement, dated May 5, 1999, among Hollywood Park, Inc.
and Churchill Downs Incorporated.
10.42* Amendment No. 1 to Amended and Restated Reducing Revolving Loan
Agreement, dated June 8, 1999.
11* Statement re Computation of Per Share Earnings
27* Financial Data Schedule
--------
* Filed herewith
(b) Reports on Form 8-K filed during the three months ended June 30, 1999:
None
25
<PAGE>
HOLLYWOOD PARK, INC.
Selected Financial Data by Property
<TABLE>
<CAPTION>
For the three months ended June 30, For the six months ended June 30,
----------------------------------- ---------------------------------
1999 1998 1999 1998
--------- -------- -------- -------
(in thousands, except per share data - unaudited)
Revenues:
<S> <C> <C> <C> <C>
Boomtown Reno $21,356 $17,912 $35,498 $31,348
Boomtown New Orleans 27,167 23,759 52,888 46,454
Boomtown Biloxi 16,894 16,354 34,693 32,227
Casino Magic Bay St. Louis 22,719 0 45,682 0
Casino Magic Biloxi 23,067 0 47,698 0
Casino Magic Bossier City 35,139 0 68,991 0
Casino Magic Argentina 5,651 0 10,978 0
Hollywood Park Race Track 28,747 27,500 34,212 32,978
Turf Paradise, Inc. 3,499 3,101 10,285 9,911
Hollywood Park, Inc. - Casino Division 14,990 13,784 29,015 26,995
Crystal Park and HP Yakama, Inc. 300 326 889 626
Hollywood Park, Inc. - Corporate 0 389 698 743
-------- -------- -------- --------
199,529 103,125 371,527 181,282
-------- -------- -------- --------
Expenses:
Boomtown Reno 16,818 16,006 30,016 30,305
Boomtown New Orleans 18,471 15,777 35,740 31,573
Boomtown Biloxi 13,685 13,200 27,771 26,554
Casino Magic Bay St. Louis 16,954 0 33,707 0
Casino Magic Biloxi 18,020 0 35,607 0
Casino Magic Bossier City 26,609 0 52,086 0
Casino Magic Argentina 3,334 0 6,489 0
Hollywood Park Race Track 16,043 16,577 23,227 23,819
Turf Paradise, Inc. 2,618 2,584 6,823 6,958
Hollywood Park, Inc. - Casino Division 12,273 11,753 24,112 23,460
Crystal Park and HP Yakama, Inc. 669 118 695 164
Hollywood Park, Inc. - Corporate 6,215 2,921 11,522 5,578
-------- -------- -------- --------
151,709 78,936 287,795 148,411
-------- -------- -------- --------
Non-recuring expenses:
Indiana pre-opening costs 802 93 1,509 93
Real Estate Investment Trust restructurin 0 0 0 469
Depreciation and amortization:
Boomtown Reno 1,858 1,461 3,517 2,930
Boomtown New Orleans 1,434 1,189 2,859 2,380
Boomtown Biloxi 1,020 900 2,013 1,782
Casino Magic Bay St. Louis 1,471 0 2,909 0
Casino Magic Biloxi 1,747 0 3,486 0
Casino Magic Bossier City 2,065 0 3,954 0
Casino Magic Argentina 395 0 767 0
Hollywood Park Race Track 1,086 1,048 2,176 2,113
Turf Paradise, Inc. 302 298 597 594
Hollywood Park, Inc. - Casino Division 671 648 1,336 1,346
Crystal Park and HP Yakama, Inc. 485 460 970 970
Hollywood Park, Inc. - Corporate 1,301 490 2,618 934
-------- -------- -------- --------
13,835 6,494 27,202 13,049
-------- -------- -------- --------
Operating income (loss):
Boomtown Reno 2,680 445 1,965 (1,887)
Boomtown New Orleans 7,262 6,793 14,289 12,501
Boomtown Biloxi 2,189 2,254 4,909 3,891
Casino Magic Bay St. Louis 4,294 0 9,066 0
Casino Magic Biloxi 3,300 0 8,605 0
Casino Magic Bossier City 6,465 0 12,951 0
Casino Magic Argentina 1,922 0 3,722 0
Hollywood Park Race Track 11,618 9,875 8,809 7,046
Turf Paradise, Inc. 579 219 2,865 2,359
Hollywood Park, Inc. - Casino Division 2,046 1,383 3,567 2,189
Crystal Park and HP Yakama, Inc. (854) (252) (776) (508)
Hollywood Park, Inc. - Corporate (7,516) (3,022) (13,442) (5,769)
Indiana pre-opening costs (802) (93) (1,509) (93)
Real Estate Investment Trust restructurin 0 0 0 (469)
-------- -------- -------- --------
33,183 17,602 55,021 19,260
-------- -------- -------- --------
Interest expense, net 15,562 4,054 30,053 7,715
-------- -------- -------- --------
Income before minority interest and income 17,621 13,548 24,968 11,545
-------- -------- -------- --------
Minority interests - Casino Magic Argentina 679 0 1,137 0
Income tax expense 7,231 5,419 9,987 4,650
-------- -------- -------- --------
Net income $9,711 $8,129 $13,844 $6,895
======== ======== ======== ========
Per common share:
Net income - basic $0.38 $0.31 $0.54 $0.26
Net income - diluted $0.37 $0.31 $0.54 $0.26
Number of shares:
Basic 25,871 26,285 25,836 26,281
Diluted 26,129 26,428 25,836 26,771
</TABLE>
26
<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, 1999
--------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Bruce C. Hinckley Dated: August 12, 1999
--------------------------------
Bruce C. Hinckley
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Hollywood Park Operating Company
(Registrant)
By: /s/ R.D. Hubbard Dated: August 12, 1999
--------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ Bruce C. Hinckley Dated: August 12, 1999
--------------------------------
Bruce C. Hinckley
Senior Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
27
<PAGE>
EXHIBIT 10.41
---------------------------------
ASSET PURCHASE AGREEMENT
Between
HOLLYWOOD PARK, INC.,
a Delaware corporation,
and
CHURCHILL DOWNS INCORPORATED,
a Kentucky corporation
Dated as of May 5, 1999
---------------------------------
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TABLE OF CONTENTS
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1. DEFINITIONS..............................................................2
2. TRANSFER OF ASSETS.......................................................7
2.1 Transfer of Assets.................................................7
2.1.1 Real Property..............................................7
2.1.2 Personal Property..........................................8
2.1.3 Inventory..................................................8
2.1.4 Intellectual Property Rights...............................8
2.1.5 Intentionally Deleted......................................8
2.1.6 Books and Records..........................................8
2.1.7 Assigned Contracts.........................................9
2.1.8 Permits and Licenses.......................................9
2.1.9 Vehicles...................................................9
2.1.10 Readerboard Signs..........................................9
2.2 Assets Not Transferred.............................................9
2.2.1 Cash and Cash Equivalents.................................10
2.2.2 Accounts Receivable.......................................10
2.2.3 Refund Claims.............................................10
2.2.4 Third Party Claims........................................10
2.2.5 Insurance.................................................10
2.2.6 Unrelated Information.....................................10
2.2.7 Adjacent Real Property....................................10
2.2.8 Unrelated and Corporate Assets............................10
2.2.9 Certain Contracts and Licenses............................10
2.2.10 Casino Building Signage...................................11
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3. CLOSING, PURCHASE PRICES, ASSUMPTION OF LIABILITIES.....................11
3.1 Closing...........................................................11
3.2 Simultaneous Delivery; Conditions Concurrent......................11
3.3 Purchase Prices...................................................11
3.3.1 Purchase Prices...........................................11
3.3.2 Assumed Liabilities.......................................11
3.4 Non-Assumption of Certain Liabilities.............................12
3.4.1 Tax Liabilities...........................................12
3.4.2 Indemnification Obligations...............................12
3.4.3 Litigation................................................12
3.4.4 Workers' Compensation Claims..............................12
3.4.5 Employee Claims...........................................12
3.4.6 Liabilities Relating to the Excluded Assets...............12
3.4.7 Brokers, etc..............................................12
3.4.8 Debt......................................................12
3.4.9 Affiliates................................................13
3.4.10 Environmental.............................................13
3.5 Deliveries at Closing.............................................13
3.6 Tax Allocation....................................................15
3.7 Costs and Prorations..............................................15
3.7.1 Costs.....................................................15
3.7.2 Prorations................................................16
3.7.3 Closing Statement.........................................17
4. REPRESENTATIONS AND WARRANTIES OF SELLER................................18
4.1 Organization, Corporate Power, and Authority......................18
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4.2 Authorization of Agreements.......................................18
4.3 Effect of Agreement...............................................18
4.4 Governmental Approvals............................................18
4.5 Condition of Property and Assets..................................19
4.6 Compliance with Laws..............................................19
4.7 Utilities.........................................................19
4.8 Improvement Contracts.............................................19
4.9 Reports; Financial Statements; Transaction Financial Statements
and Balance Sheet.................................................19
4.10 Hazardous Substances..............................................20
4.11 Leases............................................................20
4.12 "Foreign Person" Status...........................................20
4.13 Eminent Domain; Zoning; Street Changes; Other Litigation..........20
4.14 Absence of Certain Changes or Events..............................21
4.14.1 Material Obligations......................................21
4.14.2 Discharge or Satisfaction of Liens........................21
4.14.3 Additional Liens..........................................21
4.14.4 Acquisition or Disposition of Assets......................21
4.14.5 Compromise of Debts or Claims.............................21
4.14.6 Waiver of Material Rights.................................21
4.14.7 Rights in Licenses, Trademarks, Patents...................21
4.14.8 Employee Compensation.....................................21
4.14.9 Material Contracts........................................21
4.14.10 Casualty Loss.............................................21
4.14.11 Material Adverse Change...................................21
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4.14.12 Accounting................................................22
4.14.13 Capital Expenditures......................................22
4.15 Title to Assets, Absence of Liens and Encumbrances................22
4.16 Material Contracts................................................22
4.17 Litigation........................................................22
4.18 Assets............................................................22
4.19 Commissions.......................................................23
4.20 Labor Relations...................................................23
4.21 Severance Obligations.............................................23
4.22 Employee Benefit Plans............................................23
4.23 Guaranties........................................................24
4.24 Foreign Corrupt Practices Act.....................................24
4.25 Affiliate Transactions............................................24
4.26 Year 2000.........................................................24
4.27 Intellectual Property Rights......................................24
5. REPRESENTATIONS AND WARRANTIES OF BUYER.................................26
5.1 Organization, Corporate Power and Authority.......................26
5.2 Authorization of Agreement........................................26
5.3 Effect of Agreement...............................................26
5.4 Approvals.........................................................26
5.5 Commissions.......................................................27
5.6 Financing.........................................................27
5.7 Buyer's Investigation.............................................27
6. COVENANTS OF SELLER.....................................................27
6.1 Real Property Matters.............................................27
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6.1.1 Resubdivision..............................................27
6.1.2 Survey.....................................................27
6.1.3 Preliminary Title Report...................................28
6.2 Conduct of Racetrack Business......................................29
6.2.1 Ordinary Course............................................29
6.2.2 Preservation of Goodwill...................................29
6.2.3 Maintain Insurance.........................................29
6.2.4 Sale of Assets.............................................29
6.2.5 Maintenance of Assets......................................29
6.2.6 Assigned Contracts.........................................29
6.2.7 Employment Contracts.......................................29
6.2.8 Collective Bargaining Agreements...........................29
6.3 Access.............................................................29
6.4 No Solicitation....................................................30
6.5 Consents...........................................................30
6.6 Collective Bargaining Agreements...................................31
7. COVENANTS OF BUYER......................................................31
7.1 Permits and Consents...............................................31
7.2 Access to Books and Records........................................31
7.3 Cooperation in Third-Party Litigation..............................31
7.4 Cooperation Regarding Resubdivision and Future Development.........32
8. CONDITIONS PRECEDENT....................................................33
8.1 Conditions Precedent to Obligations of Buyer.......................33
8.1.1 Resubdivision..............................................33
8.1.2 Title to Real Property.....................................33
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8.1.3 HSR Act...................................................33
8.1.4 Accuracy of Representations and Warranties................33
8.1.5 Financial Statements......................................33
8.1.6 Compliance with Covenants.................................33
8.1.7 Buyer's Inspections.......................................34
8.1.8 Opinion of Counsel for Seller.............................34
8.1.9 Legal Actions or Proceedings..............................34
8.1.10 Consents Obtained.........................................34
8.1.11 Other Transaction Documents...............................34
8.1.12 Casino License............................................34
8.1.13 Casino Operator...........................................34
8.1.14 Liquor License............................................34
8.1.15 Non-Competition Agreement.................................35
8.1.16 Buyer's Financing.........................................35
8.1.17 Easement Agreement Approval...............................35
8.1.18 Information Technology....................................35
8.2 Conditions Precedent to Obligations of Seller.....................35
8.2.1 Resubdivision.............................................35
8.2.2 HSR Act...................................................35
8.2.3 Accuracy of Representations and Warranties................35
8.2.4 Compliance with Covenants.................................35
8.2.5 Opinion of Counsel for Buyer..............................35
8.2.6 Legal Actions or Proceedings..............................35
8.2.7 Consents Obtained.........................................36
8.2.8 Purchase Prices...........................................36
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8.2.9 Other Transaction Documents...............................36
8.2.10 Bank of America Lien......................................36
8.2.11 Casino Sublease...........................................36
8.2.12 Casino Operator...........................................36
8.2.13 Easement Agreement Approval...............................36
8.2.14 Non-Disturbance, Subordination and Attornment Agreement...36
9. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS...........................36
9.1 Survival of Representations.......................................36
9.2 Agreements to Indemnify...........................................37
9.2.1 General Indemnity..........................................37
9.2.2 Environmental Indemnity....................................38
9.2.3 Conflict...................................................40
9.2.4 Subrogation................................................40
9.2.5 Other Indemnification Provisions...........................41
9.3 Conditions of Indemnification.....................................41
9.3.1 Notice.....................................................41
9.3.2 Assumption of Defense......................................42
9.3.3 Claim Adverse to Indemnifying Party........................43
9.3.4 Cooperation................................................44
9.4 Remedies Exclusive................................................44
9.5 Damages...........................................................44
10. TERMINATION.............................................................44
10.1 Injunction........................................................44
10.2 Mutual Agreement..................................................44
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10.3 Review Period..................................................44
10.4 Termination Date...............................................45
10.5 Material Breach................................................45
10.6 Uncured Asset Loss.............................................45
10.7 Effects of Termination.........................................45
11. OTHER COVENANTS........................................................45
11.1 Announcements..................................................45
11.2 Employment Matters.............................................46
11.2.1 Offers of Employment..................................46
11.2.2 Retention of Liabilities..............................47
11.3 Cooperation....................................................47
11.4 Excluded Assets................................................47
11.5 Tax Cooperation................................................47
11.6 Best Efforts...................................................47
11.7 Non-Parimutuel Gaming..........................................48
11.7.1 Buyer's Covenant......................................48
11.7.2 Terms.................................................48
11.7.3 Records...............................................49
11.7.4 Audited Financial Statements..........................49
11.7.5 Lobbying Expenses.....................................49
11.7.6 Net Revenue and Expense Items.........................50
11.8 Non-Compete....................................................50
11.8.1 Recitals..............................................50
11.8.2 Covenant Not to Compete...............................50
11.8.3 Savings Clause........................................50
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11.8.4 Injunctive Relief.....................................51
11.8.5 Non-Competition Agreement of R.D. Hubbard.............51
11.9 Access Easements...............................................51
11.10 Audit of Financial Statements of Racetrack Business............51
11.11 TVG Operations.................................................51
11.12 Common Area Charges Under Casino Lease.........................52
11.13 Ticket Prices..................................................52
12. MISCELLANEOUS.........................................................52
12.1 Bulk Transfer Laws.............................................52
12.2 Expenses.......................................................52
12.3 Waivers........................................................52
12.4 Amendments, Supplements........................................52
12.5 Entire Agreement...............................................52
12.6 Binding Effect, Benefits.......................................53
12.7 Assignability..................................................53
12.8 Notices........................................................53
12.9 Governing Law; Jurisdiction....................................54
12.10 Attorneys' Fees................................................54
12.11 Equitable Remedies.............................................54
12.12 Representations and Warranties.................................54
12.13 Rules of Construction..........................................54
12.13.1 Headings..............................................54
12.13.2 Tense and Case........................................55
12.13.3 Severability..........................................55
12.13.4 Knowledge.............................................55
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12.13.5 Agreement Negotiated............................55
12.14 Counterparts.............................................55
12.15 Specific Performance.....................................55
12.16 Risk of Loss.............................................55
12.17 Cooperation in Exchange..................................55
12.18 No Merger................................................56
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This ASSET PURCHASE AGREEMENT (together with the exhibits and schedules
hereto, the "Agreement") is entered into as of May 5, 1999 by and between
CHURCHILL DOWNS INCORPORATED, a Kentucky corporation ("Buyer") and, HOLLYWOOD
PARK, INC., a Delaware corporation ("Seller") with reference to the following
facts:
RECITALS
A. Seller or certain of its subsidiaries are the owners of certain assets
more particularly described in this Agreement, including both real and personal
property, tangible and intangible, used by it in the operation of a horse racing
facility known as the Hollywood Park Racetrack and a card club casino known as
the Hollywood Park-Casino in Inglewood, California.
B. Seller desires to sell, and Buyer desires to purchase those assets, as
more particularly described in this Agreement and assume certain of the
liabilities as more particularly described in this Agreement, on the terms and
conditions set forth herein.
C. Prior to the Closing, as hereinafter defined, Seller shall cause its
subsidiaries to transfer certain assets to Seller.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
hereinafter set forth, the parties agree as follows:
1. DEFINITIONS. The following terms shall have the following meanings when
-----------
used in this Agreement:
"Accounts Receivable" shall have the meaning set forth in Section 2.2.2.
"Affiliate" shall mean, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such other Person, through the ownership of all or part of any Person.
"Asset Loss" shall have the meaning set forth in Section 12.16.
"Assets" shall have the meaning set forth in Section 2.1.
"Assigned Contracts" shall have the meaning set forth in Section 2.1.7.
"Assumed Liabilities" shall have the meaning set forth in Section 3.3.2.
"Bank of America Loan Agreement" shall have the meaning set forth in
Section 4.3.
"Bill of Sale" shall mean a Bill of Sale substantially in the form of
Exhibit B hereto, pursuant to which Buyer shall assume and agree to pay, perform
- ---------
and discharge when due the Assumed Liabilities.
"Business" shall mean, collectively, the Casino Business and the Racetrack
Business.
<PAGE>
"Capital Budget" shall have the meaning set forth in Section 4.8.
"Casino Building" shall mean that certain building, including the
"pavilion" portion thereof, as delineated on Exhibit A, commonly known as 3883
W. Century Boulevard, Inglewood, California 90303, in which the Hollywood Park-
Casino is operated, and all fixtures, built-in apparatus, built-in equipment,
built-in appliances and fittings of every kind located on the Casino Building or
used in the operation of the Casino Business, halls, dining rooms, lounges,
offices, lobbies and all other public spaces, lavatories, basements, cellars,
vaults and other portions of the Casino Building, such as heating and air
conditioning systems and facilities used to provide any utility services,
parking services, refrigeration, ventilation, garbage disposal, recreation or
other services thereto, and all leasehold improvements of tenants, if any.
"Casino Business" shall mean the operation of the Hollywood Park-Casino in
and about the Casino Building.
"Casino Lease" shall mean a lease pursuant to which Buyer shall lease to
Seller the Casino Building in substantially the form of Exhibit C hereto.
---------
"Casino Operator" shall mean a person or entity who has obtained all
requisite licenses and permits to operate the Casino Business, has been approved
by Seller and by Buyer (which approval shall not be unreasonably withheld) and
has agreed to the terms and conditions of the Casino Sublease.
"Casino Sublease" shall mean a sublease between Seller and the Casino
Operator pursuant to which the Casino Operator will sublease the assets of the
Casino Business and operate the Casino Business.
"Closing" and "Closing Date" shall have the respective meanings set forth
in Section 3.1.
"Closing Statement" shall have the meaning set forth in Section 3.7.3.
"Commission" shall mean the Securities and Exchange Commission.
"Contract" shall mean any contract, agreement, option, lease, license,
sales order, purchase order or other legally binding commitment, whether written
or oral pertaining to the operation of the Racetrack Business.
"Debt" shall mean any indebtedness of Seller, whether or not contingent, in
respect of borrowed money or evidenced by bonds, notes, debentures or other
similar instruments or letters of credit (or reimbursement agreements in respect
thereof) or banker's acceptances or the balance deferred and unpaid of the
purchase price of any Asset, if and to the extent any of the foregoing
indebtedness (other than letters of credit) would appear as a liability upon a
balance sheet of Seller prepared in accordance with generally accepted
accounting principles, as well as all indebtedness of others secured by a lien
on any Asset (whether or not such indebtedness is assumed by Seller) and, to the
extent not otherwise included, any guaranty by Seller of any indebtedness of any
other Person.
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"Disclosure Schedule" shall mean the schedules delivered to Buyer by or on
behalf of the Seller, containing all lists, descriptions, exceptions and other
information and materials as included therein in connection with the
representations and warranties made by Seller in this Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Easement Agreement" shall have the meaning set forth in Section 11.9.
"Employee Benefit Plans" shall have the meaning set forth in Section 4.22.
"Environmental Claim or Claims" shall mean any administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance or violation asserted by
a third party or governmental agency alleging potential liability arising out
of, based on, or resulting from the presence or release into the environment of
any Hazardous Substances, including, without limitation, any claim related to
storm water runoff, water quality or the discharge of waste water resulting from
the operation of horse stables on the Real Property.
"Environmental Laws" shall mean all laws, statutes, regulations, rules,
ordinances, by-laws, orders or determinations of any governmental or judicial
authority at the federal, state or local level, in effect as of the date of this
Agreement, which regulate or relate to the protection or clean-up of the
environment, the use, treatment, storage, transportation, generation,
manufacture, processing, distribution, handling or disposal of, or emission,
discharge or other release or threatened release of Hazardous Substances, the
preservation or protection of waterways, groundwater, drinking water, air,
wildlife, plants or other natural resources, or the health and safety of persons
or property, including, without limitation, protection of the health and safety
of employees, other than laws, statutes, regulations, rules, ordinances, by-
laws, orders or determinations pertaining to land use planning, zoning matters,
and development entitlements.
"Excluded Assets" shall have the meaning set forth in Section 2.2.
"Excluded Liabilities" shall have the meaning set forth in Section 3.4.
"Grant Deed" shall have the meaning set forth in Section 3.5.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976 (15 U.S.C. (S) 18a), and any amendments thereto.
"Hazardous Substances" shall mean any pollutant, contaminant, chemical,
waste and any toxic, infectious, carcinogenic, reactive, corrosive, ignitable,
or flammable chemical or chemical compound or hazardous substance, material or
waste, whether solid, liquid or gas, including, without limitation, any quantity
of asbestos in any form, urea formaldehyde, PCB's, radon gas, crude oil or any
fraction thereof, all forms of natural gas, petroleum products or by-products or
derivatives, radioactive substance or material, pesticide waste waters, sludges,
slag and any other substance, material or waste that is subject to regulation,
control or remediation under any Environmental Laws.
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"Hired Employee" shall have the meaning set forth in Section 11.2.1.
"Improvements" shall mean, collectively, all buildings, structures and
improvements of any kind and nature located on the Land, other than the Casino
Building, and all fixtures and built-in equipment located on such buildings,
structures and improvements, including all built-in apparatus, built-in
equipment, built-in appliances and fittings of every kind located on or used in
the operation of the Racetrack Business, horse stalls, stables, tack rooms,
fencing, halls, dining rooms, lounges, offices, lobbies and all other public
spaces, lavatories, basements, cellars, vaults and other portions of such
buildings, structures and improvements, such as heating and air conditioning
systems and facilities used to provide any utility services, parking services,
refrigeration, ventilation, garbage disposal, recreation or other services
thereto, and all landscaping and leasehold improvements of tenants, if any.
"Indemnified Party" shall mean, with respect to any Losses, the party
seeking indemnity hereunder.
"Indemnifying Party" shall mean, with respect to any Losses, the party from
whom indemnity is being sought hereunder.
"Intellectual Property Assets" shall have the meaning set forth in Section
2.1.4.
"Intellectual Property Rights" shall mean all patent rights, copyrights,
moral rights, trademark, service mark, and trade name rights (including all
goodwill associated therewith), rights under unfair competition law, trade
secret rights (including customer lists and customer databases), privacy rights,
publicity rights, and all similar intellectual and industrial property rights
now known or hereafter existing under the laws of the United States or any other
jurisdiction (including all rights under common law and in applications and
registrations pertaining to the foregoing).
"Internal Revenue Code" shall have the meaning set forth in Section 4.12.
"Inventories" shall mean collectively, all feed supplies, hay, stock, food
and beverage items, provisions in storerooms, other merchandise intended for
sale or resale, fuel, mechanical supplies, stationery and other expensed
supplies, and all goods, materials and supplies used or intended for use at, or
held for sale (whether on or off-site) in connection with, the Racetrack
Business, to the extent owned or held by Seller, including, without limitation,
(i) food and liquor in unbroken packages, (ii) raw and uncooked food, unopened
beverages and other salable merchandise, (iii) reserve stocks of operating
supplies not in use, and (iv) engineering and maintenance supplies.
"Land" shall mean that certain real property more particularly described
in Exhibit "A."
----------
"Leases" shall mean the leases or subleases to which Seller or an Affiliate
of Seller is lessor or sublessor and affecting any portion of the Assets which
constitute Assigned Contracts.
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"License Agreement" shall mean an agreement pursuant to which Buyer shall
license to Seller certain of the Hollywood Park trademarks, tradenames, logos
and marks in substantially the form of Exhibit D hereto.
---------
"Licenses" shall mean, collectively, all governmental permits, franchises,
licenses and approvals relating to the Assets or the use, occupancy and
operations of the Racetrack Business or any other portion of the Assets,
including all gaming permits and licenses, racing licenses, certificates of
occupancy, certificates of compliance, food handlers permits, liquor licenses,
any certificates of unofficial bodies, such as the National Fire Prevention
Association and such other certificates as may be required or customary in the
jurisdiction where the Assets are located or which pertain thereto, including,
without limitation, those licenses listed on Schedule 2.1.8 hereto.
--------------
"Losses" shall mean all demands, claims, actions or causes of action,
assessments, losses, damages, costs, expenses, liabilities, encumbrances, liens,
expenses of investigation and defense of any claim, judgments, awards, fines,
sanctions, penalties, charges and amounts paid in settlement (net of insurance
proceeds actually received), including reasonable costs, fees and expenses of
attorneys, accountants and other agents of such Person.
"Material Adverse Effect" shall mean a material adverse effect on the
financial condition, business, results of operations or properties or assets of
the Racetrack Business or on the Assets in each case taken as a whole.
"Non-Competition Agreement" shall have the meaning set forth in Section
11.8.5.
"Office Lease" shall mean a lease between Buyer and Seller pursuant to
which a Seller or its Affiliate shall lease office space from Buyer
substantially on the terms set forth on Exhibit E hereto, covering the premises
---------
outlined on Exhibit E-1 hereto.
-----------
"Parking License" shall mean a license agreement to be executed on the
Closing Date pursuant to which Seller (or its Affiliate) shall allow Buyer's
patrons to park on the Remainder Parcels, substantially on the terms set forth
on Exhibit G hereto.
---------
"Person" means an individual, corporation, partnership, limited liability
company, association, trust, estate or other entity or organization.
"Preliminary Title Report" shall have the meaning set forth in Section
6.1.3.
"Purchase Prices" shall mean the purchase price for the Real Property and
the purchase price for the Casino Building as specified in Section 3.3.1.
"Racetrack Business" shall mean the operation of the Hollywood Park
Racetrack on a portion of the Real Property.
"Racetrack Employees" shall mean employees employed by Seller exclusively
in connection with the Racetrack Business.
"Real Property" shall have the meaning set forth in Section 2.1.1.
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"Readerboard Leases" shall have the meaning set forth in Section 2.1.10.
"Remainder Parcels" shall have the meaning set forth in Section 2.2.7.
"Representatives" shall have the meaning set forth in Section 6.4.
"Resubdivision" shall have the meaning set forth in Section 6.1.1
"Review Period" shall have the meaning given that term in Section 8.1.7
hereof.
"SEC Reports" shall have the meaning set forth in Section 4.9.
"Survey" shall have the meaning set forth in Section 6.1.2.
"Title Company" shall have the meaning set forth in Section 6.1.3.
"Title Policy" shall have the meaning set forth in Section 8.1.2
"Transactions" shall mean the transactions contemplated by the Transaction
Documents.
"Transaction Financial Statements and Balance Sheet" shall mean the
unaudited income statement and balance sheet of the Racetrack Business, as of
March 31, 1999, prepared by Seller and attached hereto as Exhibit F.
---------
"Transaction Documents" shall mean this Agreement, the Grant Deed, the
Casino Building Grant Deed, the Bill of Sale, the Office Lease, the Casino
Lease, the License Agreement, the Parking License, the Easement Agreement, the
Non-Competition Agreement and such other documents as the parties shall mutually
agree are necessary to complete the Transactions.
"TVG Founders Agreement" shall mean that certain Founders Agreement, dated
July 30, 1997, between ODS Technologies, L.P. and Seller, as amended by that
certain Amendment Agreement No. 1 (Founders Agreement), dated December 31, 1998.
"TVG Investment Agreement" shall have the meaning set forth in Section
2.2.8.
2. TRANSFER OF ASSETS.
-------------------
2.1 Transfer of Assets. Subject to the terms and conditions of this
------------------
Agreement, on the Closing Date, Seller will sell, convey, transfer, assign and
deliver to Buyer, and Buyer will purchase from Seller those certain assets of
Seller described below including, without limitation, all of the assets of
Seller necessary to conduct and operate the Racetrack Business substantially
consistent with past operation, (the "Assets") as the same shall exist on the
Closing Date (except the Excluded Assets, as defined in Section 2.2):
2.1.1 Real Property.
-------------
(a) The Racetrack Property. That certain real property in the
----------------------
City of Inglewood, County of Los Angeles, State of California,
consisting of
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<PAGE>
approximately 239.4 acres, as delineated on Exhibit A, including the
---------
Land, Improvements thereon and all rights, privileges and easements
which are appurtenant to such real property (the "Real Property").
(b) The Casino Building. The Casino Building, as that term is
-------------------
defined in Section 1 hereof.
2.1.2 Personal Property.
-----------------
(a) All tangible personal property, including, but not limited
to, machinery and equipment including computer equipment (but not
licensed software installed therein except to the extent assigned as
Intellectual Property Assets under Section 2.1.4 of this Agreement)
and communications equipment, furniture, supplies, inventory and trade
fixtures reflected on the Transaction Financial Statements and Balance
Sheet or otherwise located on the Real Property on the Closing Date
and used in the Racetrack Business (other than the office furniture,
software, computer and other equipment set forth on Schedule 2.1.2(a))
and including the televisions located in the Casino Building.
(b) Any leases relating to tangible personal property,
including, but not limited to, machinery and equipment, furniture and
tools, inventory, trade fixtures and supplies, located on the Real
Property and used in the Racetrack Business, including those personal
property leases and service agreements listed on Schedule 2.1.2(b).
-----------------
2.1.3 Inventory. All Inventory reflected on the Transaction
---------
Financial Statements and Balance Sheet or otherwise located on the Real Property
on the Closing Date.
2.1.4 Intellectual Property Rights. Except as identified on Schedule
----------------------------
2.2.9, (i) the Internet domain name registration for "hollywoodpark.com", (ii)
all Intellectual Property Rights owned by or licensed to Seller which are used
or held for use principally in connection with the Racetrack Business and (iii)
all of the items identified on Sections (a), (b), (c), (d), (e) and (f) of
Schedule 4.27 ((i), (ii) and (iii) collectively, the "Intellectual Property
Assets"), all subject to (a) all of the terms and conditions of the licenses or
other agreements by which Seller holds, uses, or exploits those Intellectual
Property Assets, (b) any existing licenses granted by Seller and other
obligations related to the Intellectual Property Assets as of the Closing Date,
and (c) the royalty obligations, contracts, claims and other restrictions on the
exercise of such Intellectual Property Assets, actual and potential, identified
on Schedule 4.27.
2.1.5 Intentionally Deleted.
---------------------
2.1.6 Books and Records. All books and records (other than personnel
-----------------
records relating to or containing performance reviews and similar evaluations
unless the transfer is consented to by such personnel) and all files, documents,
papers, customer lists, architectural plans, drawings and specifications,
advertising and promotional materials and management and accounting procedures
and guidelines relating to the Racetrack Business,
-8-
<PAGE>
pertaining to the Assets, the Assumed Liabilities or otherwise to the Racetrack
Business that are related to continuing the operation of the Racetrack Business
as a going concern, subject to the Seller retaining copies of the same, if and
as it so chooses.
2.1.7 Assigned Contracts. The rights of Seller under all Contracts
------------------
relating to the Racetrack Business relating to periods after the Closing Date,
including but not limited to (i) the Contracts listed on any of the schedules
hereto (including all Material Contracts listed in Schedule 4.16 but not
including: (a) the employment contracts listed on Buyer's notice to Seller
pursuant to Section 11.2.1; and (b) the contracts listed on Schedule 2.2.9),
(ii) all collective bargaining agreements, (iii) all unfilled orders outstanding
as of the Closing Date for the purchase of raw materials, goods or services by
Seller and all unfilled orders outstanding as of the Closing Date for the sale
of goods or services by Seller, and (iv) those entered into in the ordinary
course of business of the Racetrack Business through the Closing Date, except
for any Contract that requires the consent to assignment of a party thereto and
for which such consent has not been obtained pursuant to Section 6.5 prior to
the Closing (the "Assigned Contracts").
2.1.8 Permits and Licenses. All transferable Licenses, including
--------------------
without limitation those listed on Schedule 2.1.8, except for those permits and
licenses excluded pursuant to Section 2.2.9, including without limitation, those
listed on Schedule 2.2.9.
2.1.9 Vehicles. All vehicles reflected on the Transaction Financial
--------
Statements and Balance Sheet and supporting schedules thereto.
2.1.10 Readerboard Signs. The readerboard signs located adjacent to
-----------------
the 405 and 105 freeways (the "Readerboard Signs").
The Assets shall include all assets described above that are acquired by Seller
for use in connection with the Racetrack Business between the date hereof and
the Closing Date (except to the extent such assets would constitute Excluded
Assets), but shall exclude assets of the type described above that are disposed
of, sold or consumed after the date hereof in the ordinary course of business on
a basis consistent with past practice. If, for any reason, any Excluded Assets
are physically transferred to Buyer, or Buyer otherwise gains access to any such
Seller property as a result of the transactions contemplated herein, no
assignment or license of such property to Buyer shall be implied and, as between
Buyer and Seller, all ownership interests and other rights of any kind in such
property shall remain with Seller. If Buyer does come to possess or gain access
to any Seller information or property other than the Assets, Buyer shall (a)
treat any such information as the confidential information of Seller, (b)
promptly notify Seller that Buyer possesses or has access to such information or
property, and (c) cooperate fully with Seller to return to Seller or destroy
such property promptly, as Seller may direct at its option. Specifically, but
without limitation, any information stored on the computers transferred to Buyer
hereunder, but not otherwise expressly transferred by this Section 2.1 shall, as
between Buyer and Seller, remain the sole and exclusive property of Seller.
2.2 Assets Not Transferred. Notwithstanding anything to the contrary
----------------------
contained herein, the following assets and properties of Seller are specifically
excluded from the Assets and shall be retained by it (the "Excluded Assets"):
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<PAGE>
2.2.1 Cash and Cash Equivalents. All working capital, cash on hand
-------------------------
and cash equivalents of Seller (whether or not relating to the Racetrack
Business), including, but not limited to, bank accounts and temporary cash
investments;
2.2.2 Accounts Receivable. All accounts receivable and notes
-------------------
receivable of Seller whether or not relating to the Racetrack Business (the
"Accounts Receivable");
2.2.3 Refund Claims. Rights to or claims for refunds of taxes and
-------------
other governmental charges to the extent attributable to any time or periods
ending on or prior to the Closing Date and the benefit of net operating loss
carry-forwards or other credits of Seller, whether or not attributable to the
Racetrack Business;
2.2.4 Third Party Claims. Claims or rights against third parties,
------------------
except those arising with respect to events or breaches occurring after the
Closing Date under the Assigned Contracts; provided, however, that any rights of
indemnification, contribution or reimbursement that may exist under the Assigned
Contracts in respect of liabilities or obligations retained by the Seller
hereunder shall be Excluded Assets;
2.2.5 Insurance. Subject to insurance policies covered under the
---------
Assigned Contracts, all insurance policies and rights thereunder, including but
not limited to rights to any cancellation value as of the Closing Date;
2.2.6 Unrelated Information. Proprietary business information,
---------------------
records and policies that relate generally to Seller, or any Affiliate, and are
not used principally in the Racetrack Business, including, but not limited to,
management procedures and guidelines, proprietary financial reporting formats,
accounting procedures, personnel records relating to or containing performance
reviews or similar evaluations, instructions, organization manuals and strategic
plans;
2.2.7 Adjacent Real Property. All real property and all rights
----------------------
appurtenant thereto, and real property improvements, owned by Seller other than
the Real Property (the "Remainder Parcels");
2.2.8 Unrelated and Corporate Assets. All other assets of Seller not
------------------------------
specifically included in the Assets to be sold hereunder, including, but not
limited to, all assets used or held for use in connection with Seller's various
gaming operations or the operations or Seller's Turf Paradise racetrack, assets
used or held for use other than principally in connection with the Racetrack
Business (including without limitation (i) the J.D. Edwards accounting software
and any other software or computer programs used by Seller on a company wide
basis and not solely for the Racetrack Business as identified on Schedule 2.2.8;
and (ii) all of Seller's right, title and interest in and to that certain
Investment Agreement, dated July 30, 1997, between ODS Technologies and Seller,
as amended (the "TVG Investment Agreement")), all assets of the Casino Business
other than the Casino Building, Seller's corporate charter, taxpayer and other
identification numbers, seals, minute books and stock transfer books and
Seller's ownership of stock in its various subsidiaries;
2.2.9 Certain Contracts and Licenses. All non-transferable licenses
------------------------------
and permits including, without limitation, those set forth on Schedule 2.2.8 and
the rights of any Seller under any Contract regarding any (i) non-transferable
licenses and permits, and
-10-
<PAGE>
(ii) any Contract that requires the consent to assignment of a party thereto and
for which such consent has not been obtained pursuant to Section 6.5 prior to
the Closing; provided that any such Contract shall be assigned upon receipt of
any necessary consents, and (iii) any Contract or license set forth on Schedule
2.2.9 hereof; and
2.2.10 Casino Building Signage. All signage located in or on the
-----------------------
Casino Building.
3. CLOSING, PURCHASE PRICES, ASSUMPTION OF LIABILITIES.
----------------------------------------------------
3.1 Closing. The consummation of the purchase and sale of the Assets (the
-------
"Closing") shall occur on August 31, 1999, unless extended by the mutual written
consent of Buyer and Seller. The date upon which the Closing shall occur is
sometimes referred to in this Agreement as the "Closing Date." Subject to the
terms and conditions of this Agreement, Seller shall deliver possession of the
Assets to Buyer on the Closing Date, free and clear of all Liens (except as
permitted in Section 8.1.2). The parties agree that time is of the essence.
3.2 Simultaneous Delivery; Conditions Concurrent. All documents and other
--------------------------------------------
items to be delivered at the Closing shall be deemed to have been delivered
simultaneously, and no delivery shall be effective until all such items have
been delivered.
3.3 Purchase Prices.
---------------
3.3.1 Purchase Prices. Prior to the Closing, the parties shall
---------------
agree upon the purchase price for the Real Property and the purchase price for
the Casino Building which amounts shall total: (a) $140,000,000 in cash; plus
(b) the assumption of the Assumed Liabilities. In the absence of agreement prior
to the Closing Date, the determination of the cash purchase price for the Casino
Building shall be determined by appraisal to be performed by a "Big-Five"
accounting firm mutually acceptable to the Buyer and Seller.
3.3.2 Assumed Liabilities. On the terms and subject to the
-------------------
conditions set forth in this Agreement, at the Closing, Buyer shall assume and
become responsible for all of the following liabilities and obligations whether
absolute, contingent, accrued or otherwise (collectively, the "Assumed
Liabilities"):
(a) Assigned Contracts. Any and all liabilities, obligations
------------------
and commitments arising or occurring after the Closing Date under the
Assigned Contracts;
(b) Post-Closing Operations. All liabilities and obligations
-----------------------
arising out of events or transactions after the Closing in connection
with the operation of the Racetrack Business by Buyer;
(c) Specific Undertakings. Any and all liabilities,
---------------------
obligations and commitments of Seller specifically undertaken by Buyer
pursuant to any other provision of this Agreement; and
-11-
<PAGE>
(d) Condition of the Assets. All liabilities arising as a
-----------------------
consequence of the physical, structural or seismic condition of the
Assets on and after the Closing Date, except to the extent that Seller
is obligated to indemnify Buyer therefor or otherwise is liable with
respect thereto under Section 9 of this Agreement.
3.4 Non-Assumption of Certain Liabilities. Buyer is not assuming, and
-------------------------------------
shall not be deemed to have assumed any liabilities, obligations or commitments
of Seller, whether contingent or non-contingent, liquidated or unliquidated,
asserted or unasserted, other than the Assumed Liabilities set forth above (the
"Excluded Liabilities"), all of which shall remain the liabilities, obligations
and commitments of Seller. The Excluded Liabilities shall include, but shall not
be limited to, the following:
3.4.1 Tax Liabilities. Liabilities for taxes relating to the
---------------
operation of the Racetrack Business and the Casino Business and the ownership of
the Real Property and other Assets through the Closing;
3.4.2 Indemnification Obligations. Seller's obligations to indemnify
---------------------------
Buyer as provided in Section 9;
3.4.3 Litigation. Except as otherwise provided in Section 9, all
----------
liabilities with respect to litigation, actions, proceedings or arbitrations
pending on the Closing Date, and those which, if asserted after the Closing
Date, exclusively relate to or which arise exclusively from events which
occurred prior to the Closing including, without limitation, the actions
described on Schedule 3.4.3;
3.4.4 Workers' Compensation Claims. All liabilities for workers'
----------------------------
compensation claims brought by Seller's employees and which exclusively relate
to or which arise exclusively from events which occurred prior to the Closing
other than relating to any obligation to rehire any such employee after the
Closing Date;
3.4.5 Employee Claims. All liabilities arising before the Closing
---------------
Date from claims (other than workers' compensation claims) brought by employees
or other present or former employees of the Seller who are not employees or
which relate to any collective bargaining agreement(s) to which Seller is a
party;
3.4.6 Liabilities Relating to the Excluded Assets. All liabilities
-------------------------------------------
or obligations arising prior to, on or after the Closing Date with respect to or
in connection with the Excluded Assets;
3.4.7 Brokers, etc. Any liability whether currently in existence or
------------
arising hereafter relating to fees, commissions or expenses owed to any broker,
finder, investment banker, attorney or other intermediary or advisor employed by
Seller or any of its Affiliates in connection with the transactions contemplated
hereby or otherwise; it being expressly acknowledged that CIBC Oppenheimer has
been engaged solely by Buyer;
3.4.8 Debt. All Debt;
----
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<PAGE>
3.4.9 Affiliates. Any liability, whether currently in existence or
----------
arising hereafter, owed by Seller to any of its Affiliates, other than
compensation and benefits for employees of the Racetrack Business to the extent
such persons are employed by Buyer or its Affiliates after the Closing; and
3.4.10 Environmental. Except as otherwise provided in Section 9, all
-------------
liabilities arising from the environmental condition of the Real Property or the
Casino Building prior to Closing.
Notwithstanding the provisions of Sections 3.4.3 and 3.4.5 hereof, in the event
a court orders equitable relief with respect to such Excluded Liabilities which
equitable relief Seller could no longer comply with due to its sale of the
Assets which would be affected by such equitable relief, Buyer shall be
responsible for complying with such order and Seller shall reimburse Buyer for
the actual out-of-pocket cost thereof; provided, however, that Buyer shall not
voluntarily agree to any such equitable relief (if it intends to seek
reimbursement from Seller) unless it shall first have advised Seller as to the
proposed equitable relief and Seller shall have consented thereto.
3.5 Deliveries at Closing. At Closing, Seller and Buyer shall each
---------------------
deliver to the other such instruments and funds as are necessary to consummate
the purchase and sale of the Assets and the assignment and assumption of the
Assumed Liabilities, including the following:
(a) Seller shall deliver to Buyer:
-----------------------------
1. A duly executed and acknowledged grant deed ("Grant
Deed"), sufficient to convey to Buyer fee title to the
Real Property.
2. A duly executed and acknowledged grant deed ("Casino
Building Grant Deed"), sufficient to convey to Buyer fee
title to the Casino Building.
3. The Bill of Sale and Assignment and Assumption
Agreement, duly executed by Seller.
4. The Easement Agreement, duly executed by Seller and
acknowledged.
5. The License Agreement, duly executed by Seller.
6. The Casino Lease, duly executed by Seller.
7. The Office Lease, duly executed by Seller.
8. The Parking License, duly executed by Seller.
9. An affidavit directed to Buyer giving Seller's taxpayer
identification number and confirming that Seller is not
a
-13-
<PAGE>
"foreign person," which affidavit shall be sufficient to
relieve Buyer of any withholding obligation under
Section 1445 of the Internal Revenue Code (provided,
however, that if Seller fails to deliver such affidavit,
Buyer's remedy shall be to withhold from the Purchase
Prices in accordance with law).
10. A California Real Estate Withholding Exemption
Certificate (Form 590-RE), which shall be sufficient to
relieve Buyer of any withholding obligation under
(S)18805 and/or (S)26131 of the California Revenue and
Taxation Code (provided however that if Seller fails to
deliver such Certificate, Buyer's remedy shall be to
withhold from the Purchase Prices in accordance with
law).
11. Originals or copies of any warranties and guaranties
received by Seller and to be assigned to Buyer, to the
extent in Sellers possession or readily available to
Seller, from any contractors, subcontractors, suppliers
or materialmen in connection with any construction,
repairs or alterations of the Improvements, the Casino
Building or any tenant improvements.
12. Originals or copies of all Assigned Contracts and all
transferable Licenses, if any, to be assigned to Buyer
pursuant to this Agreement.
13. All existing as-built plans and specifications for the
Improvements and the Casino Building in the possession
or under the control of Seller.
14. The Closing Statement, duly executed by Seller.
15. The certificates referred to in Section 8.1.4 and 8.1.6
hereof.
16. The Opinion of counsel to Seller referred to in Section
8.1.8.
17. The Non-Competition Agreement referred to in Section
11.8.5.
18. Such other instruments and documents as may be
reasonably required for Seller to perform its
obligations hereunder or as may be reasonably required
by the Title Company.
(b) Buyer shall deliver to Seller:
-----------------------------
1. The Purchase Prices, in cash or immediately available
funds.
2. The Bill of Sale and Assignment and Assumption Agreement,
duly executed by Buyer.
-14-
<PAGE>
3. The Easement Agreement, duly executed by Buyer and
acknowledged.
4. The License Agreement, duly executed by Buyer.
5. The Casino Lease, duly executed by Buyer.
6. The Office Lease, duly executed by Buyer.
7. The Parking License, duly executed by Buyer.
8. The Closing Statement, duly executed by Buyer.
9. The certificates referred to in Section 8.2.3 and 8.2.4
hereof.
10. The Opinion of counsel to Buyer referred to in Section
8.2.5.
11. Such other instruments and documents as may be
reasonably required for Buyer to perform its obligations
hereunder or as may be reasonably required by the Title
Company.
3.6 Tax Allocation. Buyer and Seller shall mutually agree upon the
--------------
allocation of the Purchase Prices to broad categories constituting components of
the Assets, including an allocation for the Casino Building, the Real Property
and the Personal Property for purposes of Internal Revenue Service Form 8594. In
the absence of agreement prior to the Closing Date, the allocation of the
Purchase Prices shall be determined by appraisal to be performed by a "Big-Five"
accounting firm mutually acceptable to Buyer and Seller. The costs of the
appraisal shall be borne equally by Buyer and Seller. Each party will report
timely the purchase and sale of the Assets in accordance with the agreed upon
allocation among such broad categories for all federal, state, local and other
tax purposes. Buyer shall also furnish Seller with a form of reseller
certificate that complies with the requirements of the California Taxation and
Revenue Code and other applicable state taxation laws.
3.7 Costs and Prorations.
--------------------
3.7.1 Costs. Costs of the Closing shall be allocated as follows:
-----
Seller shall pay:
----------------
(a) the costs of preparing and recording the Grant Deed, the
Casino Building Grant Deed, the Easement Agreement and all other
documents (other than those relating to Buyer's financing, if any) to
be recorded at the Closing,
(b) all state and local documentary transfer, stamp, or similar
taxes, if any, imposed in connection with the transfer of the Casino
Building and the Real Property,
-15-
<PAGE>
(c) all trustee's and other fees in connection with any deeds
of trust which shall be reconveyed at Closing,
(d) the cost of preparing the Preliminary Title Report and the
premiums for a CLTA Owner's Title Policy in the amount of the portion
of the Purchase Prices allocated to the Casino Building and the Real
Property,
(e) the cost of the Survey, and any supplemental survey,
(f) one-half of the actual costs incurred by Buyer to obtain a
liquor license for the Racetrack Business, not to exceed $25,000, and
(g) one-half of the HSR filing fee.
Buyer shall pay:
---------------
(a) all state and local sales or use taxes imposed in
connection with the transfer of the Personal Property,
(b) the cost of preparation and recordation of its mortgage,
deed of trust, or other applicable financing instruments, if any,
(c) the portion of the premium for the Title Policy not
chargeable to Seller as provided above, including the incremental cost
of the ALTA Title Policy and all endorsements thereto specified by
Buyer, and
(d) one-half of the HSR filing fee.
All other costs, if any, shall be apportioned in the customary manner for real
estate transactions in Los Angeles County.
3.7.2 Prorations. At Closing, the parties shall prorate as of the
----------
Closing Date, the following with respect to the Racetrack Business and the
Assets:
(a) Taxes: Real estate taxes, assessments, personal property
-----
taxes and rent tax, if any, on all or any portion of the Casino
Building and the Real Property, based on the regular and supplemental
tax bills for the calendar year in which the Closing occurs. In the
event that the actual property taxes payable in respect of the Assets
are not ascertainable as of the Closing Date, then the parties will
prorate such taxes on the basis of the latest available tax bill and
will make such post-Closing adjustment as may be necessary when the
actual taxes are determined. All taxes and assessments relating to
periods prior to and through the Closing shall be paid by Seller and
Buyer shall be responsible for all taxes and assessments relating to
periods after the Closing. Seller shall pay any supplemental tax bills
or taxes or assessments levied by the taxing authorities or received
subsequent to the Closing Date to the extent applicable to periods
prior to the Closing Date. If any supplemental real estate taxes are
levied for the taxable period up to and including the Closing Date,
the parties will, immediately after the Closing or the issuance of the
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<PAGE>
supplemental real estate tax bill (whichever last occurs), prorate
between themselves, in cash, without interest and to the date of the
Closing Date, the supplemental real estate taxes shown by such bill.
(b) Prepaid Items, Deposits and Utilities: All prepaid items
-------------------------------------
and deposits applicable to the ownership of the Assets or operation of
the Racetrack Business covering periods prior to and after the Closing
Date, including without limitation, the items listed on Schedule
3.7.2(b) and all utilities including gas, water, sewer, electricity,
telephone and other utilities supplied to the Casino Building and the
Real Property. Seller shall pay, prior to the Closing Date, all such
amounts for which a bill has been received or for which payments are
otherwise due prior to the Closing Date, and Buyer shall be credited,
and Seller shall be debited, with an amount equal to all utility
charges for the period from the date such bills were issued or such
payments were due until the Closing Date. All meters shall be read as
of the Closing Date.
(c) Accounts Receivable. Buyer agrees to use its best efforts
-------------------
to collect all Accounts Receivable, including advertising, income,
rents and other revenues derived from the operation of the Racetrack
Business, for the benefit of Seller by using substantially the same
efforts as the Racetrack Business has historically used in the
collection of its accounts; provided however, that Buyer shall not be
required to resort to litigation. Seller shall designate an account to
which Buyer shall deposit monies it collects with respect to such
receivables and Buyer agrees to promptly deposit to such account any
monies it collects. Seller agrees to reimburse Buyer for the
reasonable, documented out-of-pocket costs (which costs shall not
include employee salaries or overhead) Buyer incurs in connection with
assisting Seller in the collection of the Accounts Receivable. Any
monies received by Buyer from the account debtors that owe Accounts
Receivable shall be applied against the invoice to which the payment
relates and shall be delivered to Seller or retained by Buyer
accordingly. Buyer and Seller shall cooperate to identify the proper
recipient of monies received without sufficient identifying
information.
(d) Assigned Contracts. Amounts payable under Assigned
------------------
Contracts shall be prorated on an accrual basis. Seller shall pay when
due all amounts for which a bill has been received prior to the
Closing Date. For bills received after the Closing Date, Seller agrees
to pay its prorated share when due or to promptly reimburse Buyer if
paid by Buyer.
3.7.3 Closing Statement. Buyer and Seller shall mutually agree upon
-----------------
a closing statement (the "Closing Statement") consistent with the foregoing and
otherwise consistent with this Agreement. Seller shall prepare a preliminary
Closing Statement and will deliver it to Buyer at least ten (10) days prior to
the Closing. Buyer shall inform Seller of any questions or disputes within five
(5) days of its receipt of the Statement. If the parties are unable to agree
upon the concepts embodied in the proposed Closing Statement, any disputes will
be resolved by a "Big-Five" accounting firm mutually acceptable to the parties.
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<PAGE>
As soon as practicable after the Closing, Seller shall deliver a final Closing
Statement to Buyer. Any disputes will be resolved as aforesaid.
4. REPRESENTATIONS AND WARRANTIES OF SELLER.
-----------------------------------------
As an inducement for Buyer to enter into this Agreement, Seller represents
and warrants to Buyer that except as set forth on any Disclosure Schedule, each
of the following statements is true and correct as of the date hereof, and shall
be true and correct as of the Closing Date (as such representations and
warranties may be modified or amended pursuant to Section 12.12 hereof):
4.1 Organization, Corporate Power, and Authority. Seller is a corporation
--------------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Delaware. Seller has all requisite corporate power and authority to
own, operate and lease the Assets, to conduct the Racetrack Business and the
Casino Business, to execute and deliver the Transaction Documents to which it is
a party and to perform its respective obligations thereunder.
4.2 Authorization of Agreements. The execution, delivery and performance
---------------------------
by Seller of the Transaction Documents to which it is a party, and the
consummation by it of the Transactions, have been duly authorized by all
necessary corporate action by the Seller. This Agreement has been, and each
other Transaction Document to which Seller is a party will be at the Closing,
duly executed and delivered by Seller, and constitute, or will, when delivered,
constitute, the legal, valid and binding obligations of Seller, enforceable
against Seller in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium, and other similar
laws and equitable principles relating to or limiting creditors' rights
generally.
4.3 Effect of Agreement. The execution, delivery and performance by
-------------------
Seller of the Transaction Documents, and the consummation by it of the
Transactions, will not violate the Certificate of Incorporation or By-laws of
Seller or any judgment, award or decree to which it is a party, or by which
Seller or the Assets are bound, or result in a breach of or constitute (with due
notice or lapse of time or both) a default under, any indenture, agreement or
other instrument, or result in the creation or imposition of any lien, charge,
security interest or encumbrance of any nature whatsoever upon any of the
Assets, except to the extent that (a) the effect thereof is not reasonably
likely to have a Material Adverse Effect, (b) consents may be required under
Seller's loan agreements, including, without limitation, that certain Amended
and Restated Reducing Revolving Loan Agreement, dated as of October 14, 1998, by
and among Seller on the one hand and Bank of America National Trust and Savings
Association as Administrative Agent and the other Banks who are parties thereto
on the other hand (the "Bank of America Loan Agreement"), or (c) consents may be
required for assignment of certain of the Contracts.
4.4 Governmental Approvals. Except as set forth in Schedule 4.4 and
----------------------
except for filings pursuant to the HSR Act, no material approval, authorization,
consent or order or action of or filing with any court, administrative agency or
other governmental authority is required to be obtained by Seller for the
execution and delivery by Seller of the Transaction Documents or the
consummation by it of the Transactions. To the knowledge of Seller,
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<PAGE>
there are no facts relating to the identity or circumstances of Seller that
would prevent or materially delay obtaining any of the required consents.
4.5 Condition of Property and Assets. Except as set forth in Schedule 4.5,
--------------------------------
4.6 or 4.10, to Seller's knowledge, there are no material physical or mechanical
defects in the Casino Building or Improvements on the Land, or in the other
Assets, in each case except ordinary wear and tear and obsolescence.
4.6 Compliance with Laws. Except as set forth in Schedule 4.5, 4.6 or
--------------------
4.10, to Seller's knowledge, the construction of the Improvements and the Casino
Building and the use and operation of the Racetrack Business is (or in the case
of construction was, at the time of such construction) in material compliance
with applicable statutes, codes, ordinances, rules, regulations, requirements,
orders, writs, directives, judgments and decrees (collectively, "Laws") of any
court, commission, tribunal or any governmental agency or authority,
(collectively, "Governmental Authority"), including without limitation, the
regulations and requirements of the Racing Board, the California Department of
Health, the Department of Commerce and Consumer Affairs, the California
Department of Toxic Substances Control, the California Regional Water Control
Board Los Angeles Region, the California State Water Resources Control Board and
the United States Environmental Protection Agency, the City of Inglewood
Building Department and any other county commission or agency, and, to Seller's
knowledge, Seller has received no notice of material non-compliance with any
Laws.
4.7 Utilities. To Seller's knowledge, all material water, sewer, gas,
---------
electric, telephone and all other utilities for the present use and operation of
the Racetrack Business and the Casino Business are installed to the property
lines thereof, are all connected and operating, are adequate to service such
property as presently configured and to permit present usage of such property.
4.8 Improvement Contracts. Except as set forth in Seller's capital budget
---------------------
for the 1999 calendar year attached hereto as Schedule 4.8 (the "Capital
Budget") at Closing, there will be no outstanding Material Contracts made by
Seller for any improvements to the Real Property or the Casino Building, or for
professional services rendered in furnishing plans for, the development of the
Real Property or the Casino Building, which have not been fully paid for, and
Seller shall have discharged all material mechanics' or materialmens, liens
arising from any labor or materials furnished to the Real Property and the
Casino Building prior to Closing. To Seller's knowledge, except as set forth in
the Title Report, no outstanding special assessment or special taxes are due or
pending, which, when imposed, would create a lien on the Real Property or the
Casino Building.
4.9 Reports; Financial Statements; Transaction Financial Statements and
-------------------------------------------------------------------
Balance Sheet. Seller has previously furnished or made available to Buyer true
- ------- -----
and complete copies of each effective registration statement, report, proxy
statement or information statement prepared and filed with Commission by it
since December 31, 1997, including (i) the Company's Annual Reports on Form 10-K
for the years ended December 31, 1997 and December 31, 1998, (ii) the Company's
Proxy Statements for its 1998 and 1999 annual meetings of stockholders, and
(iii) the Company's Registration Statement on Form S-4 dated March 26, 1999 and
any amendments thereto filed prior to the date hereof (collectively,
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<PAGE>
including any such reports and documents filed subsequent to the date hereof,
the "SEC Reports"), as filed with the Commission. As of their respective dates,
the SEC Reports did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading with respect to the Racetrack Business or the Assets. The
audited consolidated financial statements and unaudited interim financial
statements of Seller included in the SEC Reports have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis (except as may be indicated therein or in the notes thereto) and fairly
present the financial position of Seller as at the dates thereof and the results
of its operations and changes in financial position for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
year-end audit adjustments and any other adjustments described therein. The
Transaction Financial Statements and Balance Sheet has been, and the monthly
financial information to be delivered pursuant to Section 6.3 will be, prepared
in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes thereto),
and present fairly the financial position of Seller as of the date thereof and
the results of its operations for the period covered by such financial statement
and balance sheet, subject to normal year-end audit adjustments and any other
adjustments described therein.
4.10 Hazardous Substances. Except as set forth on Schedule 4.5, 4.6, 4.10
--------------------
or 4.17, (a) to Seller's knowledge, neither the Real Property nor the Casino
Building (including, without limitation, the subsurface soil and the ground
water thereunder) contain any material amount of any Hazardous Substance, or any
active or abandoned underground storage tank, (b) Seller has no knowledge of any
past generation, transportation, storage, treatment or disposal of any material
amount of any Hazardous Substance on the Real Property or the Casino Building;
(c) Seller has no knowledge of any actual or threatened claims or demands by any
third party or employee with regard to releases of, or exposures to, Hazardous
Substances, (d) Seller has no knowledge of any off-site disposal of any material
amount of any Hazardous Substance, and (e) to Seller's knowledge, Seller has
delivered to Buyer copies of all environmental reports in its possession
relating to the Real Property and the Casino Building.
4.11 Leases. Except as set forth on Schedule 4.11, there are no Leases or
------
other agreements relating to the possession or occupancy of any portion of the
Real Property or the Casino Building.
4.12 "Foreign Person" Status. Seller is not a "foreign person" within the
-----------------------
meaning of (S)1445 of the Internal Revenue Code of 1986, as amended (the
"Internal Revenue Code").
4.13 Eminent Domain; Zoning; Street Changes; Other Litigation. Except as
--------------------------------------------------------
set forth in Schedule 4.13, to Seller's knowledge, there are no actions,
litigation or proceedings pending, contemplated or threatened to take all or any
portion of the Real Property or the Casino Building, or any interest therein, by
eminent domain or to modify the zoning of, the Real Property or the Casino
Building.
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<PAGE>
4.14 Absence of Certain Changes or Events. Except in the ordinary course
------------------------------------
of business, consistent with past practice, or as disclosed on the Transaction
Financial Statements and Balance Sheet, or as contemplated hereunder, since
December 31, 1998, Seller has not with respect to the Racetrack Business or the
Assets:
4.14.1 Material Obligations. Incurred any material obligation or
--------------------
liability (fixed or contingent), except normal trade or business obligations and
liabilities incurred in the ordinary course of business and obligations and
liabilities in connection with the Transactions;
4.14.2 Discharge or Satisfaction of Liens. Discharged or satisfied
----------------------------------
any material lien, security interest or encumbrance or paid any material
obligation or liability (fixed or contingent), other than pursuant to the terms
of such obligation;
4.14.3 Additional Liens. Mortgaged, pledged or subjected to any
----------------
material lien, security interest or other encumbrance any of the Assets;
4.14.4 Acquisition or Disposition of Assets. Transferred, leased or
------------------------------------
otherwise disposed of any portion of the Assets;
4.14.5 Compromise of Debts or Claims. Canceled or compromised any
-----------------------------
debt or claim;
4.14.6 Waiver of Material Rights. Waived or released in writing any
-------------------------
rights of value to the Racetrack Business or the Assets;
4.14.7 Rights in Licenses, Trademarks, Patents. Transferred or
---------------------------------------
granted any rights under any Intellectual Property Rights;
4.14.8 Employee Compensation. Made or granted any material wage or
---------------------
salary increase to any Racetrack Employees, entered into any written employment
contract with any officer of Seller working exclusively for the Racetrack
Business or Racetrack Employee or made any material loan to, or entered into any
material transaction of any other nature with, any officer of Seller working
exclusively for the Racetrack Business or Racetrack Employee. Seller has made
available to Buyer the salary and benefits information relative to the employees
of Seller relating to the Racetrack Business;
4.14.9 Material Contracts. Entered into any Material Contract,
------------------
except for (i) Contracts listed in Schedule 4.16, (ii) the Transaction
Documents, and (iii) sales or purchases in the ordinary course of business;
4.14.10 Casualty Loss. Experienced any material damage, destruction
-------------
or loss (whether or not covered by insurance) to the Assets;
4.14.11 Material Adverse Change. Experienced any adverse change in
-----------------------
the financial condition, business, results of operations, properties or assets
of the Racetrack Business or the Assets that would reasonably be likely to
result in a Material Adverse Effect other than any such adverse change which
results from economic conditions which generally affect the industry in which
the Company operates or from economic conditions generally;
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<PAGE>
4.14.12 Accounting. Changed its accounting principles, methods or
----------
practices or in the manner it keeps its books and records or changed its current
practices with regards to sales, receivables, payables or accrued expenses; or
4.14.13 Capital Expenditures. Incurred any single capital
--------------------
expenditure or commitment materially inconsistent with the Capital Budget.
4.15 Title to Assets, Absence of Liens and Encumbrances. Seller has, or
--------------------------------------------------
at the time of the Closing will have, good and valid title to all of the Assets
(except for leased Assets), in each case free and clear of all mortgages, liens,
charges, security interests or other encumbrances of any nature whatsoever,
other than (a) liens for taxes not yet due, (b) liens in the ordinary course of
business consistent with past practice, (c) matters disclosed by the Title
Report, Survey and any supplements thereto or otherwise of record, and (d)
matters which would be disclosed by a physical inspection of the Assets.
4.16 Material Contracts. Schedule 4.16 sets forth each executory Contract
------------------
(collectively, the "Material Contracts") (a) that obligates Seller to pay an
amount of $100,000 or more and which cannot be terminated at any time without
material penalty, (b) that has an unexpired term as of the date hereof of one
(1) year or more and which cannot be terminated prior to each expiration without
material penalty; (c) by which any material portion of the Assets are bound; or
(d) is a written employment agreement or collective bargaining agreement.
Seller has made available to Buyer true and complete copies of all written
Contracts, together with all amendments thereto, and accurate descriptions of
all oral Contracts, listed, or required to be listed, on Schedule 4.16. To
Seller's knowledge, neither Seller nor the other parties thereto is in material
breach of any such Material Contract, each Material Contract is valid and
enforceable in accordance with its terms for the periods stated therein, and
there is not under any such Material Contract any existing material default
(including, but not limited to, any payment default) or event of material
default or event that, with notice or lapse of time or both, would constitute
such a material default. Seller has paid or accrued for, or will pay or accrue
for prior to the Closing, all amounts due and owing prior to the Closing under
the Assigned Contracts requiring the payment of a specific sum(s) of money on a
specific date(s) or as the result of a specific occurrence(s). In addition,
Seller has received all amounts due and owing it from the other parties to the
Assigned Contracts requiring the payment of a specific sum(s) of money on a
specific date(s) or as the result of a specific occurrence(s) (except to the
extent such amounts are reflected as Accounts Receivable).
4.17 Litigation. To Seller's knowledge, except as disclosed in Schedule
----------
3.4.3, 4.5, 4.6, 4.10 or 4.17, there is no material legal, administrative,
arbitration or other proceeding, claim, action, or governmental or regulatory
investigation of any nature pending or, to the knowledge of Seller, threatened
against or affecting the Assets.
4.18 Assets. To Seller's knowledge, the Assets constitute all of the
------
assets and properties used by, and materially necessary for the operation of,
the Racetrack Business and the Casino Business as of the date of the Transaction
Financial Statements and Balance Sheet, except as to Assets sold, disposed of or
consumed in the ordinary course of business since such date and the Excluded
Assets.
-22-
<PAGE>
4.19 Commissions. Neither the Seller nor any of its directors, officers,
-----------
employees or agents have employed or incurred any liability to, any broker,
finder or agent for any brokerage fees, finder's fees, commissions or other
amounts with respect to the Transactions.
4.20 Labor Relations. To Seller's knowledge, except as set forth in
---------------
Schedule 4.20, (a) there is no material unfair labor practice charge or
complaint or union or employee grievance or arbitration against Seller pending,
or, to Seller's knowledge, threatened in writing against Seller; (b) there is no
labor strike, dispute, slowdown or stoppage threatened or, to Seller's
knowledge, pending against Seller; (c) there is no representation claim or
petition pending before the National Labor Relations Board; (d) there are no
collective bargaining agreements applicable to the Racetrack Employees of
Seller; and (e) there has been no material work stoppage during the past five
(5) years.
4.21 Severance Obligations. The consummation of the Transactions will not
---------------------
entitle any current or former Racetrack Employee to severance payment by Buyer,
provided that Buyer complies with the provisions of Section 11.2.1 hereof.
4.22 Employee Benefit Plans. To Seller's knowledge, there are no liens
----------------------
the Assets under Section 412(n) of the Code or Sections 302(f) or 4068 of ERISA.
To Seller's knowledge, except as set forth on Schedule 4.16, neither Seller nor
any corporation, trade, business or other entity under common control with
Seller, within the meaning of Sections 414(b), (c), (m) or (o) of the Code, or
under Section 4001 of ERISA (an "ERISA Affiliate") is or was obligated to
contribute to any multi-employer plan within the meaning of Section 3(37) of
ERISA or any plan subject to Title IV of ERISA. From and after Closing, except
pursuant to applicable collective bargaining agreements, pursuant to an
agreement with, or membership in, the California Racetrack Federation
Association or as provided in this Agreement, Buyer will have no obligation to
contribute to, or any liability in respect of, any "Employee Benefit Plan" (as
such term is defined below) sponsored or maintained by Seller or any ERISA
Affiliate, or to which Seller or any ERISA Affiliate was obligated to
contribute. Neither any applicable collective bargaining agreement nor any
agreement with, or membership in, the California Racetrack Federation
Association, would require Buyer to contribute after the Closing to any employee
benefit plan as defined in Section 3(3) of ERISA to which only one employer
contributes directly or indirectly (with the number of contributing employers
being determined under Sections 414(b), (c), (m), (n) and (o) of the Code). The
Seller and its ERISA Affiliates will not, in connection with the transactions
contemplated by this Agreement, cease to provide any group health plan coverage
to their employees in a manner which would cause Buyer to be deemed a successor
employer of such Seller or its ERISA Affiliates within the meaning of Proposed
Treasury Regulations Section 54.4980B-9 Q&A8(c). For purposes of this
Agreement, the term "Employee Benefit Plan" means (i) any employee benefit plan
within the meaning of Section 3(3) of ERISA, or (ii) any similar employment,
severance or other arrangement or policy (whether written or oral) providing for
insurance coverage (including self-insured arrangements), workers' compensation,
disability benefits, supplemental unemployment benefits, vacation benefits,
fringe benefits, or retirement benefits, or for profit sharing, deferred
compensation, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post-retirement insurance, compensation or benefits.
-23-
<PAGE>
4.23 Guaranties. Except as set forth on Schedule 4.23, there are no
----------
guaranties, letters of credit or performance bonds with respect to any
obligations or liabilities of the Racetrack Business.
4.24 Foreign Corrupt Practices Act. To Seller's knowledge, Seller has not,
-----------------------------
directly or indirectly, used any corporate funds for unlawful contributions,
gifts, entertainment or other unlawful expenses relating to political activity,
made any unlawful payment to foreign or domestic government officials or
employees or to foreign or domestic political parties or campaigns from
corporate funds, violated any provision of the Foreign Corrupt Practices Act of
1977, as amended, or made any bribe, rebate, payoff, influence payment, kickback
or other similar unlawful payment.
4.25 Affiliate Transactions. Except as disclosed in the SEC Reports or as
----------------------
disclosed in Schedule 4.25, there are no Contracts, liabilities, transactions or
relationships that would be required to be disclosed by the Seller by Item 404
of Regulation S-K.
4.26 Year 2000. Except as set forth in the SEC Reports, Seller, to its
---------
knowledge, has taken all actions necessary and appropriate to confirm that there
shall be no material adverse change to the Racetrack Business's business or
electronic systems or material interruptions in the Racetrack Business by reason
of the advent of the year 2000; provided, however, no representation or warranty
is being made with respect to Seller's systems suppliers.
4.27 Intellectual Property Rights. To Seller's knowledge:
----------------------------
(a) Section (a) of Schedule 4.27 contains a complete and correct list
of all: (i) U.S., state, and foreign trademark, service mark, and trade name
registrations and applications owned by--or, for applications, filed on behalf
of--Seller that are material to the Racetrack Business, or that contain the
phrase HOLLYWOOD PARK or a substantially similar phrase, including an
identification of the mark at issue, the registration or application number, the
registration date (if applicable), and the class and description of the related
goods or services; and (ii) all other trademarks, service marks, or trade names
that are owned by Seller and material to the Racetrack Business.
(b) Section (b) of Schedule 4.27 contains a complete and correct list
of all: (i) U.S. and foreign copyright registrations and applications owned by--
or, for applications, filed on behalf of--Seller that are used or held for use
principally in connection with the Racetrack Business, including an
identification of the title and nature of the work at issue and its registration
number (if applicable); and (ii) major categories of materials, other than
computer programs, that are likely to be protected by copyright laws, owned by
Seller and material to the Racetrack Business.
(c) Section (c) of Schedule 4.27 contains a complete and correct list
of all U.S. and foreign patent registrations and applications owned by--or, for
applications, filed on behalf of--Seller that are material to the Racetrack
Business, including an identification of the title and nature of the work and
its registration or application number.
-24-
<PAGE>
(d) Section (d) of Schedule 4.27 contains a complete and correct list
of all trade secrets and confidential or other proprietary information
(including customer lists and customer databases) that are owned by Seller and
material to the Racetrack Business.
(e) Section (e) of Schedule 4.27 contains a complete and correct list
of all computer programs owned by, or licensed to, Seller that are material to
the Racetrack Business.
(f) Except as set forth on Schedules 2.2.9 and 2.2.10, Section (f) of
Schedule 4.27 contains a complete and correct list of all: (i) agreements
granting Seller the right to use any Intellectual Property Rights material to
the Racetrack Business; (ii) all agreements by which Seller has licensed third
parties any of the Intellectual Property Rights assigned to Buyer hereunder; and
(iii) all other agreements or obligations of any sort limiting the use of or
otherwise impacting any of the Intellectual Property Rights assigned to Buyer
hereunder. Except as identified on Schedule 4.27, the agreements identified in
Section (f) of Schedule 4.27 are valid and binding obligations of Seller,
enforceable in accordance with their terms, and neither Seller nor any other
Person party thereto is in default thereunder.
(g) Except as set forth in Section (g) or elsewhere in Schedule 4.27:
(i) no claim is pending or threatened to the effect that the present or past use
of the Intellectual Property Assets by Seller infringes upon, or conflicts with,
the rights of another Person; (ii) Seller's current use, sale, or licensing of
the Intellectual Property Assets does not infringe upon or violate any rights of
another Person; (iii) no Person is infringing upon Seller's rights in and to the
Intellectual Property Assets; (iv) none of the Intellectual Property Assets are
subject to any outstanding order, judgment, decree, or stipulation restricting
the use thereof by Seller, or restricting the licensing thereof by Seller; and
(v) the consummation of the transactions contemplated hereby will not result in
the loss or impairment of any Intellectual Property Asset, except as may be
provided in any licenses or other agreements by which Seller holds any third-
party Intellectual Property Rights.
(h) Except as set forth in Section (h) of Schedule 4.27, Seller is
not currently obligated to make royalty or other payments to any owner of,
licensor of, other claimant to, or any other Person regarding any Intellectual
Property Assets.
(i) Except as set forth on Schedules 2.2.9 and 2.2.10, the
Intellectual Property Assets include all Intellectual Property Rights which are
owned or used by Seller and material to the conduct of the Racetrack Business in
the manner that the Racetrack Business has heretofore been conducted.
(j) Except as identified otherwise on Schedule 4.27, (i) the
registrations listed on Schedule 4.27 are valid and subsisting in full force and
effect and have not expired or been canceled or abandoned; (ii) there is no
pending or threatened, opposition, interference, cancellation, or other legal or
governmental action or proceeding before any court or registration authority
with respect to the registrations listed on Schedule 4.27; and (iii) Seller is
the sole and exclusive owner of all the Intellectual Property Assets identified
on Schedule 4.27 other than those third-party Intellectual Property Rights
licensed to Seller and identified in Section (f) of Schedule 4.27.
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<PAGE>
5. REPRESENTATIONS AND WARRANTIES OF BUYER.
----------------------------------------
As an inducement for Seller to enter into this Agreement, Buyer represents
and warrants to Seller that each of the following statements is true and correct
as of the date hereof, and shall be true and correct as of the Closing Date (as
such representations and warranties may be modified or amended pursuant to
Section 12.12 hereof):
5.1 Organization, Corporate Power and Authority. Buyer is a corporation
-------------------------------------------
duly organized, validly existing and in good standing under the laws of the
State of Kentucky and is duly qualified to do business as a foreign corporation
in the jurisdictions in which Buyer conducts its business, except where the
failure so to qualify will not have a material adverse effect on Buyer's ability
to perform its obligations under the Transaction Documents and, after the
Closing, to use the Assets and operate the Racetrack Business. Buyer has all
requisite corporate power and authority to acquire, own, lease and operate the
Assets, to conduct the Racetrack Business and to execute and deliver the
Transaction Documents to which it is a party and to perform its obligations
thereunder.
5.2 Authorization of Agreement. The execution, delivery and performance
--------------------------
by Buyer of the Transaction Documents to which it is a party, and the
consummation by it of the Transactions, have been duly authorized by all
necessary corporate action by Buyer. This Agreement has been, and each other
Transaction Document to which Buyer is a party will be at the Closing, duly
executed and delivered by Buyer and constitute, or will, when delivered,
constitute, the legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws and equitable principles relating to or limiting creditors' rights
generally.
5.3 Effect of Agreement. The execution, delivery and performance by Buyer
-------------------
of the Transaction Documents to which it is a party, and the consummation by it
of the Transactions, will not violate the Certificate of Incorporation or By-
laws of Buyer or any judgment, award or decree or any material indenture,
material agreement or other material instrument to which Buyer is a party, or by
which Buyer or its properties or assets are bound, or conflict with, result in a
breach of or constitute (with due notice or lapse of time or both) a default
under, any such indenture, agreement or other instrument, or result in the
creation or imposition of any lien, charge, security interest or encumbrance of
any nature whatsoever upon any of the properties or assets of Buyer, except to
the extent the effect thereof will not be materially adverse to Buyer's ability
to fulfill its obligations under the Transaction Documents to which it is a
party and, after the Closing, to use the Assets and operate the Racetrack
Business.
5.4 Approvals. Except as set forth in Schedule 5.4 and except for filings
---------
pursuant to the HSR Act, no approval, authorization, consent or order or action
of or filing with any court, administrative agency or other governmental
authority is required to be obtained by Buyer for the execution and delivery by
Buyer of the Transaction Documents to which it is a party or the consummation by
it of the Transactions. Buyer has received all required consents from its
lender(s) necessary for Buyer to execute this Agreement and consummate the
Transactions. To the knowledge of Buyer, there are no facts relating to the
-26-
<PAGE>
identity or circumstances of Buyer that would prevent or materially delay
obtaining any of the required consents.
5.5 Commissions. Except for CIBC Oppenheimer, whose fees shall be Buyer's
-----------
sole responsibility, neither Buyer nor any of its directors, officers, employees
or agents have employed, or incurred any liability to, any broker, finder or
agent for any brokerage fees, finder's fees, commissions or other amounts with
respect to the Transactions.
5.6 Financing. Buyer has sufficient funds available (through existing
---------
credit arrangements) to consummate the Transactions. To the extent Buyer's
internal financing sources become unavailable, Buyer will promptly arrange for
alternate financing for the Transactions, which financing will be in place in
time to permit the Closing to occur on August 31, 1999.
5.7 Buyer's Investigation. Buyer is an experienced investor in real
---------------------
estate and a sophisticated operator of racing tracks and will make its own
investigation and analysis of the Real Property and Assets as Buyer deems
necessary with respect to the condition, suitability, compliance with law, and
prospects for future development of the Real Property and Assets for Buyer's use
and all other aspects of this Transaction. Buyer will rely upon its own (and its
consultants') inspections, investigations and analyses of the Real Property and
other Assets, and, with the exception of only those express representations and
warranties of Seller (as modified by the results of Buyer's inspections and
investigations) set forth herein, upon which Buyer shall be entitled to rely,
Buyer will not rely in any way upon any representations, statements, agreements,
warranties, studies, reports, descriptions, guidelines or other information or
material furnished by Sellers or its representatives, whether oral or written,
express or implied, of any nature whatsoever regarding any such matters it being
expressly acknowledged that Seller has not verified the accuracy or completeness
of any such information or the qualification of the persons preparing such
information. Buyer acknowledges that Seller has not made any representations or
warranties regarding the condition or suitability of the Assets, except as
expressly set forth in this Agreement.
6. COVENANTS OF SELLER.
--------------------
6.1 Real Property Matters.
---------------------
6.1.1 Resubdivision. Seller shall promptly and diligently process
-------------
the approval of such lot line adjustments, parcel maps and/or tentative maps and
related approvals and conditions as may be approved or required by the City of
Inglewood, and the finalization and/or recordation thereof, pursuant to which
the Casino Building and the Real Property, on the one hand, and the "Remainder
Parcels" on the other hand, will be legally subdivided into separate legal
parcels substantially as outlined on Exhibit A hereto (the "Resubdivision"). All
costs associated with the preparation, processing and recordation of the
Resubdivision shall be borne by Seller.
6.1.2 Survey. Buyer acknowledges that Seller has heretofore
------
delivered to Buyer a copy of that certain ALTA ACSM Land Title Survey of the
Casino Building, the Real Property and the Remainder Parcels, prepared by Psomas
& Associates and dated February 14, 1997 (the "Survey"). Seller shall promptly
cause the Survey to be
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<PAGE>
supplemented at such time as the Preliminary Title Report is issued and when the
Resubdivision is in final form to reflect the subdivision of subject real
property. All costs of preparation of the Survey and supplements thereto shall
be borne by Seller.
6.1.3 Preliminary Title Report.
------------------------
(a) Within ten (10) days following mutual execution of this
Agreement, Seller shall request First American Title Insurance Company
(the "Title Company"), to prepare a preliminary title report with
respect to the Casino Building, the Real Property and the Remainder
Parcels setting forth the legal description of the Casino Building and
Real Property together with the Remainder Parcels and containing such
exceptions as the Title Company would specify in an American Land
Title Association ("ALTA") form of owner's policy of title insurance
and to deliver said preliminary title report to Buyer and Seller and,
in addition, to deliver to Buyer and Seller legible copies of all
documents of record or in its possession identified as exceptions in
said preliminary title report (such preliminary title report and
legible copies of documents are hereinafter collectively referred to
as the "Preliminary Title Report").
(b) Buyer may, not later than fifteen (15) days following the
date of its receipt of the Preliminary Title Report (and also not
later than fifteen (15) days following the date of Buyer's receipt of
any supplemental Survey or Preliminary Title Report modifying the
legal description of the Casino Building or Real Property or
containing exceptions not contained on the original Preliminary Title
Report and not caused by Buyer, together with legible copies of all
documents identified as additional exceptions in Schedule B of the
Preliminary Title Report), give written notice to Seller disapproving
any items shown in the Survey or specified or identified in said
Preliminary Title Report or supplemental Survey or Preliminary Title
Report, and identifying the items disapproved. If Buyer does not
timely give notice of disapproval as aforesaid, then Buyer shall be
deemed to have approved all items on the Survey, Preliminary Title
Report and any supplementals thereto, as the case may be.
(c) If Buyer shall timely give notice of disapproval as
aforesaid, Seller shall, within ten (10) days after the receipt of
such notice, advise Buyer of (i) those matters which Seller agrees to
use reasonable efforts to remove at Seller's cost and expense, and
(ii) those matters which Seller is unable or unwilling to remove. If
Seller is unable or unwilling to remove any such exception, Seller
shall not be in default hereunder as a result hereof, and Buyer's sole
remedy shall be to terminate this Agreement by written notice
delivered to Seller within ten (10) business days after Seller has
notified Buyer in writing of Seller's inability or unwillingness to
remove such exception.
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<PAGE>
6.2 Conduct of Racetrack Business. During the period from the date hereof
-----------------------------
to the Closing Date, unless Buyer consents otherwise in writing (which consent
shall not be unreasonably withheld), Seller shall:
6.2.1 Ordinary Course. Conduct the Racetrack Business only in the
---------------
ordinary course consistent with past practice, except as contemplated by this
Agreement;
6.2.2 Preservation of Goodwill. Use reasonable efforts to preserve
------------------------
the goodwill of those of its suppliers, customers and distributors having
business relations with the Racetrack Business;
6.2.3 Maintain Insurance. Maintain any insurance coverage existing
------------------
as of the date hereof against loss or damage to the Assets;
6.2.4 Sale of Assets. Not transfer or encumber any of the Assets
--------------
except for any transfer or encumbrance in the ordinary course of business;
6.2.5 Maintenance of Assets. Maintain the Assets, in the aggregate,
---------------------
in a condition comparable to their current condition, reasonable wear, tear and
depreciation excepted, and except for Assets disposed of, sold or consumed in
the ordinary course of business;
6.2.6 Assigned Contracts. Not materially amend any Assigned Contract
------------------
or be in default under any Material Contract (other than to the extent that the
execution of this Agreement and the consummation of the Transactions may or may
be alleged to constitute a default under any Material Contract);
6.2.7 Employment Contracts. Except for "stay bonuses" or special
--------------------
severance agreements to be paid by Seller, not materially increase the
compensation or other remuneration of any of Seller's current officers working
exclusively in the Racetrack Business or key Racetrack Employees; and
6.2.8 Collective Bargaining Agreements. Not enter into new or amend
--------------------------------
any existing collective bargaining agreements unless the terms of such agreement
or amendment as an entirety are not materially less favorable to the Racetrack
Business than the previous applicable agreement.
6.3 Access. Seller will (a) during ordinary business hours and upon
------
reasonable notice from Buyer, permit Buyer and its authorized representatives to
have access to all Assets in order to make such inspections, tests, and
investigations as Buyer shall deem appropriate, (b) furnish, as soon as
reasonably practicable, to Buyer or its authorized representatives such other
information in Seller's possession with respect to the Assets as Buyer may from
time to time reasonably request (including monthly financial information
relating to the Racetrack Business as soon as practicable after the end of each
calendar month), and (c) otherwise reasonably cooperate in the examination or
audit of the Racetrack Business by Buyer. Without prior notice to Seller, Buyer
shall not be entitled or permitted to perform or cause to be performed any
invasive actions or any drilling. Buyer shall not initiate any inquiry or
request (including any inquiry or request relating to any zoning variance,
zoning change or conditional use permit) directed at any governmental official
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with respect to the Real Property; provided, however, that nothing in this
clause shall be deemed to prevent Buyer from inspecting or reviewing any or all
records of any federal, state, or local governmental authority. Buyer shall
immediately repair any and all damage resulting from the acts or omissions of
Buyer or Buyer's agents, employees, contractors, representatives or
subcontractors relating to the whole or any part of the Real Property. Buyer
shall indemnify, defend and hold Seller harmless from and against any and all
claims and liens arising out of the respective activities of Buyer and its
authorized representatives in and about the Real Property prior to the Closing
or earlier termination of this Agreement.
6.4 No Solicitation. Except as provided in this Section 6.4, Seller shall
---------------
not, and Seller shall cause its Affiliates and the respective officers,
directors, employees, investment bankers, attorneys, accountants and other
representatives and agents (collectively, "Representatives") of Seller and its
Affiliates not to, directly or indirectly, initiate, solicit, encourage or
participate in negotiations or discussions relating to, or provide any
information to any person concerning, or take any action to facilitate the
making of, any offer or proposal which constitutes or is reasonably likely to
lead to any Subject Business Transaction Proposal (as defined below), or any
inquiry with respect thereto, or agree to approve or recommend any Subject
Business Transaction Proposal. For purposes of this Agreement, "Subject Business
Transaction Proposal" shall mean any proposal (other than any proposal by Buyer
or its Affiliates) regarding any sale, lease, exchange, transfer or other
disposition of all or a substantial portion of the Racetrack Business or the
Assets.
6.5 Consents. As promptly as practicable after the date hereof, Seller
--------
shall make all required filings with governmental bodies and other regulatory
authorities, and use all reasonable efforts to obtain all permits, approvals,
authorizations and consents of all third parties, required for Seller to
consummate the Transactions. Seller shall furnish promptly to Buyer all
information that is in Seller's possession and not otherwise available to Buyer
that Buyer may reasonably request in connection with any such filing to be made
by Buyer. Seller and Buyer shall use reasonable efforts to obtain such consents
to the assignment of the Contracts as may be required. Notwithstanding anything
herein to the contrary, the parties hereto acknowledge and agree that at the
Closing, Seller will not assign to Buyer any Contract that by its terms
requires, prior to such assignment, the consent of any other contracting party
thereto unless such consent has been obtained prior to the Closing Date. With
respect to each such Contract not assigned on the Closing Date, after the
Closing Date, Seller shall continue to deal with the other contracting
party(ies) to such Contract as the prime contracting party, and Buyer and Seller
shall use reasonable efforts to obtain the consent of all required parties to
the assignment of such Contract. Such Contract shall be promptly assigned by
Seller to Buyer after receipt of such consent after the Closing Date, and
thereafter shall be deemed to be an Assigned Contract for all purposes
hereunder. If (i) such consent, waiver or confirmation is not obtained with
respect to any such Contract and (ii) notwithstanding the provisions of Section
8.1.10, Buyer shall elect to consummate the Closing, Seller and Buyer shall
cooperate in an arrangement reasonably satisfactory to Buyer and Seller under
which Buyer would obtain, to the extent practicable, the claims, rights and
benefits and assume the corresponding obligations thereunder in accordance with
this agreement, including subcontracting, sub-licensing or sub-leasing to Buyer,
or under which Seller would enforce for the benefit of Buyer, with Buyer
assuming Seller's obligations, any and all claims, rights and benefits of Seller
against a third party thereto. Seller will promptly pay to Buyer when received
all monies received by Seller under any
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Asset or any claim, right or benefit arising thereunder not transferred to Buyer
pursuant to this Section 6.5.
6.6 Collective Bargaining Agreements. Seller has four collective
--------------------------------
bargaining agreements which either have expired or will expire prior to the
Closing Date and are or will be subject to negotiations with the following
respective unions (the "Unions") for a new agreement: (a) Hotel Employees &
Restaurant Employees, Local 11 (expired September 30, 1998), (b) International
Brotherhood of Electrical Workers, Local 45 (expired April 23, 1999), (c)
Graphic Communications International Union, Local 404 (expired April 30, 1999)
and (d) Teamsters, Local 495 (expires June 30, 1999). If the negotiation of a
new collective bargaining agreement with any of the above Unions results in any
retroactive pay increase, benefit contribution increase, or any other
retroactive adjustments for the period prior to the Closing Date or if any lump
sum bonus or other similar payment is agreed to in lieu of such retroactive
increase, then Seller will be responsible for paying the cost of any such
retroactive increase or adjustment for the period prior to the Closing Date and
for any such lump sum bonus or other similar payment agreed to in lieu of such
retroactive increase applicable to the period prior to the Closing. Seller shall
keep Buyer informed promptly of the status of negotiations with respect to new
collective bargaining agreements with the Unions and, at Buyer's option, a
representative of Buyer may participate in such negotiations.
7. COVENANTS OF BUYER.
-------------------
7.1 Permits and Consents. As promptly as practicable after the date
--------------------
hereof, Buyer will make all filings with governmental bodies and other
regulatory authorities necessary in connection with the Transactions, and use
all reasonable efforts to obtain all permits, licenses, approvals,
authorizations and consents of all third parties, required for Buyer to
consummate the Transactions. Buyer shall promptly furnish to Seller all
information that is in Buyer's possession and not otherwise available to Seller
which Seller may reasonably request in connection with any such filing to be
made by Seller.
7.2 Access to Books and Records. Except as otherwise provided herein,
---------------------------
Buyer shall maintain for at least seven (7) years all original books, records,
files, documents, papers and agreements pertaining to the Assets, the Assumed
Liabilities or to the Racetrack Business before the Closing. After the Closing,
Buyer shall provide Seller and its representatives, during ordinary business
hours and upon reasonable notice from Seller, with reasonable access to such
original documents. If, at any time, Buyer proposes to dispose of any of such
original documents, Buyer shall first provide Seller with 60 days written notice
of such proposal and shall offer to deliver the original documents it wishes to
dispose of to Seller at the expense of Seller. At the end of such 60 day period,
Buyer may, without liability to Seller, dispose of any such original documents
which Seller has not informed Buyer in writing that it desires to recover.
7.3 Cooperation in Third-Party Litigation. After the Closing, Buyer shall
-------------------------------------
provide such cooperation as Seller or its counsel may reasonably request in
connection with (a) any proceedings for which Buyer may be entitled to
indemnification from Seller under Section 9.2 hereof; and (b) the Excluded
Liabilities. Such cooperation shall include, but not be limited to: (i) making
available at the reasonable request of Seller or its counsel and
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permitting Seller and its counsel, to make and retain copies of, any and all
documents in the possession of or otherwise available to Buyer and allowing
Seller to make inspections of the Real Property and the Casino Building; (ii)
making available upon the reasonable request of Seller or its counsel, employees
and other persons within the control of or available to Buyer to consult with
and assist Seller and its counsel and to prepare for and testify in connection
with any proceedings, including depositions, trials and arbitration proceedings;
and (iii) making available at the reasonable request of Seller or its counsel
such other resources as may be within the control of or available to Buyer.
Seller shall reimburse Buyer for Buyer's reasonable, documented out-of-pocket
expenses incurred (including such items as travel costs, and reasonable
attorneys' fees but not including any employee salaries or overhead) in
connection with fulfilling its obligations under this Section 7.3.
7.4 Cooperation Regarding Resubdivision and Future Development.
----------------------------------------------------------
(a) Buyer shall provide such cooperation as Seller or its
counsel may reasonably request in connection with the processing and
recordation of the Resubdivision. Seller shall provide Buyer with
copies of any maps, applications, reports, data and filings provided
by Seller to the City of Inglewood in connection therewith and shall
reimburse Buyer for its out of pocket costs, reasonably incurred.
(b) Seller hereby covenants and agrees to and for the benefit
of Buyer that Seller shall use commercially reasonable efforts to
cause any blasting or major earth moving (not to include surface
grading or landscaping), conducted on the Remainder Parcels in
connection with any improvements or development thereon, to be
conducted at such times and in such a manner so as to mitigate the
impact on the business operations of the Buyer on the Land. In the
event of any future development on the Land, Buyer hereby covenants
and agrees to and for the benefit of Seller, that Buyer shall use
commercially reasonable efforts to cause any blasting or major earth
moving (not to include surface grading or landscaping) conducted by
Buyer on the Land in connection therewith, to be conducted at such
times and in such a manner so as to mitigate the impact or the
business operations of Seller on the Remainder Parcels.
(c) Buyer shall provide cooperation to Seller in connection
with Seller's development of the Remainder Parcels provided that the
action, if any, requested of Buyer by Seller shall be at no cost or
expense to Buyer and provided further that nothing herein contained
shall require Buyer to take any action (nor shall Buyer be precluded
from taking any such action) if and to the extent Buyer reasonably
believes that the proposed development could have a material adverse
effect on the use, value or utility of the Assets.
(d) Seller shall provide cooperation to Buyer in connection
with any future development by Buyer on the Land provided that the
action, if any, requested of Seller by Buyer shall be at no cost or
expense to Seller and provided further that nothing herein contained
shall require Seller to take any action (nor shall Seller be precluded
from taking any such action) if and to
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the extent that the proposed development could have a material adverse
effect on the use, value or utility of the Remainder Parcels.
8. CONDITIONS PRECEDENT.
---------------------
8.1 Conditions Precedent to Obligations of Buyer. The obligations of
--------------------------------------------
Buyer under this Agreement are subject, at the option of Buyer, to the
satisfaction or waiver of each of the following conditions on or prior to the
Closing Date:
8.1.1 Resubdivision. The Resubdivision shall have been effectuated
-------------
as required by law through recordation or otherwise, which Resubdivision and all
conditions, if any, affecting the Assets shall be in form and substance
reasonably acceptable to Buyer.
8.1.2 Title to Real Property. Buyer shall have obtained the
----------------------
unconditional commitment of the Title Company to issue its ALTA form of owner's
policy of title insurance (the "Title Policy") in favor of Buyer insuring Buyer
as the fee owner of the Real Property and the Casino Building in the amount of
the portion of the Purchase Prices allocated to each of the Real Property and
the Casino Building, subject to no exceptions except: (a) the exceptions
approved by Buyer pursuant to Section 6.1.3; (b) property taxes for the current
fiscal year not yet payable; (c) the Casino Lease, the Casino Sublease and the
Office Lease; and (d) such other exceptions as may have been approved in writing
by Buyer or imposed upon the Real Property or the Casino Building by Buyer, with
endorsements, reinsurance and direct access agreements as reasonably required by
Buyer.
8.1.3 HSR Act. All waiting periods under the HSR Act shall have
-------
expired or terminated.
8.1.4 Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of Seller contained in this Agreement or in any
certificate delivered to Buyer pursuant hereto shall be true and correct on and
as of the Closing Date as though made at and as of that date (except where such
representation and warranty is made as of a date specifically set forth therein)
and Seller shall have delivered to Buyer a certificate to that effect. If Seller
has amended any representation or warranty as contemplated by Section 12.12,
such representation or warranty, as so amended, shall not constitute a Material
Adverse Effect (which for purposes of this Section only shall mean $250,000
individually or in the aggregate).
8.1.5 Financial Statements. Buyer's receipt of December 31, 1998
--------------------
audited financial statements of Seller which reflect that the Racetrack Business
generated 1998 earnings before interest, taxes, depreciation and amortization of
at least $13,000,000. The monthly financial statements provided to Seller with
respect to the Racetrack Business as provided in Section 6.3 hereof shall not
reflect in the aggregate a material negative variance from calendar year 1998.
8.1.6 Compliance with Covenants. Seller shall in all material
-------------------------
respects have performed and complied with all material terms, agreements,
covenants and conditions of this Agreement to be performed or complied with by
it at the Closing Date, and Seller shall have delivered to Buyer a certificate
to that effect.
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8.1.7 Buyer's Inspections. Buyer shall have approved the results of
-------------------
its inspections and investigations in connection with Buyer's purchase of the
Assets and the Transactions contemplated under this Agreement not later than
June 10, 1999 (the "Review Period"). Buyer shall, prior to 11:59 P.M. (Pacific
Daylight Savings Time) on the last day of the Review Period, notify Seller of
any objections Buyer has to the physical, seismic, structural, environmental or
other condition of the Assets, other than the state of title, which shall be
subject to the review periods set forth in Section 6.1.3 hereof. If Buyer does
not give written notice to Seller of its objections on or prior to the end of
the Review Period, Buyer shall be deemed to have had no objections thereto. If
Buyer shall object as provided herein, Buyer shall have the option, which must
be exercised at any time but no later than five (5) business days after the last
day of the Review Period, (i) to waive its objections and proceed with the
purchase of the Assets as contemplated hereby notwithstanding such objections,
and Seller shall convey the Assets to Buyer, subject thereto, or (ii) to
terminate this Agreement. If Buyer shall fail to give Seller notice of Buyer's
elections pursuant to (i) or (ii) of this clause (a) within such 5-day period,
Buyer shall be deemed to have elected option (ii) hereof.
8.1.8 Opinion of Counsel for Seller. Buyer shall have received the
-----------------------------
favorable opinion of counsel to Seller, dated the Closing Date to the effect set
forth in Schedule 8.1.8.
8.1.9 Legal Actions or Proceedings. No legal action or proceeding
----------------------------
shall have been instituted or overtly threatened by any governmental agency
seeking to restrain, prohibit, invalidate or otherwise affect the consummation
of the Transactions.
8.1.10 Consents Obtained. Each party hereto shall have obtained all
-----------------
material consents and approvals required to be obtained from (a) any
governmental authority (including if applicable under the California Gambling
Control Act and the California Horseracing Board), or (b) other parties to those
contracts set forth on Schedule 8.1.10, except where the failure to obtain such
consents or approvals is a result of a breach by Buyer.
8.1.11 Other Transaction Documents. Seller shall have executed and
---------------------------
delivered to Buyer a short-form trademark assignment of U.S. Registration
1,850,076 for HOLLYWOOD PARK and original counterparts of each Transaction
Document (other than this Agreement) to which it is a party.
8.1.12 Casino License. Buyer shall be licensed to own and be the
--------------
lessor of the Casino.
8.1.13 Casino Operator. Buyer shall have approved (or deemed approved
---------------
if no written notice of objection is given) California Casino Management, Inc.
as the Casino Operator no later than May 20, 1999, which approval shall not be
unreasonably withheld.
8.1.14 Liquor License. Buyer shall have obtained an "on-premises
--------------
liquor license" sufficient to enable Buyer to sell alcoholic beverages
consistent with the past practice of the Racetrack Business.
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<PAGE>
8.1.15 Non-Competition Agreement. Seller shall have delivered to
-------------------------
Buyer an original of the Non-Competition Agreement, executed by R.D. Hubbard.
8.1.16 Buyer's Financing. Not later than June 10, 1999, Buyer shall
-----------------
have obtained the consents or approvals, if any, of its lender in respect of any
financing for the Transactions.
8.1.17 Easement Agreement Approval. The easements contemplated by
---------------------------
the Easement Agreement shall be in place and Buyer shall have approved all
conditions, if any, imposed on the Land by governmental authorities with respect
to the construction of the access drive.
8.1.18 Information Technology. Not later than May 20, 1999, Buyer
----------------------
shall have completed its investigation of the information technology systems and
licenses related to Intellectual Property necessary for Buyer's operation of the
Racetrack Business after the Closing Date.
8.2 Conditions Precedent to Obligations of Seller. The obligations of
---------------------------------------------
Seller under this Agreement are subject, at the option of Seller, to the
satisfaction or waiver of each of the following conditions at or prior to the
Closing Date:
8.2.1 Resubdivision. The Resubdivision shall have been effectuated
-------------
as required by law through recordation or otherwise, which Resubdivision and all
conditions, if any, affecting the Remainder Parcels in form and substance
reasonably acceptable to Seller.
8.2.2 HSR Act. All waiting periods under the HSR Act shall have
-------
expired or terminated.
8.2.3 Accuracy of Representations and Warranties. The
------------------------------------------
representations and warranties of Buyer contained in this Agreement (as amended
or supplemented through the Closing Date pursuant to Section 12.12 hereof) or in
any certificate delivered to Seller pursuant hereto shall be true and correct in
all material respects on and as of the Closing Date as though made at and as of
that date (except where such representation and warranty is made as of a date
specifically set forth therein), and Buyer shall have delivered to Seller a
certificate to that effect.
8.2.4 Compliance with Covenants. Buyer shall in all material
-------------------------
respects have performed and complied with all material terms, agreements,
covenants and conditions of this Agreement to be performed or complied with by
it at the Closing Date, and Buyer shall have delivered to Seller a certificate
to that effect.
8.2.5 Opinion of Counsel for Buyer. Seller shall have received the
----------------------------
favorable opinion of counsel to Buyer, dated the Closing Date, as to the due
authorization, execution and binding effect of the Agreement and each of the
other Transaction Documents.
8.2.6 Legal Actions or Proceedings. No legal action or proceeding
----------------------------
shall have been instituted or overtly threatened by any governmental agency
seeking to restrain, prohibit, invalidate or otherwise affect the consummation
of the Transactions.
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8.2.7 Consents Obtained. Each party hereto shall have obtained all
-----------------
material consents and approvals required to be obtained from any governmental
authority or other parties to those contracts set forth in Section 8.1.10,
except where the failure to obtain such consents or approvals is a result of a
breach by Seller.
8.2.8 Purchase Prices. Buyer shall have delivered the Purchase
---------------
Prices in accordance with Section 3.3.
8.2.9 Other Transaction Documents. Buyer shall have executed and
---------------------------
delivered to Seller original counterparts of each Transaction Document to which
it is a party.
8.2.10 Bank of America Lien. Not later than June 10, 1999, Seller
--------------------
shall have obtained any consents required under the Bank of America Loan
Agreement, including, without limitation, the agreement of Bank of America to
the release of any liens on the Assets on or before the Closing Date.
8.2.11 Casino Sublease. Seller and the Casino Operator shall have
---------------
entered into the Casino Sublease.
8.2.12 Casino Operator. Buyer shall have approved California Casino
---------------
Management Inc. as the Casino Operator not later than May 20, 1999.
8.2.13 Easement Agreement Approval. Seller shall have approved all
---------------------------
conditions imposed by governmental authorities with respect to the construction
of the access drive described in Section 11.9.
8.2.14 Non-Disturbance, Subordination and Attornment Agreement.
-------------------------------------------------------
Buyer and its lender, if any, shall have executed a Non-Disturbance,
Subordination and Attornment Agreement with respect to the Casino Lease in form
and substance reasonably satisfactory to Seller; provided however that Seller
shall waive this condition if, on the Closing Date, the Casino Lease is senior
in priority to the lien of any mortgage, deed of trust or other security device
obtained by Buyer in connection with the Transaction.
9. SURVIVAL OF REPRESENTATIONS; INDEMNIFICATIONS.
----------------------------------------------
9.1 Survival of Representations. The representations and warranties set
---------------------------
forth in Sections 4.1, 4.2 and 4.3 shall survive indefinitely. All other
representations or warranties contained herein shall survive until the date
which is eighteen (18) months after the Closing Date and shall then expire.
Upon the expiration of a representation or warranty pursuant to this Section
9.1, unless written notice of a claim based on such representation or warranty
specifying in reasonable detail the facts on which the claim is based shall have
been delivered to the Indemnifying Party prior to the expiration of such
representation or warranty, such representation or warranty shall be deemed to
be of no further force or effect, as if never made, and no action may be brought
based on the same, whether for breach of contract, tort or under any other legal
theory.
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<PAGE>
9.2 Agreements to Indemnify.
-----------------------
9.2.1 General Indemnity.
-----------------
(a) Seller's General Indemnity. Subject to the terms and
--------------------------
conditions of this Section 9, Seller hereby agrees to indemnify, defend and
hold Buyer harmless from and against all Losses incurred by Buyer and
Buyer's employees, directors, officers, shareholders and agents resulting
from (i) a breach of any representation, warranty or covenant of Seller
made in this Agreement, or (ii) any liabilities or obligations of Seller
other than the Assumed Liabilities, or (iii) the conduct of the Racetrack
Business on or prior to the Closing (except for the Assumed Liabilities).
Notwithstanding anything to the contrary contained herein, Seller shall not
be in breach of any representation or warranty made in this Agreement, if
prior to the Closing, Buyer had knowledge that such representation or
warranty was incorrect or untrue.
(b) Buyer's General Indemnity. Subject to the terms and conditions
-------------------------
of this Section 9, Buyer hereby agrees to indemnify, defend and hold Seller
harmless from and against all Losses incurred by Seller and Seller's
employees, directors, officers, shareholders and agents resulting from (i)
a breach of any representation, warranty or covenant of Buyer made in this
Agreement, (ii) the failure of Buyer to pay, perform and discharge when due
the Assumed Liabilities, or (iii) the conduct of the Racetrack Business
after the Closing. Notwithstanding anything to the contrary contained
herein, Buyer shall not be in breach of any representation or warranty made
in this Agreement, if prior to the Closing, Seller had knowledge that such
representation or warranty was incorrect or untrue.
(c) General Indemnification Threshold. No claim for
---------------------------------
indemnification will be made by either party under Section 9.2.1(a)(i) or
(b)(i) unless the aggregate of all Losses incurred by such party otherwise
indemnified against under clauses (i) of Sections 9.2.1(a) or 9.2.1(b), as
the case may be, exceeds $1,000,000, at which time a claim may be asserted
for the entire amount of Losses incurred.
(d) Environmental Claims. The provisions of this Section 9.2.1
--------------------
shall be inapplicable to Environmental Claims or to Losses related to or
associated with Environmental Laws or Hazardous Substances, which shall be
governed exclusively by Section 9.2.2.
(e) Physical Condition. Except as set forth in Sections
------------------
9.2.1(a)(i) and 9.2.2, no indemnification or other claim may be made by
Buyer against Seller relating to the physical condition of the Real
Property or the Casino Building, including without limitation, the
structural or seismic condition thereof.
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<PAGE>
9.2.2 Environmental Indemnity.
-----------------------
(a) Seller's Indemnification of Buyer for Environmental Liabilities
---------------------------------------------------------------
Arising out of Pre-Closing Conditions and Events.
-------------------------------------------------
Subject to the terms and conditions of this Section 9, Seller hereby
agrees to indemnify, defend and hold harmless Buyer from and against any
and all Losses incurred by Buyer as a result of Environmental Claims to the
extent arising from:
(1) The presence of any Hazardous Substance upon or beneath
the Real Property or the Casino Building including in the soil or
groundwater on, or prior to, the Closing, including to the extent
such Hazardous Substance passively remains or migrates after Closing
(except to the extent indemnified by Buyer in Section 9.2.2(b)(1));
(2) Any act, event or omission that occurred at the Real
Property or the Casino Building on, or prior to, the Closing;
(3) Any actual or alleged violation of any Environmental Law
that occurred on, or prior to, the Closing; or
(4) Any offsite disposal of a Hazardous Substance generated on
or at the Real Property or the Casino Building on, or prior to, the
Closing.
PROVIDED, HOWEVER, that Seller's indemnification of Buyer under
items (1) and (2) above shall expire and be of no force or effect as to a
specific Loss if such Loss is the result of actions taken by the Buyer or
any successor in interest or subsequent owner of the Real Property in
furtherance of a discontinuance of horse racing operations or a material
construction project or material change in the nature of the use of the
Real Property or the Casino Building or the addition of a material new or
different use of the Real Property or the Casino Building.
(b) Buyer's Indemnification of Seller for Environmental Liabilities
---------------------------------------------------------------
Arising out of Post-Closing Conditions and Events.
-------------------------------------------------
Subject to the terms and conditions of this Section 9, Buyer hereby
agrees to indemnify, defend and hold harmless Seller from and against any
and all Losses incurred by Seller as a result of Environmental Claims to
the extent arising from:
(1) Any Hazardous Substance that is released or becomes
present (including without limitation new or additional releases of
the same Hazardous Substance already present upon or beneath the
Casino Building or the Real Property on, or prior to, the Closing)
upon or beneath the Casino Building or the Real Property including
in
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the soil or groundwater after Closing (except to the extent
indemnified by Seller in Section 9.2.2(a)(1)), and any movement
after Closing of any Hazardous Substance present on, or prior to,
Closing that results from Buyer or Buyer's agents' conduct or the
exacerbation of any environmental condition that results from Buyer
or Buyer's agents' conduct;
(2) Any act, event or omission that occurs at the Real
Property or the Casino Building after Closing;
(3) Any actual or alleged violation of any Environmental Law
that occurs after Closing or any actual, alleged or proposed
requirement or necessity that building or construction materials or
equipment lawfully present at the Real Property or the Casino
Building as of Closing (including without limitation asbestos-
containing building materials and lead-based paint) be removed,
abated or mitigated; or
(4) Any offsite disposal of a Hazardous Substance generated on
or at the Real Property or the Casino Building after Closing.
(c) Notwithstanding the foregoing or any other provision of this
Agreement, the indemnification obligations in this Section 9.2.2 shall
not extend to any Losses that result from any voluntary act, omission,
transaction or agreement on or on behalf of the party seeking
indemnification hereunder.
(d) Indemnification Threshold
-------------------------
No indemnification will be made by either party under Section
9.2.2(a) or (b) unless the aggregate of all Losses incurred by such party
otherwise indemnified against under Section 9.2.2(a) or (b) exceeds
$250,000 at which time a claim may be asserted for the entire amount of
the Losses incurred. Notwithstanding the foregoing, the provisions of
Section 9.3 shall apply irrespective of whether the aggregate of all
Losses incurred by a party has exceeded $250,000.
(e) Indemnification For Costs To Comply With The Requirements of
The Regional Water Quality Control Board.
(1) In December 1998, the Regional Water Quality Control
Board, Los Angeles Region ("Regional Board"), issued tentative Waste
Discharge Requirements ("WDRS") and Time Schedule Orders ("TSOS") to
Seller which identified certain potential obligations of the Seller
with respect to storm water runoff, water quality, and the discharge
of waste water resulting from the operation of horse stables on the
Real Property (hereafter, all of these obligations or requirements,
to the extent they become applicable,
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<PAGE>
final, valid and enforceable requirements upon Buyer, are referred
to as the "Regional Board Requirements").
(2) Seller has engaged attorneys and consultants to assist it
in evaluating the Regional Board Requirements and to assist it in
negotiations with the Regional Board over the applicability of the
Regional Board Requirements to the Real Property and Seller's
operations thereon.
(3) From and after Closing, Seller shall indemnify, defend and
hold harmless Buyer from any and all Losses as a result of the
Regional Board Requirements. This indemnification of the Buyer by
the Seller includes without limitation any and all costs associated
with: (i) modification of barns or stables; (ii) installation of
basins or reservoirs to contain process and stormwater; (iii) pipe
construction and facility modifications necessary to transport waste
water and stormwater to the sewer, so long as such modifications are
necessary to meet the Regional Board Requirements; and (iv)
necessary operation and maintenance, for a period not to exceed ten
(10) years. This indemnification of the Buyer by the Seller also
includes without limitation any costs to challenge or appeal any
decision of the Regional Board regarding the applicability of the
Regional Board Requirements to the Real Property or Buyer's
operations thereon, including without limitation reasonable
attorneys' fees and consultants' fees associated with the evaluation
of, and negotiations with the Regional Board.
(4) Notwithstanding any other provision of this Agreement,
including without limitation Section 9.2.2(a), Seller's obligations
under the indemnity provisions set forth in this Section 9.2.2(e)
shall in no event exceed $5,000,000. It is the intention of the
parties that Five Million Dollars ($5,000,000) shall be the maximum
amount of Seller's liability with respect to the Regional Board
Requirements. Accordingly, Buyer hereby agrees to indemnify, defend
and hold harmless Seller from and against any and all Losses
incurred by Seller as a result of Environmental Claims related to
the Regional Board Requirements including without limitation those
matters set forth in Section 9.2.2(e)(3) in excess of Five Million
Dollars ($5,000,000).
9.2.3 Conflict. If a matter arises which is subject to the
--------
indemnification provisions of both 9.2.1 and 9.2.2, the provisions of 9.2.2
shall apply exclusively.
9.2.4 Subrogation. If the Indemnifying Party makes any payment under this
-----------
Section 9 in respect of any Losses, the Indemnifying Party shall be subrogated,
to the extent of such payment, to the rights of the Indemnified Party against
any insurer or third party with respect to such Losses; provided, however, that
the Indemnifying Party shall not
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have any rights of subrogation with respect to the other party hereto or any of
its Affiliates or any of its or its Affiliates' officers, directors, agents or
employees.
9.2.5 Other Indemnification Provisions.
--------------------------------
(a) Without limiting the generality of any provision of this
Agreement, Seller shall indemnify, defend and hold Buyer harmless from
and against all Losses incurred by Buyer and Buyer's employees,
directors, officers, shareholders and agents resulting from: (a) any
taxes imposed with respect to the operation of the Racetrack Business
for periods prior to and through the Closing Date, (b) Seller's
obligation to contribute to or sponsorship of or participation in any
Employee Benefit Plan or (c) any withdrawal liability under Section
4201 of ERISA with respect to any Employee Benefit Plan which has
arisen or may arise in connection with the consummation of the
Transactions, or otherwise caused by a withdrawal by Seller or any of
its ERISA Affiliates from an Employee Benefit Plan. The
indemnification provided in this paragraph 9.2.5(a) shall (x) not be
subject to the provisions of Section 9.2.1(c) and (y) survive the
expiration provision of this Agreement and any applicable statute of
limitations.
(b) Without limiting the generality of any provision of this
Agreement, Buyer shall indemnify, defend and hold Seller harmless from
and against all Losses incurred by Seller and Seller's employees,
directors, officers, shareholders and agents resulting from: (a) any
taxes imposed with respect to the operation of the Racetrack Business
for periods after the Closing Date, (b) Buyer's obligation to
contribute to or sponsorship of or participation in any Employee
Benefit Plan after the Closing Date or (c) any withdrawal liability
arising after the Closing Date under Section 4201 of ERISA with
respect to a withdrawal by Buyer or any of its ERISA Affiliates from
any Employee Benefit Plan. The indemnification provided in this
paragraph 9.2.5(b) shall (x) not be subject to the provisions of
Section 9.2.1(c) and (y) survive the expiration provision of this
Agreement and any applicable statute of limitations.
(c) Notwithstanding anything to the contrary contained in this
Agreement, Seller shall reimburse Buyer for the out of pocket costs
and expenses incurred by Buyer after the Closing Date to complete the
alterations of the Assets required by the Confidential Settlement
Agreement, dated November 10, 1998, with respect to the settlement of
litigation between Seller and Laura Marie Scotlan.
9.3 Conditions of Indemnification. The respective obligations and
-----------------------------
liabilities of the Indemnifying Party to the Indemnified Party under Section 9.2
shall be subject to the following terms and conditions:
9.3.1 Notice. Within thirty (30) days after receipt of notice of
------
commencement of any action or the assertion of any claim by a third party or
governmental agency (but in any event at least ten days preceding the date on
which an answer or other
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pleading must be served in order to prevent a judgment by default in favor of
the party asserting the claim), or notice of any other matter for which
indemnification may be sought, the Indemnified Party shall give the Indemnifying
Party written notice thereof together with a copy of any claim, process or other
legal pleading and, in the event the notice relates to any other matter, a
reasonably detailed description of the nature of such other matter, and the
Indemnifying Party shall have the right to undertake the defense thereof by
representatives of its own choosing that are reasonably satisfactory to the
Indemnified Party. Notwithstanding the Indemnifying Party's undertaking of such
defense, the Indemnified Party shall have the right to engage its own counsel,
at its own expense, and participate in the defense of the claim; provided,
however, that the Indemnifying Party shall retain the right in its sole and
absolute discretion to make all decisions with respect to the defense,
settlement or compromise of such claim, except as otherwise provided herein,
provided that the Indemnifying Party remains liable for any payments due under
any such settlement or compromise. The failure of the Indemnified Party to give
notice of any claim or other matter within the time period specified herein
shall not adversely affect the Indemnified Party's right to indemnification
hereunder except to the extent that such failure adversely affects the right of
the Indemnifying Party to assert any reasonable defense to such claim or
otherwise results in prejudice's the Indemnifying Party.
9.3.2 Assumption of Defense. If the Indemnifying Party, by the
---------------------
fifteenth day after receipt of notice of any claim or matter (or, pursuant to
the parenthetical in Section 9.3.1, by the fifth day preceding the day on which
an answer or other pleading must be served in order to prevent judgment by
default in favor of the person asserting such claim), does not elect to defend
against such claim, the Indemnified Party will (upon further notice to the
Indemnifying Party) have the right to undertake the defense, compromise or
settlement of such claim on behalf of and for the account and risk of the
Indemnifying Party (but only to the extent of the indemnification obligation);
provided, however, that the Indemnified Party shall not settle or compromise
such claim without the Indemnifying Party's consent, which consent shall not be
unreasonably withheld. If after electing not to defend against such claim or
proceeding, the Indemnifying Party seeks to question the manner in which the
Indemnified Party defended such claim or proceeding or the amount of or nature
of any such settlement, the Indemnifying Party shall have the burden to prove by
a preponderance of the evidence that the Indemnified Party did not defend such
claim or proceeding in a reasonably prudent manner.
Notwithstanding the preceding paragraph, the Indemnifying Party shall
have the right to assume the defense of any claim or matter at any time prior to
settlement, compromise or final determination thereof if the Indemnifying Party
provides assurances, reasonably satisfactory to the Indemnified Party, that the
Indemnifying Party will be financially able to satisfy such claim in full (to
the extent of the indemnification obligation) if such claim or proceeding is
decided adversely. The Indemnifying Party shall select counsel reasonably
acceptable to the Indemnified Party to conduct the defense of such claim or
proceeding.
If the Indemnifying Party assumes the defense of any claim or matter
in accordance with this Section 9.3, the Indemnifying Party shall be authorized
to consent to a settlement of, or the entry of any judgment arising from, any
such claim or matter, without the prior written consent of such Indemnified
party; provided, however, that:
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(i) the Indemnifying Party shall pay or cause to be paid all
amounts arising out of such settlement or judgment, except to the
extent such settlement or judgement exceeds the indemnification
obligation or as otherwise provided under 9.2.2(d) concurrently with
the effectiveness thereof, or shall obtain and deliver to such
Indemnified Party prior to the execution of a settlement a general
release executed by the claimant, which general release shall release
such Indemnified party from any liability in such matter;
(ii) the Indemnifying Party shall not be authorized to
encumber any of the assets of any Indemnified Party or to agree to any
restriction that would apply to any Indemnified Party or to its
conduct of business; and
(iii) a condition to any such settlement shall be a complete
release of such Indemnified Party with respect to such claim.
If, in the reasonable opinion of counsel for the Indemnified Party,
there is a conflict of interest between the Indemnifying Party and the
Indemnified Party, the Indemnified party may direct the defense with respect to
those issues as to which a conflict exists or potentially exists at the
Indemnifying Party's sole cost and expense.
In the event both the Seller and the Buyer are potentially liable
under the terms and conditions of this Agreement, including Section 9.2.2, with
respect to an Environmental Claim or other matter for which indemnification may
be sought, both Seller and Buyer shall participate in the defense thereof only
with separate counsel of their own choice and at their own expense, subject to
the rights of each party to seek indemnification under Section 9.2 for such
expenses including reasonable fees and costs of attorneys and experts. The
liability of Seller and Buyer with respect to such a claim or other matter shall
be apportioned in accordance with Section 9.2.2 or to the extent that such
provisions do not allocate responsibility entirely to one of the parties, in
accordance with the parties' respective contributions to the facts and
circumstances giving rise to the Environmental Claim or other matter. To the
extent there is no dispute between Seller and Buyer as to the appropriate
allocation of responsibility for a portion of an Environmental Claim or other
matter, Seller and Buyer, if feasible, shall each assume full responsibility for
their respective portion of the Environmental Claim or other matter, provided
that such assumption of responsibility does not prejudice such party's rights as
to the disputed portion of the Environmental Claim or other matter. In the
event the Indemnifying Party exercises its right to undertake the defense
against such Environmental Claim or other matter as provided above, the
Indemnified Party shall at its own expense reasonably cooperate with the
Indemnifying Party in such defense and timely make available to the Indemnifying
Party all witnesses, pertinent records, materials and information in its
possession or under its control reasonably relating thereto as requested by the
Indemnifying Party.
9.3.3 Claim Adverse to Indemnifying Party. Notwithstanding anything
-----------------------------------
to the contrary in this Section 9.3, if there is a reasonable probability that a
claim may materially adversely affect the Indemnifying Party other than as a
result of money damages or other money payments, the Indemnifying Party shall
have the right, at its own cost and expense, to compromise or settle such claim,
but the Indemnifying Party shall not, without
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the prior written consent of the Indemnified Party, settle or compromise any
claim or consent to the entry of any judgment which does not include as an
unconditional term thereof the giving by the claimant or the plaintiff to the
Indemnified Party a release from all liability in respect of such claim.
9.3.4 Cooperation. In connection with any such indemnification, the
-----------
Indemnified Party will cooperate in all reasonable requests of the Indemnifying
Party.
9.4 Remedies Exclusive. Except as provided herein, the remedies provided
------------------
in this Section 9 shall be the exclusive remedy for monetary damages and for any
Environmental Claim (whether at law or in equity) between the parties. With
respect to any rights or obligations of Buyer or Seller concerning any
Environmental Claims or Losses related to or associated with Environmental Laws
or Hazardous Substances that are not subject to resolution pursuant to Section
9.2.2, it is the intent of Buyer and Seller that their respective rights and
obligation be resolved in accordance with law. None of Seller's officers,
employees, agents, stockholders, consultants, investment bankers, legal advisers
or representatives shall have any liability or obligation to Buyer in connection
with the Transactions contemplated by this Agreement or in respect of any
statement, representation, warranty or assurance of any kind made by Seller, its
representatives or any other person. None of Buyer's officers, employees,
agents, stockholders, consultants, investment bankers, legal advisors or
representatives shall have any liability or obligation to Seller in connection
with the Transactions contemplated by this Agreement or in respect of any
statement, representation, warranty, or assurance of any kind made by Buyer, its
representatives or any other Person.
9.5 Damages. Notwithstanding anything to the contrary elsewhere in this
-------
Agreement or any other Transaction Document, no party (or its Affiliates) shall,
in any event, be liable to the other party (or its Affiliates) for any
consequential damages, including, but not limited to, loss of revenue or income,
cost of capital, or loss of business reputation or opportunity relating to the
breach or alleged breach of this Agreement.
10. TERMINATION.
-----------
This Agreement may be terminated at any time on or prior to the Closing
Date:
10.1 Injunction. By either party if any court of competent
----------
jurisdiction in the United States shall have issued an order (other than a
temporary restraining order), decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Transactions and such order,
decree, ruling or other action shall have become final and non-appealable.
10.2 Mutual Agreement. By mutual written agreement of the parties.
----------------
10.3 Review Period. By Buyer (i) if Buyer shall exercise its right of
-------------
termination as set forth in Section 6.1.3(c) or 8.1.7 hereof, (ii) if Buyer
shall not approve California Casino Management as the Casino Operator in
accordance with Section 8.1.13 hereof, (iii) if Buyer shall not have obtained
the consent or approval of its lender in accordance with Section 8.1.16 hereof,
or (iv) if Buyer shall not have completed its investigation of information
systems technologies and licenses relating to Intellectual Property in
accordance
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with Section 8.1.18. By Seller (A) if Seller shall not have obtained any
consents required under the Bank of America Loan Agreement in accordance with
Section 8.2.10, (B) if Seller and the Casino Operator fail to enter into the
Casino Sublease in accordance with Section 8.2.11, or (C) if Buyer shall fail to
approve California Casino Management as the Casino Operator in accordance with
Section 8.1.13 hereof.
10.4 Termination Date. By either party if the Closing shall not have
----------------
occurred as provided in Section 3.1 hereof (provided that the right to terminate
this Agreement pursuant to this Section 10.4 shall not be available to any party
who has materially breached any representation, warranty or covenant of this
Agreement; and provided further that if as of September 15, 1999, (i) there is
an injunction or other order of any of the types described in Section 10.1 that
has not become final and non-appealable, such termination shall be three (3)
days after such injunction or other order is dissolved, but in no event later
than September 30, 1999); or (ii) the Closing has not occurred as provided in
Section 3.1 hereof due solely to the failure to satisfy or waive the
contingencies provided in Section 8.1.1 or 8.2.1, then the date for Closing
under Section 3.1 shall be automatically extended to September 30, 1999 to
enable the satisfaction or waiver of such contingencies.
10.5 Material Breach. By either Buyer or Seller, if there has been a
---------------
material breach on the part of the other party in its representations,
warranties or covenants set forth herein; provided, however, that if such breach
is susceptible to cure the breaching party shall have twenty (20) business days
after receipt of notice from the other party of its intention to terminate this
Agreement pursuant to this Section 10.5 in which to cure such breach.
Termination for material breach shall not impair any party's rights to pursue
any available remedies at law or in equity.
10.6 Uncured Asset Loss. By Buyer if an Asset Loss (as defined in Section
------------------
12.16) occurs with respect to an asset material to the operation of the
Racetrack Business and such Asset Loss is not cured by Seller prior to the
Closing Date, it being acknowledged that Seller shall not have any obligation to
do so.
10.7 Effects of Termination. If this Agreement is terminated pursuant to
----------------------
this Section 10, all obligations of the parties hereunder (except for those
pursuant to Section 10 and Sections 6.3, 11.1, 12.2, 12.8, 12.9, 12.10 and
12.11) shall terminate without liability of any party to any other party;
provided, however, that no termination shall relieve any party from any
liability arising from or relating to a material breach prior to termination.
11. OTHER COVENANTS.
----------------
11.1 Announcements. Each party agrees not to make, nor cause to be made,
-------------
any news releases or other public announcements pertaining to the Transactions
without first consulting the other party and attempting to formulate a mutually
satisfactory arrangement for such disclosure, and in any case will make an
announcement thereafter without the consent of the other only to the extent it
believes in good faith that disclosure is required by applicable law or by
obligations pursuant to any rules of or listing agreement with any national
securities exchange or the Nasdaq National Market System. The commencement of
litigation relating to this Agreement or any proceedings in connection therewith
shall not be deemed a violation of this Section 11.1.
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11.2 Employment Matters.
------------------
11.2.1 Offers of Employment. Buyer agrees that it will offer
--------------------
employment to all of the Racetrack Employees effective on the Closing Date
(other than such non-union Employees Buyer has identified by written notice to
Seller on or before the expiration of the Review Period) ("Hired Employees"), it
being understood that Buyer shall thereafter be free to terminate such employees
as it wishes to based on its own evaluation of such employees' performance,
Buyer's business needs and such other factors as Buyer in its sole discretion
deems relevant. Each Hired Employee shall be eligible to receive benefits under
Employee Benefits Plans sponsored or maintained by Buyer or its Affiliates, or
to which Buyer or its Affiliates contribute (and for the costs of which Seller
shall not be responsible), which, in the aggregate, are at least as favorable to
such Hired Employee as the benefits for which such Employee would have been
eligible had such Hired Employee been employed by Buyer immediately before the
Closing Date under the Employee Benefit Plans maintained or sponsored by Buyer
or its Affiliates, or to which Buyer or its Affiliates contributed for its
employees. To the extent any Hired Employee has accrued but unpaid wages
(including vacation entitlements) as of the Closing Date, Buyer shall pay to
Hired Employee such amounts as Employee would have been entitled for such
amounts and at such times as Hired Employee would have been paid had Hired
Employee remained an Employee of Seller. On the Closing Date, Seller shall pay
to Buyer the collective amount of such accrued but unpaid wages (including
vacation entitlements). Each Hired Employee's period of service and compensation
history with Seller or its Affiliates shall be counted in determining
eligibility for, and to the extent applicable, the amount and/or vesting of,
vacation benefits or any benefits or practice as to which period of service is a
factor, including benefits under each Employee Benefit Plan maintained or
sponsored by Buyer or its Affiliates, or to which Buyer or its Affiliates
contribute. Each Hired Employee shall be covered as of his date of hire under
any Employee Benefit Plan maintained or sponsored by Buyer or its Affiliates, or
to which Buyer or its Affiliates contribute, providing health care benefits
(whether or not through insurance) without regard to any waiting period or any
condition or exclusion based on any pre-existing conditions, medical history,
claims experience, evidence of insurability, or genetic factors, and shall
receive full credit for any co-payments or deductible payments made before the
Closing Date.
Seller shall cause the interests of Employees in the Hollywood Park, Inc.
401(k) Investment Plan (the "HP Plan") to become fully vested at the Closing
Date and distributable immediately thereafter unless it reasonably concludes
that causing vesting and distributability prejudices the tax qualification of
the HP Plan or creates severe administrative hardship for Buyer in either of
which case, upon the request of Seller made within two (2) years after the
Closing Date, Buyer shall cause a defined contribution plan qualified under code
Section 401(a) and maintained or sponsored by Buyer or its Affiliates (the
"Buyer Plan") to accept from the HP Plan a plan-to-plan transfer under Code
Section 414(l) of the assets allocated to accounts of Employees and liabilities
attributable thereto; provided that for purposes of the foregoing, Seller at its
own expense shall, if requested by Buyer, in order to demonstrate prejudice to
the tax qualification to the HP Plan, apply to the Internal Revenue Service
where appropriate for rulings that causing vesting and distributability do not
prejudice the tax qualification of the HP Plan and shall vigorously prosecute
such application, and if such application is filed and vigorously prosecuted the
determination of whether to cause full vesting and immediate distributability or
a plan-to-
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plan transfer shall be deferred until the conclusion of the IRS ruling process,
or, if earlier, two (2) years from the Closing Date; provided further that Buyer
or its counsel shall at its own expense have the right and opportunity to review
ruling application papers and consult with Seller during the application
process. In the event an Employee receives an "eligible rollover distribution"
(within the meaning of Section 402(c)(4) of the Code) from the HP Plan, Buyer
shall cause the Buyer Plan to accept a direct rollover of such eligible rollover
distribution (including, but not limited to, any portion of such eligible
rollover distribution comprised of the outstanding balance of a loan from the HP
Plan to such Employee).
11.2.2 Retention of Liabilities. Seller shall be responsible for all
------------------------
liabilities, if any, resulting from Seller's termination of any Racetrack
Employee, including, but not limited to, (i) hospitalization or medical claims;
(ii) any claim asserting the right to participate in any medical insurance
program on a "self-pay" basis under COBRA or any comparable state or local law;
and (iii) any claims or litigation resulting from such terminations and/or the
sale of the Assets, regardless of when such claims may be asserted; provided,
however, that Seller shall not be responsible for any such liabilities to the
extent such liabilities are caused or are exacerbated by Buyer's breach of any
of its covenants in Section 11.2.1 hereof.
11.3 Cooperation. Each party hereto agrees, both before and after
-----------
the Closing, to execute any and all further documents and writings and to
perform such other reasonable actions which may be or become necessary or
expedient to effectuate and carry out the Transactions (which shall not include
any obligation to make payments).
11.4 Excluded Assets. If, after the Closing Date, Excluded Assets,
---------------
including, but not limited to, proprietary information of Seller, shall remain
on the Real Property, then Buyer shall take reasonable efforts to deliver such
Excluded Assets to Seller at the expense of Seller and, so long as such
information shall remain on the Real Property, Buyer shall exercise the same
reasonable degree of care with respect thereto as it does with respect to its
own property.
11.5 Tax Cooperation. After the Closing, the parties shall, and
---------------
shall cause their respective Affiliates to, cooperate with each other in the
preparation of all tax returns and shall provide, or cause to be provided, to
such other party any records and other information reasonably requested by such
party in connection therewith as well as access to, and the cooperation of, the
auditors of such other party and its Affiliates. After the Closing, the parties
shall, and shall cause their respective Affiliates to, cooperate with the other
party in connection with any tax investigation, tax audit or other tax
proceeding relating to the Racetrack Business or the Assets. Any information
obtained pursuant to this Section relating to taxes shall be kept confidential
by the other party.
11.6 Best Efforts. Each party will use its best efforts (excluding
------------
the institution of litigation) to cause all conditions to its obligations
hereunder to be timely satisfied and to perform and fulfill all obligations on
its part to be performed and fulfilled under this Agreement to the end that the
Transactions shall be effected substantially in accordance with the terms of
this Agreement as soon as reasonably practicable. In addition, each party will
use reasonable efforts to ensure that its representations and warranties remain
true and correct in all respects as of the Closing Date.
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11.7 Non-Parimutuel Gaming.
---------------------
11.7.1 Buyer's Covenant. If at any time within sixty (60)
----------------
months after the Closing Date, Buyer shall conduct or contract with a third
party to conduct or become legally able to conduct other forms of gaming not
presently legal under the laws of the State of California, including, without
limitation, video lottery terminal or slot machine gaming ("Non-Parimutuel
Gaming"), on the Real Property, Seller (or at Seller's option, its designee)
shall be entitled to receive as additional purchase price hereunder an amount
equal to fifty percent (50%) of the "net revenue" (the "Additional Purchase
Price Payments") generated by such Non-Parimutuel Gaming. The parties
acknowledge that Non-Parimutuel Gaming does not include any wagering on
horseracing, including by means of the internet or telephone. The term "net
revenue" shall mean all receipts generated by Non-Parimutuel Gaming less the
expenses relating to such Non-Parimutuel Gaming, including indirect expenses
relating to capital employed with respect to such Non-Parimutuel Gaming,
including a pro rata allocation for the fair market rental value of the Real
Property used for the Non-Parimutuel Gaming and any horsemens' share, but
without any charge for corporate overhead or other similar allocations of
indirect expenses not directly related to the Non-Parimutuel Gaming, determined
in accordance with generally accepted accounting principles, consistently
applied. The Additional Purchase Price Payments constitute additional
consideration under this Agreement without which Seller would not agree to the
Transactions contemplated hereunder. In the event the parties are at any time
unable to agree on the categories of expenses to be included in the calculation
of "net revenue" as defined herein, such matter shall be resolved in accordance
with the provisions of Section 11.7.6 hereof.
11.7.2 Terms. The terms of Buyer's obligation to make the
-----
Additional Purchase Price Payments shall be as follows:
(a) The Additional Purchase Price Payments shall be
paid to Seller (or at Seller's option, its designee) monthly, on
or before the fifteenth (15th) day following the end of each
calendar month in which Non-Parimutuel Gaming is conducted. If
at the end of any calendar year, an adjustment is appropriate
pursuant to Section 11.7.4, Buyer or Seller shall make the
appropriate payment to the other party within ten (10) days of
completion of the final audit under Section 11.7.4. Each
calendar year shall be considered an independent accounting
period for the purpose of computing the amount of the Additional
Purchase Price Payments.
(b) The Additional Purchase Price Payments shall be
paid to Seller (or, at Seller's option, its designee) for a
period of twenty (20) years if the Buyer is permitted to operate
Non-Parimutuel Gaming on the Real Property, and on or before the
expiration of the twenty-year term, Buyer exercises the Purchase
Option, as provided in subparagraph (c) below. If such option is
not exercised as therein provided, the Additional Purchase Price
Payments shall continue in perpetuity. Notwithstanding the
foregoing, the Additional Purchase Price Payments shall be paid
to Seller (or, at Seller's option, its designee) for a period of
only ten (10) years if the Buyer shall be legally permitted to
operate Non-Parimutuel Gaming on the Real Property
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and card club casinos shall become legally permitted to conduct
Non-Parimutuel Gaming in the State of California.
(c) Buyer shall have a one-time option (the "Purchase
Option") to purchase all, but not less than all, of Seller's
interest in the revenue of the Non-Parimutuel Gaming ("Seller's
Interest") subject to the following terms: (i) Buyer may
exercise this Purchase Option only by giving written notice to
Seller ("Exercise Notice") not more than twelve (12) months and
not less than three (3) months prior to the expiration of the
twentieth (20th) year of the operation of Non-Parimutuel Gaming;
(ii) the purchase price for the Purchase Option ("Option Price")
shall equal two (2) times the EBITDA of Non-Parimutuel Gaming
(i.e. four (4) times Seller's share of the EBITDA of Non-
Parimutuel Gaming) for the twentieth (20th) year, determined on
a consistent basis with prior years and exclusive of
extraordinary charges incurred or paid during the twentieth
(20th) year; (iii) the Option Price shall be paid in cash within
thirty (30) days of its determination, subject to regulatory and
other necessary approvals. In the event of a dispute as to the
EBITDA for the twentieth (20th) year, such determination shall
be made in accordance with the same procedures specified in
Section 11.7.4.
11.7.3 Records. For the purposes of ascertaining compliance by
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Buyer of its obligations under this Section 11.7, Buyer shall prepare and keep
or cause to be prepared and kept on the Real Property for a period of not less
than seven (7) years after each fiscal year, adequate records which shall show
all receipts as well as all expenses paid or required to be paid in connection
with the operation of the Non-Parimutuel Gaming, whether operated by Buyer or a
third party and shall make such records available for inspection by Seller as
herein provided. Monthly reports of receipts and expenses shall be provided to
Seller concurrently with each payment of Additional Purchase Price.
11.7.4 Audited Financial Statements. In connection with each
----------------------------
annual audit of its financial statements, Buyer shall prepare and shall have its
independent public accountant who shall at all times be a "Big-Five" accounting
firm, review a schedule of the "net revenues" derived from Non-Parimutuel Gaming
during the preceding calendar year and shall cause such schedule to be delivered
to Seller as soon as practicable and in any event within ninety (90) days of the
end of the calendar year. Seller shall have sixty (60) days after receipt of
each such schedule in which to raise questions with respect to the calculation
of net revenues for the period in question. If Buyer and Seller are not able to
resolve any questions raised by Seller within thirty (30) days of its
determination of whether adjustments to the calculation prepared by Buyer's
auditors is required, an audit shall be made by a "Big-Five" accounting firm
mutually acceptable to Buyer and Seller. The determination of such firm (whose
fees shall be paid equally by Buyer and Seller) shall be conclusively binding on
Buyer and Seller.
11.7.5 Lobbying Expenses. Seller and other interested parties have
-----------------
made commitments to lobby for the passage of laws which would permit Non-
Parimutuel Gaming on the Real Property. Buyer and Seller shall share equally in
the first $1,000,000 of such out of pocket expenses incurred between the Closing
Date and December 31, 2000. Seller acknowledges that, as of the date hereof,
Buyer has not made any commitment to contribute
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<PAGE>
to the cost of marketing or seeking approval of any voter initiative related to
Non-Parimutuel Gaming.
11.7.6 Net Revenue and Expense Items. In the event of a dispute
-----------------------------
between Seller and Buyer as to whether any items of expense are properly
deductible from the gross receipts generated by Non-Parimutuel Gaming for
purposes of determining "net revenues", Buyer's auditors and Seller's auditors
shall have 15 days after submission of a dispute to seek to mutually agree upon
whether one or more items is properly an item of expense for purpose of the net
revenue computation. If they are unable to agree, they shall mutually select
another "Big-Five" accounting firm which shall make the determination and whose
decision, in the absence of manifest error, shall be conclusive and binding on
the parties, each of whom shall be entitled to present evidence in support of
its position. The cost of the parties accounting firms shall be borne by the
respective parties and the costs of any third accounting firm selected shall be
borne equally by Buyer and Seller.
11.8 Non-Compete.
-----------
11.8.1 Recitals.
--------
(a) In substance, the transactions contemplated by this
Agreement effect, among other things, the sale by the Seller of
the Racetrack Business and Buyer's indirect purchase of the
goodwill of Seller in the Racetrack Business;
(b) Buyer and its Affiliates intend to engage in the
Racetrack Business in the Los Angeles, Orange, Ventura, or San
Diego California Counties (the "Territory");
(c) If Seller were to compete with Buyer's or any of
its Affiliate's operation of the Racetrack Business in the
Territory, Buyer would be deprived of the full benefit of any
reputation or goodwill associated with the Racetrack Business,
as the Racetrack Business may exist on and after the Closing
Date; and
(d) The covenants provided in this Section 11.8 are
material, significant and essential to effecting the
transactions contemplated by the Agreement, and good and
valuable consideration under the Agreement has been transferred
from Buyer to Seller in exchange for such covenants.
11.8.2 Covenant Not to Compete. From the Closing Date until
-----------------------
the fifth (5th) anniversary of the Closing Date, neither Seller nor its
Affiliates, will directly or indirectly, except on behalf of Buyer and its
respective Affiliates: (i) own, operate or manage (directly or indirectly with
others) a thoroughbred horse racetrack in the Territory; (ii) conduct off-track
wagering in the Territory or (iii) solicit any Hired Employee so long as such
employee remains employed by Buyer or within six months thereafter.
11.8.3 Savings Clause. It is the desire and intent of the
--------------
parties to this Agreement that this Section 11.8 be enforced to the fullest
extent permissible under the law and public policies of each jurisdiction in
which enforcement is sought. If this Section 11.8
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<PAGE>
is determined to be illegal or unenforceable in any jurisdiction - because it
extends for too long a time, because its geographic scope is too great, because
the business it covers is too broad or for any other reason or reasons - there
shall be deemed to be made those changes, and only those changes, necessary so
that it is valid and enforceable in such jurisdiction or jurisdictions.
11.8.4 Injunctive Relief. Buyer and Seller agree that the
-----------------
remedies of Buyer and its respective Affiliates at law would be an inadequate
remedy in the event of breach or threatened breach of this Agreement and thus,
in any such event, Buyer and its Affiliates may, either with or without pursuing
any potential damage remedies (including, without limitation, remedies available
pursuant to Section 9 and Sections 12.10 and 12.11), immediately obtain and
enforce an injunction from a court of competent jurisdiction prohibiting Seller
from violating this Agreement. Notwithstanding Section 12.10, the prevailing
party in any action regarding this Section 11.8 will, in addition to any other
remedies the prevailing party may obtain, be entitled to recover from the other
party its reasonable legal fees and out of pocket costs incurred in enforcing or
defending its rights under this Section 11.8.
11.8.5 Non-Competition Agreement of R.D. Hubbard. On the
-----------------------------------------
Closing Date, Seller shall deliver to Buyer the agreement of R.D. Hubbard to
refrain from participating in the day to day operations of a thoroughbred horse
racetrack in the territory for a period of two (2) years after the Closing nor
to solicit any Hired Employees during such two year period so long as they are
employed by Buyer or within six months thereafter.
11.9 Access Easements. Promptly after the execution of this
----------------
Agreement, Seller shall cause its engineers to identify the exact location of
easements, to provide vehicular ingress, egress and access to and from the Real
Property. The easements shall be in the locations and dimensions shown on
Exhibit "A", subject to modification as necessary to account for existing
easements, other matters of record, physical conditions and to comply with
Applicable Laws. On the Closing Date, Buyer and Seller shall execute an easement
agreement ("Easement Agreement") which shall provide that (i) Seller shall grant
Buyer (and successive owners of the Real Property) an easement for vehicular
ingress, egress and access; (ii) Seller (or its Affiliate) shall construct an
access drive over the easement area at its sole cost and expense; (iii) Buyer
and successor owners of the Real Property shall maintain and repair the access
drive at their sole cost and expense, and (iv) the costs associated with any
continuation of the access drives onto or across the Land shall be borne by
Buyer. The Easement Agreement shall be a "covenant running with the land" and
shall be recorded in the Official Records of Los Angeles County on the Closing
Date.
11.10 Audit of Financial Statements of Racetrack Business. Seller
---------------------------------------------------
shall direct its auditors to perform an audit of the financial statements of the
Racetrack Business as of the date designated by Buyer and otherwise pursuant to
the reasonable instructions of Buyer. Seller shall not have any other
obligations with respect to the preparation of such financial statements. Buyer
shall be responsible for all fees and expenses of the independent auditors in
connection with such audit.
11.11 TVG Operations. Neither Buyer (with respect to the TVG
--------------
Investment Agreement) nor Seller (with respect to the TVG Founders Agreement)
shall take any action
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<PAGE>
to cause TVG to modify or amend the rights or obligations of the other party
under said agreements.
11.12 Common Area Charges Under Casino Lease. The parties shall use
--------------------------------------
reasonable efforts to agree on the percentage allocation between Landlord and
Tenant of Common Area charges prior to the Closing Date, and if so agreed, to
modify the Casino Lease accordingly. Absent agreement, the provisions of Section
3.02 of the Casino Lease shall remain unmodified.
11.13 Ticket Prices. Seller shall not decrease ticket prices for the
-------------
Del Mar simulcast meet below 1998 prices for the comparable meet in 1998.
12. MISCELLANEOUS.
--------------
12.1 Bulk Transfer Laws. Buyer hereby waives compliance by Seller with
------------------
any applicable bulk transfer laws, including, without limitation, the bulk
transfer provisions of the Uniform Commercial Code of any state, or any similar
statute, with respect to the transaction contemplated by this Agreement.
12.2 Expenses. Whether or not the Transactions are consummated, neither
--------
of the parties hereto shall have any obligation to pay any of the fees and
expenses of the other party incident to the negotiation, preparation and
execution of the Transaction Documents, or the closing of the Transactions,
including, but not limited to, the fees and expenses of legal counsel,
accountants, investment bankers, consultants and other experts.
12.3 Waivers. Either party may, by written notice to the other party, (a)
-------
extend the time for the performance of any of the obligations or other actions
of the other party under this Agreement; (b) waive any inaccuracies in the
representations or warranties of the other party contained in this Agreement or
in any certificates delivered pursuant to this Agreement; (c) waive compliance
with any of the conditions or covenants of the other contained in this
Agreement; or (d) waive performance of any of the obligations of the other under
this Agreement. With regard to any power, remedy or right provided herein or
otherwise available to any party hereunder, (i) no waiver or extension of time
will be effective unless expressly contained in a writing signed by the waiving
party, and (ii) no alteration, modification or impairment will be implied by
reason of any previous waiver, extension of time, or delay or omission in
exercise of rights or other indulgence.
12.4 Amendments, Supplements. This Agreement may be amended or
-----------------------
supplemented at any time by the mutual written consent of the parties.
12.5 Entire Agreement. This Agreement, the documents incorporated by
----------------
reference and the Transaction Documents, constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and supersede all
prior agreements and understandings, oral and written, between the parties
hereto with respect to the subject matter hereof. No representation, warranty,
promise, inducement or statement of intention has been made by either party that
is not embodied in this Agreement or the Transaction Documents and neither party
shall be bound by, or be liable for, any alleged representation, warranty,
promise, inducement or statement of intention not embodied herein or therein.
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<PAGE>
12.6 Binding Effect, Benefits. This Agreement shall inure to the benefit
------------------------
of and be binding upon the parties hereto and their respective permitted
successors and assigns. Except as set forth in Article 9, nothing in this
Agreement, expressed or implied, is intended to confer on any person other than
the parties hereto or their respective permitted successors and assigns, any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
12.7 Assignability. Neither this Agreement nor any of the parties' rights
-------------
hereunder shall be assignable by either party (other than to an Affiliate),
without the prior written consent of the other party, which consent shall be
within such party's sole discretion.
12.8 Notices. All notices under this Agreement shall be in writing and
-------
shall be delivered by personal service or telegram, telecopy or certified mail
(if such service is not available, then by first class mail), postage prepaid,
or overnight courier to such address as may be designated from time to time by
the relevant party, and which will initially be as set forth below. All notices
shall be deemed given when received. No objection may be made to the manner of
delivery of any notice actually received in writing by an authorized agent of a
party. Notices shall be addressed as follows or to such other address as the
party to whom the same is directed will have specified in conformity with the
foregoing:
(a) If to Buyer:
Churchill Downs Incorporated
700 Central Avenue
Louisville, KY 40208
Attn: Robert L. Decker
Tel: (502) 636-4588
Fax: (502) 636-4456
With duplicate notice to:
Gibson, Dunn & Crutcher
333 South Grand Avenue
Los Angeles, CA 90071
Attn: Jonathan K. Layne
Tel: (213) 229-7000
Fax: (213) 229-7520
(b) If to Seller:
Hollywood Park, Inc.
1050 S. Prairie Ave.
Inglewood, CA 90301
Attn: G. Michael Finnigan
Tel: (310)419-1500
Fax: (310) 672-0567
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<PAGE>
With duplicate notice to:
Irell & Manella LLP
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067-4276
Attn: Sandra G. Kanengiser
Tel: (310) 277-1010
Fax: (310) 203-7199
12.9 Governing Law; Jurisdiction. This Agreement has been negotiated and
---------------------------
entered into in the State of California, and all questions with respect to the
Agreement and the rights and liabilities of the parties will be governed by the
laws of that state, regardless of the choice of laws provisions of California or
any other jurisdiction. Any and all disputes between the parties which may arise
pursuant to this Agreement will be heard.
12.10 Attorneys' Fees. As to any litigation or arbitration (including any
---------------
proceedings in a bankruptcy court) between the parties hereto or their
representatives concerning any provision of this Agreement or the rights and
duties of any person or entity hereunder, solely as between the parties hereto
or their successors, each party shall bear its own attorneys' fees and expenses.
12.11 Equitable Remedies. Seller and Buyer acknowledge that the remedy at
------------------
law for any breach, or threatened breach, of their respective covenants to
consummate the Transactions will be inadequate and, accordingly, each covenants
and agrees that, with respect to any such breach or threatened breach, the other
will, in addition to any other rights or remedies that it may have and
regardless of whether such other rights or remedies have been previously
exercised, be entitled to such injunctive relief as may be available from any
appropriate court referred to in Section 12.9, but to no other equitable relief,
except as set forth in Sections 11.8.4 and 12.15 hereof. Notwithstanding the
foregoing sentence, any monetary damages which are all or a portion of any
equitable relief granted hereunder shall be subject to the limitations set forth
in Section 9.
12.12 Representations and Warranties. At any time and from time to time
------------------------------
prior to the Closing, Buyer or Seller may amend or supplement any of the
schedules delivered by them in connection with this Agreement to reflect any
matters arising between the date of this Agreement and the Closing Date not
inconsistent with the parties' obligations hereunder and any applicable
representation or warranty shall be deemed modified ab initio by such amendment
or supplement. Notwithstanding any materiality qualification in any
representation or warranty in this Agreement, certain items have been included
in the schedules attached hereto which are not considered by Seller to be, and
the inclusion of any item in a schedule is not an admission by Seller that such
item is, material to the operation of the Racetrack Business, or condition of
the Assets, taken as a whole.
12.13 Rules of Construction.
---------------------
12.13.1 Headings. The section headings in this Agreement are
--------
inserted only as a matter of convenience, and in no way define, limit, or extend
or interpret the scope of this Agreement or of any particular section.
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<PAGE>
12.13.2 Tense and Case. Throughout this Agreement, as the context
--------------
may require, references to any word used in one tense or case shall include all
other appropriate tenses or cases.
12.13.3 Severability. The validity, legality or enforceability of
------------
the remainder of this Agreement will not be affected even if one or more of the
provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
12.13.4 Knowledge.
---------
(a) Whenever a representation or warranty is stated to be
based on the knowledge of Seller, or words to that effect, such
phrase refers to whether any of R.D. Hubbard, G. Michael Finnigan,
Donald Robbins, Euall Wyatt, Cammie Morin, Steve Arnold or Clen
Bounds has actual present knowledge (without having made any
investigation and without any duty to investigate or inquire) of the
matters involved.
(b) Whenever a representation or warranty is stated to be
based on the knowledge of Buyer, or words to that effect, such
phrase refers to whether any of Thomas H. Meeker, Robert L. Decker,
Rebecca C. Reed, Dan Parkerson or Jim Gates has actual present
knowledge (without having made any investigation and without any
duty to investigate or inquire) of the matters involved.
12.13.5 Agreement Negotiated. The parties hereto are sophisticated
--------------------
and have been represented by lawyers throughout the Transactions who have
carefully negotiated the provisions hereof. As a consequence, the parties do not
believe the presumption of California Civil Code Section 1654 and similar laws
or rules relating to the interpretation of contracts against the drafter of any
particular clause should be applied in this case and therefore waive its
effects.
12.14 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.15 Specific Performance. The parties understand and agree that
--------------------
the Property is unique and for that reason, among others, Buyer will be
irreparably damaged in the event that this Agreement is not specifically
enforced. Accordingly, in the event of any breach or default in or of this
Agreement or any of the warranties, terms or provisions hereof by either party ,
the other party shall have, in addition to a claim for damages for such breach
or default, and in addition and without prejudice to any right or remedy
available at law or in equity, the right to demand and have specific performance
of this Agreement.
12.16 Risk of Loss. The risk of any loss, damage, impairment,
------------
confiscation or condemnation of the Assets, or any part thereof (an "Asset
Loss"), shall be upon the Seller at all times prior to the Closing.
12.17 Cooperation in Exchange. Buyer acknowledges that Seller may
-----------------------
transfer the Real property and/or the Casino Building to Buyer as part of a tax-
deferred exchange by
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<PAGE>
Seller pursuant to Section 1031 of the Internal Revenue Code of 1986 ("Code"),
and that Seller has the right to restructure all or a part of the within
transaction as provided in Internal Revenue Code (S) 1031 as a concurrent or
delayed (non-simultaneous) tax deferred exchange for the benefit of Seller.
Buyer agrees to cooperate, and if requested by Seller, to accommodate Seller in
any such exchange, provided that (i) such cooperation and/or accommodation shall
be at no further cost or liability to Buyer and Seller hereby indemnifies Buyer
in connection therewith; and (ii) the restructuring of the within transaction
shall not prevent nor delay the Closing beyond the Closing Date. Seller, in
electing to structure the sale as an exchange, shall have the right to
substitute another entity or person, who will be Seller's accommodator in
Seller's place and stead. Buyer and Seller acknowledge and agree that such
substitution will not relieve the herein named Seller of any liability or
obligation hereunder, and Buyer shall have the right to look solely to said
herein named Seller with respect to the obligations of Seller under this
Agreement.
12.18 No Merger. The parties intend that the provisions of this Agreement
---------
shall survive the delivery of the deeds and not merge therewith, and, without
limitation, Sections 9.2 and 11.7 shall survive the Closing.
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<PAGE>
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed
and delivered by the duly authorized officers of the parties hereto as of the
date first above written.
"BUYER"
CHURCHILL DOWNS INCORPORATED,
a Kentucky corporation
By: /s/ Thomas H. Meeker
--------------------------
Its: President/CEO
--------------------------
"SELLER"
HOLLYWOOD PARK, INC.,
a Delaware corporation
By:
--------------------------
Its:
--------------------------
<PAGE>
IN WITNESS WHEREOF, this Asset Purchase Agreement has been duly executed
and delivered by the duly authorized officers of the parties hereto as of the
date first above written.
"BUYER"
CHURCHILL DOWNS INCORPORATED,
a Kentucky corporation
By:
--------------------------
Its:
--------------------------
"SELLER"
HOLLYWOOD PARK, INC.,
a Delaware corporation
By: /s/ R. D. Hubbard
--------------------------
Its: Chairman
--------------------------
<PAGE>
[MAP PLAN APPEARS HERE]
EXHIBIT A
<PAGE>
EXHIBIT A
A PORTION OF THE FOLLOWING PROPERTY AS DELINEATED ON THE
ATTACHED MAP
THE LAND REFERRED TO HEREIN IS SITUATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:
PARCELS 1:
PARCELS "A", "B", "C", AND THAT PARCEL OF LAND SHOWN AS "REMAINDER PARCEL 'A',
IN THE CITY OF INGLEWOOD, AS SHOWN ON PARCEL MAP 23141, FILED IN BOOK 264 PAGES
32 TO 38 INCLUSIVE, OF PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID
COUNTY.
EXCEPTING AND RESERVING UNTO, TIDEWATER ASSOCIATED OIL COMPANY, ITS SUCCESSORS
AND ASSIGNS, IN DEED RECORDED FEBRUARY 25, 1947 IN BOOK 24243 PAGE 423, OFFICIAL
RECORDS, ALL MINERALS, INCLUDING BUT NOT LIMITED TO HYDRO CARBONACEOUS
SUBSTANCES, TOGETHER WITH THE RIGHT TO MINE, EXTRACT, RECOVER AND REMOVE THE
SAME; PROVIDED, HOWEVER, AND GRANTOR SO COVENANTS, THAT GRANTOR, ITS SUCCESSORS
AND ASSIGNS, EXCEPT BY PERMISSION OF GRANTEE, ITS SUCCESSORS OR ASSIGNS, WILL
NEVER ENTER UPON THE SURFACE OF SAID LANDS FOR THE PURPOSE OF MINING,
EXTRACTING, REMOVING, OR RECOVERING SAID MINERALS, IT BEING EXPRESSLY COVENANTED
AND AGREED, HOWEVER, THAT GRANTOR, ITS SUCCESSORS AND ASSIGNS, SHALL HAVE THE
RIGHT TO MINE, EXTRACT, RECOVER AND REMOVE SAID MINERALS BY MEANS OF DIRECTIONAL
OR SUBSURFACE DRILLING OR ANY OTHER RECOVERY METHOD, WHETHER SIMILAR OR
DISSIMILAR, SO LONG AS THE SURFACE OF SAID LANDS IS NOT OCCUPIED OR USED, OR ITS
SUPPORT MATERIALLY IMPAIRED, ALSO FROM THAT PORTION OF SAID LAND LYING EASTERLY
OF THE FOLLOWING DESCRIBED LINE; BEGINNING AT A POINT IN THE NORTHERLY LINE OF
THE SOUTHEAST QUARTER OF SAID SECTION 34, DISTANT THEREON SOUTH 89(DEGREES) 59'
12" EAST 1322.40 FEET FROM THE NORTHWEST CORNER OF SAID SOUTHEAST QUARTER OF
SAID SECTION, SAID POINT OF BEGINNING BEING THE NORTHWEST CORNER OF THE EAST
HALF OF SAID SOUTHEAST QUARTER OF SAID SECTION; THENCE ALONG THE WESTERLY LINE
OF SAID EAST HALF OF SAID SOUTHEAST QUARTER OF SAID SECTION, SOUTH 0(DEGREES) 2'
22" EAST 2590.40 FEET TO THE NORTHERLY LINE OF CENTURY BOULEVARD, 100 FEET WIDE.
ALSO RESERVING UNTO MANCHESTER AVENUE COMPANY, A CALIFORNIA CORPORATION, BY DEED
RECORDED AUGUST 31, 1956 IN BOOK 52179 PAGE 412, OFFICIAL RECORDS, AN UNDIVIDED
28/200 OF ONE PERCENT OF ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES
OR THE PROCEEDS THEREFROM IN AND UNDER OR THAT MAY BE PRODUCED OR SAVED FROM
THAT PORTION OF SAID LAND LYING NORTHERLY OF A LINE PARALLEL WITH AND 1320 FEET
MEASURED SOUTHERLY AT RIGHT ANGLES FROM THE NORTHERLY LINE OF SAID SECTION 34.
ALSO EXCEPT ALL SUBSURFACE OIL, GAS, CASINGHEAD GAS AND OTHER HYDROCARBON AND
OTHER GASEOUS SUBSTANCES LOCATED ON SAID PROPERTY, AS GRANTED TO HOLLYWOOD PARK
OPERATING COMPANY, A DELAWARE CORPORATION, IN A DEED RECORDED MAY 18, 1982 AS
INSTRUMENT NO. 82-511580.
ALSO RESERVING UNTO MASON LETTEAU, F. T. HINTON AND JOHN R. MAC FADEN
CONSTITUTING THE BOARD OF TRUSTEES OF THE ENDOWMENT CARE FUND OF INGLEWOOD PARK
CEMETERY ASSOCIATION, IN DEED RECORDED MARCH 18, 1964 IN BOOK D2398 PAGE 795,
OFFICIAL RECORDS, ALL MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES LYING
IN OR BELOW A DEPTH OF 500 FEET AND WITHOUT RIGHT OF SURFACE ENTRY ON THAT
PORTION OF SAID LAND LYING NORTHERLY OF A LINE PARALLEL WITH AND 1320 FEET
SOUTHERLY MEASURED AT RIGHT ANGLES FROM THE NORTHERLY LINE OF SAID SECTION 34.
<PAGE>
PARCEL 2:
THAT PORTION OF THE NORTHEAST QUARTER OF SECTION 34, TOWNSHIP 2 SOUTH, RANGE 14
WEST, SAN BERNARDINO MERIDIAN, IN THE RANCHO SAUSAL REDONDO, IN THE CITY OF
INGLEWOOD, DESCRIBED AS FOLLOWS:
BEGINNING AT THE SOUTHWESTERLY CORNER OF SAID NORTHEAST QUARTER; THENCE ALONG
THE SOUTHERLY LINE OF SAID NORTHEAST QUARTER, SOUTH 89 degrees 59' 12" EAST
1,322.40 FEET; THENCE NORTH 0 degrees 2' 10" WEST, 1,230.03 FEET TO A POINT IN
THE SOUTHERLY LINE OF THE NORTHERLY 1,410.00 FEET (MEASURED AT RIGHT ANGLES), OF
SAID SECTION, DISTANT EAST THEREON 1,322.16 FEET FROM THE WESTERLY LINE OF SAID
NORTHEAST QUARTER; THENCE ALONG SAID LAST MENTIONED SOUTHERLY LINE WEST 1,322.16
FEET TO SAID WESTERLY LINE OF SAID NORTHEAST QUARTER; THENCE SOUTHERLY ALONG
SAID WESTERLY LINE 1,229.73 FEET TO THE POINT OF BEGINNING.
PARCEL 3:
PARCEL "B" AS SHOWN ON PARCEL MAP 7053, IN THE CITY OF INGLEWOOD, AS PER MAP
RECORDED IN BOOK 73 PAGES 34 TO 37 INCLUSIVE OF MAPS, IN THE OFFICE OF THE
COUNTY RECORDER OF SAID COUNTY.
EXCEPT FROM A PORTION THEREOF, AN UNDIVIDED 28/200THS OF 1 PERCENT OF ALL
MINERALS, OIL, GAS AND OTHER HYDROCARBON SUBSTANCES, OR THE PROCEEDS THEREFROM
IN AND UNDER OR THAT MAY BE PRODUCED OR SAVED FROM SAID LAND, RESERVED BY
MANCHESTER AVENUE COMPANY, IN DEED RECORDED AUGUST 31, 1956 INSTRUMENT NO.
2084 IN BOOK 52179 PAGE 412, OFFICIAL RECORDS.
ALSO EXCEPT FROM SAID PORTION THEREOF THE INTEREST OF INGLEWOOD GOLF COURSE, A
PARTNERSHIP, IN ALL OIL, AND GAS ROYALTIES AND PAYMENTS DERIVED FROM THE
EXISTING OIL AND GAS LEASES ON SAID LAND, OR ANY PART THEREOF, WHICH ARE
PRESENTLY OF RECORD IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY, AS
EXCEPTED AND RESERVED BY INGLEWOOD GOLF COURSE, A PARTNERSHIP, IN DEED RECORDED
NOVEMBER 21, 1962 AS INSTRUMENT NO. 1996 IN BOOK D1829 PAGE 887, OFFICIAL
RECORDS.
ALSO EXCEPT FROM A PORTION OF SAID LAND, ALL MINERALS, OIL, GAS AND OTHER
HYDROCARBON SUBSTANCES LYING IN OR UNDER SAID LAND BELOW A DEPTH OF 500 FEET,
BUT WITHOUT RIGHT OF SURFACE ENTRY, AS RESERVED BY MASON LETTEAU, F. T. HINTON
AND JOHN R. MAC FADEN, BEING THE SUCCESSOR IN THE OFFICE OF CHRIS G. DEMETRIOU
AND THEIR SUCCESSORS IN OFFICE AS BOARD OF TRUSTEES OF THE ENDOWMENT CARE FUND
OF INGLEWOOD PARK CEMETERY ASSOCIATION, IN DEED RECORDED MARCH 18, 1964 AS
INSTRUMENT NO. 1220 IN BOOK D2398 PAGE 795, OFFICIAL RECORDS.
ALSO EXCEPT FROM ALL SAID LAND OIL, MINERAL, GAS, HYDROCARBONS AND OTHER SIMILAR
RIGHTS LYING BELOW THE DEPTH OF 500 FEET FROM THE SURFACE OF SAID LAND, WITHOUT
ANY RIGHT OF ENTRY TO THE SURFACE OR TO THAT PORTION OF THE SUBSURFACE LESS
THAN 500 FEET IN DEPTH, AS QUITCLAIMED TO HOLLYWOOD PARK HOTEL CORPORATION, BY A
QUITCLAIM DEED RECORDED AUGUST 12, 1977 AS INSTRUMENT NO. 77-888762.
<PAGE>
EXHIBIT B
BILL OF SALE
This BILL OF SALE ("Bill of Sale") is made this ____ day of April, 1999 by
and among Hollywood Park, Inc., a Delaware corporation ("Seller"), and Churchill
Downs Incorporated, a Kentucky corporation ("Buyer").
RECITALS
A. Buyer and Seller have entered into that certain Asset Purchase
Agreement, dated as of April __, 1999 (the "Agreement"), which provides, on the
terms and conditions set forth therein, for the sale by Seller and purchase by
Buyer of certain assets of Seller as set forth in the Agreement. Capitalized
terms used herein without definition shall have the meanings ascribed to them in
the Agreement.
B. The assets being sold by Seller and purchased by Buyer include, but are
not limited to, Seller's tangible and intangible personal property (the
"Assets") as set forth in the Agreement.
C. Buyer desires to obtain all right, title and interest in and to any and
all of the Assets.
D. This Bill of Sale is being executed and delivered in order to effect
the sale of the Assets to Buyer, as provided in the Agreement.
NOW THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Seller agrees as follows:
1. Assignment. Seller hereby sells, grants, conveys, bargains, transfers,
assigns and delivers to Buyer, and to Buyer's successors and assigns, all of
Seller's right, title and interest throughout the world, in and to the Assets,
to have and to hold the same forever.
2. Assumption. Buyer, in consideration of the assignment, hereby assumes
and undertakes to discharge all of the Assumed Liabilities except as otherwise
set forth in the Agreement.
3. Further Assurances. Seller agrees that it will, at Buyer's request at
any time and from time to time after the date hereof and without further
consideration, do, execute, acknowledge and deliver or will cause to be done,
executed, acknowledged and delivered all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney and other instruments and assurances
as may be considered by Buyer, its successors and assigns, to be necessary or
proper to better effect the sale, conveyance, transfer, assignment, assurance,
confirmation and delivery of ownership of the Assets to Buyer, or to aid and
assist in collecting and reducing to the possession of Buyer, any and all
Assets.
<PAGE>
4. Construction. This Bill of Sale, being further documentation of a
portion of the conveyances, transfers and assignments provided for in and by the
Agreement, neither supersedes, amends, or modifies any of the terms or
provisions of the Agreement nor does it expand upon or limit the rights,
obligations or warranties of the parties under the Agreement. In the event of a
conflict or ambiguity between the provisions of this Bill of Sale and the
Agreement, the provisions of the Agreement will be controlling.
5. Governing Law. The rights and obligations of the parties under this
Bill of Sale will be construed under and governed by the internal laws of the
State of California (regardless of its or any other jurisdiction's conflict-of-
law provisions).
6. Counterparts. This Bill of Sale may be executed in one or more
counterparts and by facsimile, each of which shall be deemed an original and all
of which taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Bill of Sale as of the
date first written above.
HOLLYWOOD PARK, INC., CHURCHILL DOWNS INCORPORATED,
a Delaware corporation a Kentucky corporation
By: __________________________ By: ______________________________
__________________________ ______________________________
Its: __________________________ Its: ______________________________
-2-
<PAGE>
Exhibit C
LEASE
by and between
Churchill Downs Incorporated,
a Kentucky corporation,
as "Landlord"
and
Hollywood Park, Inc.,
a Delaware corporation,
as "Tenant"
Dated: _________________, 1999
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
-----------------
Page
----
<S> <C> <C>
Article 1. LEASE OF PREMISES.......................................... 1
1.01 Premises................................................ 1
Article 2. TERM; POSSESSION; ACCEPTANCE............................... 2
2.01 Initial Term............................................ 2
2.02 Extension............................................... 2
2.03 The "Term".............................................. 2
Article 3. RENT....................................................... 3
3.01 Base Rent............................................... 3
3.02 Common Area Charges..................................... 4
3.03 Additional Rent; Rent Defined........................... 5
3.04 Interest on Late Payments............................... 6
Article 4. USE AND OPERATION OF PREMISES.............................. 6
4.01 Specific Use of Premises................................ 6
4.02 Compliance with Laws.................................... 7
4.03 Independent Business.................................... 7
Article 5. MAINTENANCE, REPAIRS AND ALTERATIONS....................... 7
5.01 By Tenant............................................... 7
5.02 By Landlord............................................. 8
5.03 Manner of Repairs....................................... 8
5.04 Tenant's Right to Make Repairs.......................... 8
5.05 Alterations; Improvements; Additions.................... 9
5.06 Mechanic's Liens........................................ 9
Article 6. DAMAGE AND DESTRUCTION.................................... 10
6.01 Definitions............................................. 10
</TABLE>
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<TABLE>
<CAPTION>
Page
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<S> <C> <C>
6.02 Insured Casualty........................................ 10
6.03 Uninsured Casualty...................................... 10
6.04 Termination of Lease.................................... 11
6.05 Abatement of Rent....................................... 11
6.06 Casualty Near End of Term............................... 12
6.07 Waiver.................................................. 12
Article 7. INSURANCE, EXONERATION AND INDEMNITY....................... 12
7.01 Liability Insurance..................................... 12
7.02 Property Insurance...................................... 13
7.03 Tenant's Property Insurance............................. 14
7.04 Landlord's Insurance.................................... 14
7.05 Insurance Policies...................................... 14
7.06 Waiver of Subrogation................................... 14
7.07 Exoneration and Indemnity............................... 15
Article 8. ASSIGNMENT, SUBLETTING, HYPOTHECATION...................... 16
8.01 Landlord's Consent Required............................. 16
8.02 Future Consents/Tenant's Liability...................... 17
8.03 Tenant Affiliates....................................... 17
8.04 Security Deposit........................................ 6
8.05 Assignment Restrictions................................. 17
Article 9. EMINENT DOMAIN............................................. 17
9.01 Effect on Lease......................................... 17
9.02 Award................................................... 18
9.03 Rebuilding.............................................. 18
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
Article 10. TENANT'S BREACH; LANDLORD'S REMEDIES...................... 18
10.01 Tenant's Breach........................................ 18
10.02 Landlord's Remedies.................................... 20
10.03 Right to Cure Tenant's Default......................... 21
10.04 Landlord's Remedies Not Exclusive...................... 21
10.05 Receipt of Rents....................................... 22
Article 11. LANDLORD'S DEFAULT; TENANT'S REMEDIES..................... 22
11.01 Landlord's Default..................................... 22
11.02 Tenant's Remedies...................................... 22
11.03 Tenant's Remedies Not Exclusive........................ 22
11.04 Payment of Rents....................................... 23
Article 12. HAZARDOUS SUBSTANCES...................................... 23
12.01 Tenant's Obligations................................... 23
12.02 Notice of Release or Investigation..................... 23
12.03 Definition of "Hazardous Substance".................... 23
Article 13. SUBORDINATION, NON-DISTURBANCE and attornment............. 24
Article 14. TAXES AND OTHER CHARGES................................... 24
14.01 Payment of Taxes....................................... 24
14.02 Tenant's Obligations................................... 24
14.03 Right to Contest....................................... 25
Article 15. UTILITY AND OTHER SERVICES................................ 25
15.01 Utility Charges........................................ 25
15.02 Security; Landlord Nonresponsibility; Indemnity........ 25
Article 16. GENERAL PROVISIONS........................................ 26
16.01 Estoppel Certificates.................................. 26
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
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<S> <C> <C>
16.02 Landlord's Right of Entry.............................. 26
16.03 Waiver................................................. 27
16.04 Surrender of Premises; Holding Over.................... 27
16.05 Notices................................................ 27
16.06 Partial Invalidity; Construction....................... 28
16.07 Captions............................................... 28
16.08 Memorandum of Lease.................................... 29
16.09 Readerboard Signs...................................... 29
16.10 Signage................................................ 29
16.11 Brokers' Commissions................................... 29
16.12 Attorneys' Fees........................................ 29
16.13 Counterparts........................................... 30
16.14 Sole Agreement......................................... 30
16.15 Successors and Assigns................................. 30
16.16 Time is of the Essence................................. 30
16.17 Survival of Covenants.................................. 30
16.18 Landlord's Consent or Approval......................... 31
16.19 Entire Agreement....................................... 31
16.20 Joint and Several Obligations.......................... 31
16.21 No Offer............................................... 31
16.22 Corporate Resolution................................... 31
</TABLE>
-iv-
<PAGE>
LEASE
This LEASE is made and entered into this ___ day of ____________, 1999, by
and between Churchill Downs Incorporated, a Kentucky corporation, hereinafter
called "Landlord", and Hollywood Park, Inc., a Delaware corporation,
hereinafter called "Tenant".
FOR AND IN CONSIDERATION of the mutual covenants and agreements contained
herein, Landlord and Tenant hereby agree as follows.
ARTICLE 1.
LEASE OF PREMISES
-----------------
1.01 Premises
--------
(a) Premises. Landlord hereby leases to Tenant and Tenant hereby leases
--------
from Landlord those certain improvements located on a portion of the real
property more particularly described on Exhibit A attached hereto (the
---------
"Property") comprised of the casino building (the "Premises") and commonly known
as 3883 West Century Boulevard, Inglewood, California 90303, which Premises are
more particularly described in Exhibit B attached hereto, subject to all of the
---------
terms, covenants and conditions set forth herein. Tenant acknowledges that
Landlord has made no representation or warranty, express or implied, regarding
the condition of the Premises except as specifically stated in this Lease.
(b) Common Areas. In addition to the Premises, Tenant shall be entitled
------------
to use the "Common Areas" of the Property comprised of parking areas, driveways,
sidewalks, walkways, loading and unloading areas, trash areas, fences and gates
as described and delineated in Exhibit C attached hereto. Tenant acknowledges
---------
that Landlord has made no representation or warranty, express or implied,
regarding the condition of the Common Areas. Landlord shall maintain the Common
Areas in neat, clean, safe, good order and condition. With respect to the Common
Areas, Landlord shall have the right, from time to time, provided, that Landlord
--------
at all times provides sufficient parking facilities for the operation of
Tenant's business, access to the Premises, and access between the Racetrack and
the Premises all similar in convenience to that provided to patrons of the
Hollywood Park Casino prior to the Closing Date to (i) make changes to the
Common Areas or to close temporarily any of the Common Areas for maintenance
purposes; (ii) add additional buildings and improvements to the Common Areas;
(iii) use the Common Areas while engaged in making additional improvements,
repairs or alterations; and (iv) promulgate reasonable rules and regulations
with respect to the use thereof. In no event will Landlord charge patrons who
have already paid admission to the Racetrack for readmission to the Racetrack
after visiting the Casino.
(c) Parimutuel Space. Notwithstanding anything contained herein to the
----------------
contrary, Landlord hereby reserves unto itself use and access rights sufficient
to allow Landlord to operate the parimutuel activities on that portion of the
Premises described and delineated on Exhibit D hereto. Landlord shall, at its
---------
sole cost and expense, provide simulcasts of all events which are otherwise
simulcast from the Racetrack to locations within the Premises consistent with
the past practices of Landlord's predecessor in interest immediately prior to
the date hereof. Landlord, at its sole cost and expense, shall be
-1-
<PAGE>
responsible for the maintenance, repair and replacement of all equipment
necessary to the operation of the Parimutuel Space.
ARTICLE 2.
TERM; POSSESSION; ACCEPTANCE
----------------------------
2.01 Initial Term
------------
The term ("Initial Term") of this Lease shall commence on [the Closing
Date] (the "Commencement Date") and shall continue for a period of one hundred
and twenty (120) full calendar months thereafter unless sooner terminated
pursuant to any provision hereof. The Initial Term shall end at 11:59 p.m. on
__________________.
2.02 Extension
---------
Tenant will have the option (the "Extension Option") to extend the Initial
Term for one (1) period of ten (10) years (the "Extension Period") upon the same
terms, covenants and conditions as herein contained, except that (i) the Base
Rent for any such Extension Period will be increased as provided in Section
3.01; and (ii) there shall be no further extension options at the end of such
ten-year period. Tenant may exercise such option by giving written notice to
Landlord ("Exercise Notice") at least nine (9) months before the expiration of
the Initial Term. Upon Tenant's giving such Exercise Notice, the Initial Term
of this Lease will be automatically extended for the applicable Extension Period
without the execution of an extension or renewal lease.
(a) The Extension Option may be exercised only by written notice
delivered by Tenant to Landlord as provided in this Section 16.05 and only if,
as of the date of delivery of the notice, Tenant is not in Default under this
Lease.
(b) The rights contained in this Section 2.02 may be exercised by the
originally named Tenant or by any assignee of Tenant's interest in this Lease if
the assignment has been approved or deemed approved by Landlord in accordance
with Section 8.01.
(c) If Tenant properly exercises the Extension Option and Tenant is not
in Default under this Lease on the expiration date of the Initial Term, the Term
shall be extended for the Extension Period.
2.03 The "Term"
----------
The phrase "the Term" (and such similar phrases as "the term of this
Lease," "the term hereof" and phrases of similar import, whether or not
capitalized) will include the Initial Term, plus any Extension Period as to
which Tenant exercises its right to extend this Lease pursuant to Section 2.02.
-2-
<PAGE>
ARTICLE 3.
RENT
----
3.01 Base Rent
---------
(a) During the Initial Term of the Lease, Tenant shall pay to Landlord
rent in the amount of two hundred fifty-thousand dollars ($250,000) per month
(the "Base Rent"). Payment of the Base Rent shall be made at Landlord's offices
at the Racetrack or at any other place that Landlord may from time to time
designate in writing. Payment must be in United States dollars, either in the
form of a check or via electronically transmitted funds.
(b) The Base Rent shall be increased upon the commencement of the
Extension Period in accordance with the provisions of Section 3.01(c) herein.
(c) Extension Period Rent
(1) As used herein, the following terms shall have the following
meanings:
(A) "Index" shall mean the Consumer Price Index for All Urban
Consumers U.S. City Average, All Items (base years 1982-1984=100), published by
the Bureau of Labor Statistics of the United States Department of Labor. In the
event the Index shall hereafter be converted to a different standard reference
base or otherwise revised, such conversion factor, formula or table for
converting the Index as may be published by the Bureau of Labor Statistics shall
be used, or if the Bureau of Labor Statistics shall not publish the same, then
such conversion factor, formula or table selected by Landlord as may be
published by any other nationally recognized publisher of similar statistical
information shall be used. In the event the Index shall cease to be published,
then there shall be substituted for the Index such other index of similar nature
as is then generally recognized and accepted for like determinations of
purchasing power, as Landlord shall select.
(B) "Base Index" shall mean the Index in effect for the
calendar month which is three (3) months prior to the calendar month in which
the Commencement Date occurs. By way of example, if the Commencement Date occurs
in February, the Base Index would be the Index for the month of November
immediately preceding the Commencement Date.
(C) "Adjustment Date" shall mean the date on which the
Extension Period commences.
(D) "Adjustment Index" shall mean the Index in effect for the
calendar month which is three (3) months prior to the calendar month in which
the Adjustment Date occurs. If the Index shall cease to be published , and there
is no Index in effect for such month, the Adjustment Index shall be the most
currently available quotation of the Index published prior to the relevant
Adjustment Date.
(2) The Base Rent shall be adjusted as of the Adjustment Date to be
the Base Rent multiplied by a fraction, the numerator of which shall be equal to
the Adjustment Index for such Adjustment Date and the denominator of which shall
be equal to the Base Index, but in no event less than one (1). Landlord shall,
within twenty (20) days after the
-3-
<PAGE>
publication of the Adjustment Index, give notice to Tenant of the Adjustment
Index and the resulting adjustment, if any, in the Base Rent as determined by
Landlord, and Landlord's computation thereof shall be conclusive and binding
(except for mathematical error), but shall not preclude any further adjustment
which may be required in the event of a published amendment of the Adjustment
Index. If Landlord's notice is not given prior to the Adjustment Date, until
receipt of Landlord's notice, Tenant shall pay, as interim Base Rent, the Base
Rent in effect immediately prior to the Adjustment Date. Commencing with the
next ensuing calendar month following Landlord's notice and until Landlord's
notice of the Adjustment Index and adjustment of Base Rent, if any, with respect
to the next succeeding Adjustment Rent required to be paid for such period as
indicated in Landlord's notice, Tenant shall pay to Landlord the amount of the
deficiency within twenty (20) days of Tenant's receipt of Landlord's notice.
Landlord's delay in giving notice of an adjustment in Base Rent shall not
constitute a waiver of Landlord's right to receive such adjusted Base Rent for
all periods from and after the applicable Adjustment Date.
(d) The Base Rent shall be paid in advance on the first day of each month
during the Term, without any deduction or offset, prior notice or demand.
Tenant's obligation to pay Base Rent shall commence on the Commencement Date. If
the Commencement Date shall be a day other than the first day of the calendar
month, or, if the Term shall end on any day other than the last day of the
calendar month, then the Base Rent for the first and/or last partial calendar
month of the Term, as the case may be, shall accrue on a daily basis for each
day of that fractional month at a daily rate equal to 1/30th of the Base Rent.
All other payments or adjustments that are required to be made under the terms
of this Lease and that require proration on a time basis shall be prorated on
the same basis.
(e) On the date Tenant executes this Lease, Tenant shall pay to Landlord
the sum of $250,000 for the period from the Commencement Date until the first
rent payment date, which amount represents the Base Rent for the first full
calendar month of the Term.
(f) Tenant shall pay to Landlord the Base Rent, Common Area Charges,
Additional Rent and other payments due hereunder without abatement, deduction or
set-off except as otherwise expressly provided herein.
3.02 Common Area Charges. Tenant shall pay to Landlord during the Term
hereof certain Common Area Charges (as defined below) in accordance herewith.
Common Area Charges shall be allocated to Tenant and Landlord in proportion to
their respective use of each of the facilities comprising the Common Areas.
(a) "Common Area Charges" shall be an amount equal to Tenant's share of
the costs, if any, incurred by Landlord in the exercise of its reasonable
discretion, for the operation, repair and maintenance of the Common Areas as
described in Section 1.01(c) herein, provided however, Landlord shall be solely
responsible for all costs, expenses and taxes related to the construction of any
additional buildings or similar capital improvements to the Common Areas or any
maintenance thereto subsequent to the execution date of this Lease.
(b) In the event of a dispute between Landlord and Tenant as to the
determination of Tenant's share of Common Area Charges, Landlord's auditors and
Tenant's auditors shall have 15 days after submission of a dispute to seek to
mutually agree upon such determination. If they are unable to agree, they shall
mutually select another "Big
-4-
<PAGE>
5" accounting firm which shall make the determination and whose decision, in the
absence of manifest error, shall be conclusive and binding on the parties, each
of whom shall be entitled to present evidence in support of its position. The
cost of the parties accounting firms shall be borne by the respective parties
and the costs of any third accounting firm selected shall be borne equally by
landlord and Tenant.
(c) Common Area Charges shall be payable by Tenant within thirty (30)
days after a reasonably detailed statement of actual expenses is presented to
Tenant by Landlord. At Landlord's option, however, an amount may be estimated by
Landlord from time to time of Common Area Charges and the same shall be payable
in twelve (12) equal installments during each calendar month of the Term, on the
same day as the Base Rent is due hereunder. Landlord shall deliver to Tenant
within sixty (60) days after the expiration of each calendar year a reasonably
detailed statement showing the actual expenses comprising elements of Common
Area Charges incurred during the preceding year. In the event Tenant has paid
estimates of Common Area Charges as aforesaid and such payments exceed the
actual charges indicated on Landlord's statement, Tenant shall be entitled to
credit the amount of such overpayment against future payments of Base Rent. If
Tenant's payments were less than Tenant's share of actual charges as indicated
on such statement, Tenant shall pay to Landlord the amount of the deficiency
within twenty (20) days after delivery by Landlord to Tenant of such statement.
(d) Tenant, at its expense, may make, or cause to be made, an audit of
all books and records of Landlord, including its respective bank accounts which
in any way pertain to the accuracy of the Common Area Charges. Landlord shall
give Tenant and its designated representatives access to such books and records
at all reasonable times for purposes of making any such audit and preparing any
such statement, report or financial statements. Such audit shall be made and
such statements and reports shall be prepared by a person or persons selected by
Tenant. The costs thereof shall be paid by Tenant; provided, however, that if
such audit results in an adjustment of five percent (5%) or more or discloses
any willful inaccuracy of Landlord, the cost of such audit shall be borne by
Landlord.
(e) Notwithstanding the foregoing, if Landlord makes the election set
forth in the Parking License to use parking facilities on the property subject
thereto, all Common Area Charges shall abate for so long as the Parking License,
executed concurrently with this Lease, remains in effect.
3.03 Additional Rent; Rent Defined
-----------------------------
(a) In addition to the Base Rent, Tenant shall also pay as additional
rent ("Additional Rent"), without deduction or offset, all Common Area Charges,
other charges relating to Tenant's use of the Premises, including, without
imitation, charges for utilities, taxes, and all other charges, fees, costs,
taxes, impositions, expenses and other sums required to be paid by Tenant under
the provisions of this Lease whether or not the same shall be designated as
Additional Rent. In the event of nonpayment of any Additional Rent when due,
Landlord shall have all of the rights and remedies provided hereunder or by law
for the nonpayment of rent.
(b) As used in this Lease, the term "Rent" shall include Base Rent for
the Premises, Common Area Charges and Additional Rent.
-5-
<PAGE>
3.04 Interest on Late Payments.
--------------------------
Any Rent or other amounts due from Tenant to Landlord hereunder which are
not paid within five (5) days of when due shall bear interest at a rate (the
"Agreed Rate") equal to two percent (2%) per annum in excess of the "reference
rate" as announced by Bank of America, NT&SA, Los Angeles main office, as such
rate may change from time to time, from the date due until the date paid,
regardless of whether a notice of default or any other notice is given by
Landlord; provided, however, if such rate is greater than the maximum rate of
interest then permitted to be charged by law, the Agreed Rate shall be such
maximum rate permitted by law. In the event that Bank of America, NT&SA, shall
cease to exist or shall cease to announce a "reference rate" (or equivalent
prime rate) or shall cease to have a Los Angeles office, there shall be
substituted such alternative bank, alternative rate or alternative office as
Landlord shall select. Acceptance of interest by Landlord shall not constitute a
waiver of Tenant's default with respect to the overdue amount, or prevent
Landlord from exercising any other rights or remedies.
3.05 Security Deposit
----------------
Tenant shall deposit an amount equal to one month's Base Rent with Landlord
as a security deposit for the performance by Tenant of the provisions of this
Lease, which shall not be construed as an advance payment of Rent hereunder. If
Tenant is in Default hereunder, Landlord shall be entitled to use the security
deposit, or any portion of it, to cure the Default or to compensate Landlord for
damages sustained by Landlord resulting from Tenant's Default. Tenant shall
immediately upon demand pay to Landlord a sum equal to the portion of the
security deposit expended or applied by Landlord as provided in this Section
3.05 so as to maintain the security deposit in the sum initially deposited with
Landlord. If Tenant is not in Default at the expiration or termination of this
Lease, Landlord shall return the security deposit to Tenant within fourteen (14)
days after the expiration of the Term of this Lease or after Tenant has vacated
the Premises, whichever is later. Landlord (i) may commingle the security
deposit with Landlord's general funds, and (ii) shall not pay Tenant interest on
the security deposit. THIS PROVISION SHALL NOT APPLY TO THE ORIGINALLY NAMED
TENANT UNDER THIS LEASE OR TO ANY ASSIGNEE WITH A NET WORTH EQUAL TO OR IN
EXCESS OF THE MINIMUM NET WORTH.
ARTICLE 4.
USE AND OPERATION OF PREMISES
-----------------------------
4.01 Specific Use of Premises
------------------------
Tenant shall use and occupy the Premises as a card club and/or for other
forms of legalized gaming, and for private parties, meetings and other ancillary
uses and for no other purpose without the prior written consent of Landlord.
Notwithstanding the foregoing, in the event any permitted use of the Premises
becomes illegal, Tenant may use the Premises for any lawful purpose so long as
such use (i) does not materially increase the burdens on the Building Systems
(as that term is Section 5.01) or the Common Areas (including without
limitation, parking); (ii) does not increase the real estate tax or insurance
costs, unless Tenant agrees to pay any such increases; and (iii) does not
compete with the types of
-6-
<PAGE>
business conducted by Landlord on the Property. Tenant understands that
Landlord's primary business is the operation of a racetrack on the Property, not
the leasing of commercial space, and that Landlord is entering into this
transaction primarily to ensure the existence, at this location, of a first-
class card club. Tenant agrees that it will not change the name of the card club
without the prior consent of Landlord. Tenant shall not allow the Premises to be
used for any unlawful purpose, nor shall Tenant cause or permit any noxious use
of or nuisance in, on or about the Premises. Tenant shall not commit or suffer
the commission of any waste in, on or about the Premises. Tenant shall not do or
permit anything to be done on or about the Premises or bring or keep anything
therein which will in any way increase the rate or jeopardize the coverage of
insurance thereon.
4.02 Compliance with Laws
--------------------
Landlord and Tenant shall cause all maintenance, repair and alterations to
the Premises to be performed in a good and workmanlike manner and in compliance
with all federal, state, county, city, or government agency laws, statutes,
ordinances, standards, rules, requirements or orders now in force or hereafter
enacted, promulgated, or issued and any covenants and restrictions of record
(including, without limitation, government measures regulating or enforcing
public access, occupational, health, or safety standards for employers,
employees, landlords, or tenants) (collectively, "Applicable Laws"). The
obligation and expense of making any repairs, replacements, alterations or
improvements to the Premises necessary to comply with all Applicable Laws shall
be allocated between Landlord and Tenant pursuant to Article 5 herein.
4.03 Independent Business
--------------------
By this Lease, neither party acquires any right, title or interest in or to
any property of the other party except such rights as are specifically stated in
this Lease. The relationship between Landlord and Tenant is solely that of
landlord and tenant, and is not and shall not be deemed to be a partnership or
joint venture.
ARTICLE 5.
MAINTENANCE, REPAIRS AND ALTERATIONS
------------------------------------
5.01 By Tenant
---------
Tenant will, at its sole cost and expense, perform such maintenance and
repairs as are necessary to keep and maintain the non-structural portions of the
Premises and all Building Systems (as hereinafter defined) in good and sanitary
order, condition and repair, but excluding ordinary wear and tear; provided,
however, that damage caused by casualty or by subsidence or other earth movement
or by Landlord's failure to perform its obligations under this Lease shall be
governed by Articles 6 and 11, respectively. For purposes of this Lease, the
term "Building Systems shall mean all systems and equipment serving the building
and other improvements comprising the Premises, including, without limitation,
mechanical, plumbing, electrical, fire/life safety, elevator, escalator, and
heating, ventilation and air conditioning ("HVAC") systems.
-7-
<PAGE>
5.02 By Landlord
-----------
Landlord will, at its sole cost and expense, perform such maintenance,
repairs and replacements as are required to maintain in good order, condition
and repair all structural components of the Premises, including but not limited
to, roof (including skylights and trap doors), foundation, footings, load-
bearing and exterior walls columns and all other structural elements of the
Premises. Further, if at any time during the Term hereof, any of the Building
Systems, or any components thereof require replacement or repair, the cost of
which would be treated as a capital expenditure under generally accepted
accounting principles, (i) Landlord shall promptly perform and pay for such
replacement or repair, and (ii) Tenant shall reimburse Landlord annually an
amount equal to the cost of any such repair or replacement, fully amortized over
its useful life in accordance with generally accepted accounting principles
together with interest at the reference rate (as that term is defined in Section
3.04) on the date of the commencement of the replacement or repair, to the
extent so amortized during the Term hereof. Landlord will not be in default of
its obligations under this Section 5.02 if Landlord performs the repairs,
replacements and maintenance within twenty (20) days after written notice by
Tenant to Landlord of the need for such repairs, replacements and maintenance.
If, due to the nature of the particular repair, replacement or maintenance
obligation, more than twenty (20) days are reasonably required to complete it,
Landlord will not be in default under this Section 5.02 if Landlord begins work
within such twenty (20) day period and diligently prosecutes the work to
completion. Except as otherwise provided in this Lease, Tenant waives its
rights, including its right to make repairs at Landlord's expense, under
California Civil Code (S)(S) 1941 - 1942 or any similar law, statute or
ordinance now or hereafter in effect.
5.03 Manner of Repairs
-----------------
All maintenance, repairs and replacements required to be made by either
party hereunder will be made in compliance with Applicable Laws and in a good
and workmanlike manner, using materials at least substantially comparable to the
materials used in the original construction (or most recent renovation, if
applicable) of the Premises. Each party shall commence its maintenance, repairs
and replacements promptly after notification by the other of the need therefor,
and carry out and complete the same with all due diligence and in such a manner
as to cause the least possible inconvenience to the other in the conduct of its
business at the Property. If repairs by one party can be made outside of the
other party's business hours without substantial additional cost, reasonable
efforts will be made to do so.
5.04 Right to Make Repairs
---------------------
Notwithstanding anything to the contrary herein, if one party provides
notice to the other party of an event, condition or circumstance that requires
repair, replacement or maintenance by the other party under Section 5.02, and if
such party fails to complete such repair, maintenance or replacement within the
period specified in Section 5.02, then the requesting party may (but shall not
be obligated to) perform such repair, replacement or maintenance on the other
party's behalf and at such party's cost and expense. If any repair, replacement
or maintenance for which one party is responsible hereunder is of an emergency
nature which, if not attended to promptly, might result in injury to persons or
damage to property, or interfere with the conduct of the other party's business
at the Property, then the
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<PAGE>
other party, without prior notice, may perform such repairs, replacements or
maintenance on the responsible party's behalf and at such party's cost and
expense. Any sums owing from one party to the other under this Section 5.04
shall be due immediately at the time the sum is paid and, if paid at a later
date, shall bear interest at the Agreed Rate from the date the sum is paid until
reimbursed.
5.05 Alterations; Improvements; Additions
------------------------------------
Tenant shall be permitted to make any and all alterations, improvements,
additions or installations ("Improvements") in or about the Premises without
Landlord's consent so long as the estimated cost of any such Improvement does
not exceed $100,000 and does not affect the structural parts of the Premises.
Tenant shall not make or permit the making of any Improvements that affect the
structural parts of the Premises or that have an estimated cost in excess of
$100,000 without Landlord's prior written consent, which consent shall not be
unreasonably withheld or delayed. No Improvements shall be undertaken until
Tenant shall have procured and paid for, so far as the same may be required from
time to time, all municipal and other governmental permits and authorizations of
the various municipal departments and governmental subdivisions having
jurisdiction, and Landlord shall join in the application for such permits or
authorizations whenever such action is necessary. Worker's compensation
insurance covering all persons employed in connection therewith and with respect
to whom death or bodily injury claims could be asserted against Landlord shall
be maintained by Tenant at all times when any work is in progress in connection
with any changes or alterations. All Improvements which may be made on the
Premises by Tenant or any subtenant shall become the property of Landlord and
remain upon and be surrendered with the Premises at the expiration or prior
termination of the Lease at the election of Landlord. In the event that
Landlord elects to have such Improvements removed, Tenant shall upon notice from
Landlord remove any and all Improvements constructed by Tenant as directed by
Landlord and shall restore the Premises to the condition it was in prior to the
construction of such Improvements.
5.06 Mechanic's Liens
----------------
Tenant shall promptly pay in cash or its equivalent and discharge all
claims for work or labor done or goods or materials furnished by third parties,
at the request of Tenant or any Subtenant and shall keep the Premises free and
clear of all mechanic's and materialman's liens in connection therewith. If any
mechanic's or materialman's lien is filed for work done on behalf of Tenant or
any Subtenant at, or materials supplied to, the Premises by a third party,
Tenant shall remove such lien by payment or bond (regardless of whether Tenant
contests the claim made by the person asserting such lien and regardless of
whether such claim is valid or has any basis in fact or law) not later than
thirty (30) days after written demand for such removal is made by Landlord. If
Tenant shall fail to discharge any such lien within such 30-day period, then in
addition to any other right or remedy of Landlord, Landlord may, but shall not
be obligated to, take such action or pay such amount as Landlord, in its sole
discretion, shall deem appropriate to remove such lien, and Tenant shall pay to
Landlord as Additional Rent all amounts (including attorneys' fees) paid or
incurred by Landlord in connection therewith within five (5) days after demand
by Landlord, together with interest at the Agreed Rate from the date of payment
by Landlord. Notwithstanding the foregoing, Tenant shall have the right to
contest the correctness or the validity of any such lien if, immediately upon
demand by Landlord, Tenant procures and records a lien release
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<PAGE>
bond issued by a corporation authorized to issue surety bonds in California in
an amount equal to one and one-half times the amount of the claim of lien. The
bond shall meet the requirements of Civil Code (S) 3143 or any similar or
successor statute and shall provide for the payment of any sum that the claimant
may recover on the claim (together with costs of suit, if it recovers in the
action). Landlord shall have the right to post and keep posted at any and all
times on the Premises any notices for the protection of Landlord and the
Premises from any such claim. Tenant shall, before the commencement of any work,
or the delivery of any materials, which might result in any such lien, give to
Landlord written notice of its (or any subtenant's) intention to perform such
work or obtain such materials in sufficient time to enable the posting of such
notices.
ARTICLE 6.
DAMAGE AND DESTRUCTION
----------------------
6.01 Definitions
-----------
For purposes of this Lease, the following terms will have the meanings
indicated:
(a) "Insured Casualty" means damage or destruction to improvements on the
Premises required to be covered by the insurance described in Section 7.02,
including any deductible amounts or coverage limits.
(b) "Uninsured Casualty" means damage or destruction to improvements on
the Premises which is not an Insured Casualty.
(c) "Threshold Amount" means an amount equal to (i) ten percent (10%) of
the replacement cost of the Premises at the time of a casualty, without
deduction for depreciation, plus (ii) available insurance proceeds, if any,
payable with respect to an earthquake or other Uninsured Casualty.
6.02 Insured Casualty
----------------
If an Insured Casualty occurs, Landlord, at its cost and expense, will
promptly repair, restore and rebuild the improvements on the Premises in a good
and workmanlike manner and with all due diligence, to substantially the same
condition as existed immediately before the Insured Casualty; provided, however,
that if so requested by Tenant and approved by Landlord, acting reasonably,
Landlord will incorporate such changes and modifications in the improvements as
Tenant reasonably determines will make the improvements more useful for the
conduct of Tenant's business, so long as the value of the improvements as so
changed or modified will be generally comparable to the value of the
improvements immediately before the Insured Casualty. Any deductibles or
coverage limits shall be shared equally between Landlord and Tenant.
6.03 Uninsured Casualty
------------------
If an Uninsured Casualty occurs and the cost to repair and restore the same
does not exceed the Threshold Amount, Landlord will promptly perform such
repairs and restoration and the costs thereof shall be shared equally between
Landlord and Tenant. If, however, the cost to repair and restore an Uninsured
Casualty exceeds the Threshold Amount, Landlord may either: (i) perform such
repairs and restoration at its expense, in which case this Lease
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<PAGE>
will remain in full force and effect, or (ii) terminate this Lease by giving
written notice to Tenant within sixty (60) days after Landlord becomes aware of
the occurrence of the Uninsured Casualty. Such termination will be effective
sixty (60) days following Tenant's receipt of such notice; provided, however,
that such termination will not occur and this Lease will remain in full force
and effect, and Landlord will promptly repair and restore the Premises at
Tenant's sole cost and expense, if prior to the effective date of such
termination Tenant gives written notice to Landlord that Tenant will pay the
cost of such repairs and restoration. Landlord may require reasonable evidence
of Tenant's financial ability to pay such costs and expenses. All repairs and
restoration required to be performed by Landlord pursuant to this Section 6.03
will be performed in the same manner as provided in Section 6.02.
6.04 Termination of Lease
--------------------
Within thirty (30) days after the occurrence of any damage to or
destruction of the Premises (whether insured or uninsured) which Landlord is
obligated or elects to repair and restore pursuant to this Article 6, Landlord
will give written notice to Tenant setting forth Landlord's contractor's
reasonable determination as to the time necessary to complete such repairs and
restoration ("Landlord's Repair Time Estimate"). Notwithstanding anything to the
contrary herein, if Landlord's Repair Time Estimate indicates that it will take
more than two hundred and seventy (270) days after the occurrence of such damage
or destruction to complete such restoration or repair, Tenant may terminate this
Lease by written notice to Landlord within thirty (30) days after Tenant's
receipt of Landlord's Repair Time Estimate. If Tenant is not entitled or
elects not to terminate this Lease pursuant to the preceding sentence, Landlord
will commence the repair and restoration promptly and will diligently prosecute
such work to completion. If during the course of such work Landlord determines
that such repair and restoration may not be completed within two hundred seventy
(270) days after the occurrence of the damage or destruction, then Landlord will
promptly provide Tenant with a revised written schedule for completion of the
repairs and restoration. Tenant may, within ten (10) days after notice of such
revised schedule, inform Landlord in writing that it (a) accepts such revised
schedule (in which case this Lease will remain in full force and effect
according to its terms) or (b) elects to terminate this Lease (in which case
this Lease will terminate as of the date indicated below). If Tenant fails to
respond within ten (10) days after receipt of written notice of such revised
schedule, Tenant will be deemed to have accepted such revised schedule. If the
repair and restoration of the Premises is not actually completed within two
hundred seventy (270) days after the occurrence of the damage or destruction, or
within fourteen (14) days after the applicable revised scheduled completion date
(if any), agreed to by Tenant in writing, then Tenant may terminate this Lease
by written notice to Landlord at any time thereafter and prior to the actual
completion of such repair and restoration. If Tenant exercises its right to
terminate pursuant to this Section 6.04, then this Lease will terminate as of
the date set forth in Tenant's written notice to Landlord. If Tenant does not
exercise its right to terminate this Lease pursuant to this Section 6.04, then
this Lease will continue in full force and effect according to its terms.
6.05 Abatement of Rent
-----------------
If the Premises are rendered untenantable by reason of any Insured or
Uninsured Casualty, or if it is impractical for Tenant to continue to operate
its business within the tenantable portion of the Premises, either due to lack
of access or utilities or for any other
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<PAGE>
cause arising as a result of the Insured or Uninsured Casualty, the Rent and all
other charges payable by Tenant under this Lease will abate for the period from
the date of the damage or destruction until the earlier to occur of (a) ten (10)
business days following delivery of the Premises to Tenant after completion of
Landlord's repair and restoration work or (b) the date that Tenant reopens for
business in the Premises. If only a portion of the Premises is rendered
untenantable by reason of such Insured or Uninsured Casualty and it is practical
for Tenant to continue to operate within the Premises following such casualty,
the Rent and other charges payable by Tenant will abate proportionately based
upon the extent and duration of such period of untenantability.
6.06 Casualty Near End of Term
-------------------------
Anything in this Article 6 to the contrary notwithstanding, if the Premises
are destroyed or substantially damaged by an Insured or Uninsured Casualty
during the last twenty four (24) months of the Term, and the Premises cannot be
completely restored within a period of ninety (90) days from the date of such
damage, this Lease may be terminated upon written notice by either party to the
other given within thirty (30) days after the occurrence of such damage.
However, if at the time of said damage Tenant has a right to extend the Term
pursuant to Section 2.02 hereof, Landlord may not terminate this Lease until it
has given Tenant notice of Landlord's intent to terminate this Lease and Tenant
fails to exercise said right of extension within thirty (30) days after receipt
of said notice. If Tenant fails to exercise said right of extension within
thirty (30) days after receipt of such notice from Landlord, this Lease will
terminate effective forty five (45) days after Tenant's receipt of said notice
from Landlord.
6.07 Waiver
------
Except as otherwise expressly provided in this Article 6, destruction or
damage to the Premises will not terminate this Lease, notwithstanding any laws
of California. If this Lease is terminated pursuant to this Article 6, Tenant
will be relieved from all liabilities hereunder except the liability to pay Rent
up to the date of such casualty and any accrued charges, costs and expenses
required to be paid by Tenant hereunder up to said date. Such termination will
not impair or affect the right of either party hereto to any remedy for breach
by the other of any obligation under this Lease occurring prior to such
termination.
ARTICLE 7.
INSURANCE, EXONERATION AND INDEMNITY
------------------------------------
7.01 Liability Insurance
-------------------
Tenant shall obtain and keep in force during the Term of this Lease a
Commercial General Liability policy of insurance protecting Tenant and Landlord
(as an additional insured) against claims for bodily injury, personal injury or
personal advertising injury, and property damage based upon, involving, or
arising out of the ownership, use, occupancy, or maintenance of the Premises and
all areas appurtenant thereto. Such insurance shall be on an occurrence basis
providing single limit coverage in an amount not less the average limitation
then being maintained by reputable owners or operators of similar space based on
Tenant's use (and the parties agree that current levels for Casino operation is
not less than Ten Million Dollars and No Cents ($10,000,000.00) per occurrence).
Such insurance shall be with an "Additional Insured-Managers or Landlords of
Property" Endorsement and
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<PAGE>
contain the "Amendment of the Pollution Exclusion" for damage caused by heat,
smoke, or fumes from a hostile fire. Such policy shall not contain any intra-
insured exclusions as between insured persons or entities, but shall include
coverage for liability assumed under this Lease as an "insured contract" for the
performance of Tenant's indemnity obligations under this Lease. During the
construction, alteration, or repair of any improvements on the Premises, the
party contracting for said construction shall provide and maintain workers'
compensation and employers' liability insurance covering all persons employed in
connection with such construction, alteration, or repair and with respect to
whom death or personal injury claims could be asserted against Landlord, Tenant,
or the Premises.
7.02 Property Insurance
------------------
(a) Building and Improvements. Landlord shall obtain and keep in
-------------------------
force during the Term a policy or policies of insurance insuring against damage
to, or destruction of any improvements comprising the Premises, together with
all fixtures, machinery and equipment therein and thereon. The amount of such
insurance shall be equal to the full replacement cost of the improvements
comprising the Premises, as such cost shall change from time to time, or such
greater amount as may be required pursuant to Applicable Laws. Such policy or
policies shall insure against all risks of direct physical loss or damage
(including, if mutually approved of by Landlord and Tenant or required by
Landlord's mortgagee, the perils of flood and/or earthquake if and to the extent
obtainable on commercially reasonable terms, including, without limitation,
coverage for any additional costs resulting from debris removal and coverage for
the enforcement of any ordinance or law regulating the reconstruction or
replacement of any undamaged sections of the Premises required to be demolished
or removed by reason of the enforcement of any Applicable Law as the result of a
covered cause of loss. Such policy or policies shall also contain an agreed
valuation provision (in lieu of any coinsurance clause), and waiver of
subrogation. If such insurance coverage has a deductible clause, the deductible
amount shall not exceed fifty thousand dollars ($50,000) per occurrence.
(b) Rental Value. Landlord shall, in addition, obtain and keep in force
------------
during the Term for the costs of a policy or policies in the name of Landlord,
with loss payable to Landlord, insuring the loss of the Rent for one (1) year.
Such insurance shall provide that in the event the Lease is terminated by reason
of an insured loss, the period of indemnity for coverage shall be extended
beyond the date of the completion of repairs or replacement of the Premises, to
provide for one (1) full year's loss of rental revenues from the date of any
such loss. Such insurance shall contain an agreed valuation provision in lieu of
any coinsurance clause, and the amount of coverage shall be adjusted annually to
reflect the projected Rent otherwise payable by Tenant, for the next one (1)
year. Tenant shall be liable for any deductible amount in the event of such
loss. Tenant may obtain its own policy of business interruption insurance.
(c) Tenant's Reimbursement Obligations. Tenant will reimburse Landlord
----------------------------------
for all insurance costs incurred under this Section 7.02 ("Reimbursable
Insurance Costs"). Immediately on receipt of each insurance bill covering a
Reimbursable Insurance Cost, Landlord will furnish a copy to Tenant. Tenant will
pay the amount of the Reimbursable Insurance Cost for which it is responsible
hereunder to Landlord within twenty (20) days of its receipt of the insurance
bill.
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<PAGE>
7.03 Tenant's Property Insurance
---------------------------
Tenant, at its sole cost, shall either by separate policy or, at Landlord's
option, by endorsement to a policy already carried, maintain insurance coverage
on all of Tenant's personal property in, on, under, or about the Premises
similar in coverage to that carried under Paragraph 7.2 hereof. Such insurance
shall be full replacement cost coverage with a deductible of not to exceed Fifty
Thousand Dollars and No Cents ($50,000.00) per occurrence. The proceeds from
any such insurance shall be used by Tenant for the replacement of personal
property.
7.04 Landlord's Insurance
--------------------
Landlord, at its expense, may obtain and keep in force during the Term of
this Lease a blanket policy of public liability insurance covering the Premises.
7.05 Insurance Policies
------------------
Insurance required hereunder shall be kept in companies duly licensed to
transact business in the State of California and if such company is rated,
maintaining during the policy term a "General Policyholders Rating" of at least
A, VIII (or such lesser rating as may be reasonably acceptable to the non-
insuring party), as set forth in the most current issue of "Best's Insurance
Guide." Neither party shall do or permit to be done anything which shall
invalidate the insurance policies referred to in this Article 7. With respect
to insurance required of the parties hereunder, the party undertaking to obtain
such insurance (the "Insuring Party") shall cause to be delivered to the other
party (the "Non-Insuring Party") certified copies of policies of insurance or
certificates evidencing the existence and amounts of such insurance with the
insureds and loss payable clauses as required by this Lease. No such policy
shall be cancelable or subject to modification except after thirty (30) days
prior written notice from the Insuring Party to the Non-Insuring party. The
Insuring Party shall, at least fifteen (15) days prior to the expiration of such
policies, furnish the Non-Insuring Party with evidence of renewals or "insurance
binders" evidencing renewal thereof, or else the Non-Insuring may order such
insurance and charge the cost thereof to the Insuring Party, which amount shall
be payable upon demand. If an Insuring Party shall fail to procure and maintain
the insurance required to be carried by it under this Article 7, the Non-
Insuring Party may, but shall not be required to, procure and maintain such
insurance, but at the Insuring Party's expense.
The insurance provided for herein may be brought within the coverage of a
so-called "blanket" policy or policies of insurance carried and maintained by
Tenant or Landlord if (i) Landlord and, if requested by Landlord, any mortgagee
of Landlord shall be named as additional insureds or loss payees thereunder as
required in this Article 7, (ii) the coverage afforded Landlord and Tenant shall
not be reduced or diminished by reason of the use of such "blanket" policy or
policies and (iii) all of the other requirements set forth in this Article 7 are
satisfied.
7.06 Waiver of Subrogation
---------------------
To the extent permitted by law and without affecting the coverage provided
by insurance required to be maintained hereunder, Landlord and Tenant each
waives any right to recover against the other (a) damages for injury to or death
of persons, (b) damages to
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<PAGE>
property, (c) damage to the Premises or any part thereof, and (d) claims arising
by reason of any of the foregoing, but only to the extent that any of the
foregoing damages and/or claims are covered (then only to the extent of such
coverage) by insurance actually carried, or required by this Lease to be
carried, by either Landlord or Tenant. This provision is intended to waive
fully, and for the benefit of each party, any rights and/or claims which might
give rise to a right of subrogation in any insurer. Each party shall cause each
insurance policy obtained by it to permit such waiver of subrogation or to
provide that the insurer waives all right of recovery by way of subrogation
against either party in connection with any damage covered by such policy. If
any insurance policy cannot be obtained permitting or providing for a waiver of
subrogation, or is obtainable only by the payment of an additional premium
charge above that charged by insurers issuing policies not permitting or
providing for a waiver of subrogation, the party undertaking to obtain such
insurance shall notify the other party in writing of this fact. The other party
shall have a period of fifteen (15) days after receiving the notice either to
place the insurance with an insurer that is reasonably satisfactory to the other
party and that will carry the insurance permitting or providing for a waiver of
subrogation, or to agree to pay the additional premium if such a policy is
obtainable at additional cost. If such insurance cannot be obtained or the party
in whose favor a waiver of subrogation is desired refuses to pay the additional
premium charged, the other party shall be relieved of the obligation to obtain a
waiver of subrogation rights with respect to the particular insurance involved
during the policy period of such insurance, but such obligation shall revive
(subject to the provisions of this Section 7.06) upon the expiration of such
policy period.
7.07 Exoneration and Indemnity
-------------------------
(a) Tenant shall indemnify Landlord and its Affiliates, and each of their
respective agents, contractors, officers, shareholders and employees and hold
each of them harmless from and against any and all losses, liabilities,
judgments, settlements, causes of action, suits, costs and expenses (including
reasonable attorneys' fees and other costs of investigation and defense) which
they may suffer or incur by reason of any claim asserted by any person arising
out of, or related to (or allegedly arising out of or related to): (i) Tenant's
use and occupancy of the Premises, use of the Common Areas and Tenant's
activities in and about the Premises or the Common Areas including, without
limitation, use or occupancy by Tenant's employees, suppliers, shippers,
customers and invitees; (ii) any failure by Tenant to perform any material
obligation to be performed by Tenant under the terms of this Lease; or (iii) any
wrongful act, wrongful omission, negligence or willful misconduct of Tenant or
any of its agents, employees, representatives, officers, directors or
independent contractors. If any action or proceeding is brought against Landlord
or any of its Affiliates (or any of their respective agents, contractors,
officers, shareholders or employees) by reason of any such claim, Tenant, upon
Landlord's request, shall defend the same by counsel reasonably satisfactory to
Landlord, at Tenant's expense.
(b) Landlord shall indemnify Tenant and its affiliates, and each of their
respective agents, contractors, officers, shareholders and employees and hold
each of them harmless from and against any and all losses, liabilities,
judgments, settlements, causes of action, suits, costs and expenses (including
reasonable attorneys' fees and other cost of investigation and defense) which
they may suffer or incur by reason of any claim asserted by any person arising
out of, or related to (or allegedly or arising out of or related to): (i) any
failure by Landlord to perform any material obligation to be performed by
Landlord under
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the terms of this Lease; (ii) any wrongful act, wrongful omission, negligence or
misconduct of Landlord or any Affiliate of Landlord or any of its or their
agents, employees, representatives, officers, directors or independent
contractors; and (iii) Landlord's activities in and about the Premises. If any
action or proceeding is brought against Tenant or any of its affiliates (or any
of their respective agents, contractors, officers, shareholders or employees) by
reason of any such claim, Landlord upon Tenant's request, shall defend the same
by counsel satisfactory to Tenant at Landlord's expense.
ARTICLE 8.
ASSIGNMENT, SUBLETTING, HYPOTHECATION
-------------------------------------
8.01 Landlord's Consent Required
---------------------------
Except as otherwise provided herein, Tenant will not assign this Lease or,
except as provided below, sublease all or part of the Premises to any third
party without Landlord's prior written consent which consent shall not be
unreasonably withheld or delayed. Notwithstanding any such consent, no
assignment or sublease shall be effective until the assignee or sublessee shall
have obtained all required permits and licenses to use the Premises for its
permitted uses. In the event of a proposed assignment or sublease requiring
Landlord's consent, Tenant will give written notice thereof ("Tenant's Notice")
to Landlord indicating the general nature of the proposed transaction, and the
proposed assignee's or subtenant's identity and financial condition and the
contemplated use of the Premises or the portion to be subleased, as the case may
be. If an assignee or licensee is required to be licensed by the California
Gambling Commission (the "Commission"), Tenant agrees to provide Landlord with
the same information, at the same time, as the proposed assignee or sublessee
provides to the Commission in connection with such licensing. Landlord will
notify Tenant in writing within thirty (30) days after the date of Tenant's
Notice as to whether Landlord grants or withholds its consent to the proposed
assignment or subletting and, if such consent is withheld, describing in
reasonable detail the basis therefor. Landlord has heretofore approved
California Casino Management, Inc., a California corporation ("CCM"), as the
Casino Operator. If, at any time, Tenant proposes to sublease the Premises to a
casino operator other than CCM, the requirements of this Section 8.01 shall
apply. In respect of such an sublease, (i) Tenant shall notify Landlord of such
proposal (the "Sublease Notice") at least sixty (60) days prior to the date such
sublease term is to commence, which notice shall include the identity of the
proposed sublessee (the "Proposed Sublessee"), the equity owners and any other
principals managing the affairs of the Proposed Sublessee together with
financial statements for the Proposed Sublessee, if available (collectively, the
"Sublessee Information"), and (ii) Tenant or the Proposed Sublessee shall
provide Landlord with copies of any applications, forms, data and information
provided to the California Gaming Commission in connection with the licensing of
the Proposed Sublessee and not already provided as part of the Sublessee
Information (collectively, the "Gaming Submittals"). Landlord, in the exercise
of its reasonable judgment, may also request additional information concerning
the Proposed Sublessee. If Landlord shall have received the Sublease Notice,
the Sublessee Information and the Gaming Submittals and thereafter rejects a
Proposed Sublessee which have been duly licensed as an operator of a casino by
the California Gaming Commission, Tenant shall be entitled to an abatement of
rent for the period commencing on the latter to occur of (A) the date sixty (60)
days after the date that Landlord shall have received all of the Sublease
Notice, the Sublessee Information and the Gaming Submittals, and (B) the date
that the California Gaming Commission issues a
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license to the Proposed Sublessee, and ending on the date that the Landlord and
Tenant agree on the identity of a mutually acceptable and licensed sublessee.
Notwithstanding anything to the contrary contained herein, Tenant may freely
sublease the meeting rooms, restaurants, retail areas or similar portions of the
Premises from time to time, without the consent of Landlord.
8.02 Future Consents/Tenant's Liability
----------------------------------
Landlord's consent to one assignment or sublease will not be deemed to
constitute its consent to any future assignments or subleases, whether by Tenant
or any assignee or subtenant. No assignment of this Lease or sublease will
relieve Tenant of its obligations hereunder with respect to the balance of the
Term; provided, however, that if the assignee has a net worth in excess of Two
Hundred Million Dollars ($200,000,000) ("Minimum Net Worth") at the time of the
assignment, and assumes the obligations of Tenant hereunder accruing from and
after the assignment, Tenant shall be released of all obligations and
liabilities hereunder accruing subsequent to the assignment. Any assignment or
subletting hereunder will be pursuant to an instrument reasonably satisfactory
to Landlord, and the assignee or subtenant will agree for the benefit of
Landlord to be bound by, assume and perform all the terms, covenants and
conditions thereafter to be performed by or applicable to Tenant hereunder. Any
purported assignment or subletting not in compliance with this Article 8 will be
null and void and will constitute a breach of this Lease.
8.03 Tenant Affiliates
-----------------
Notwithstanding anything to the contrary herein, Landlord's consent will
not be required for any assignment or subletting to a Tenant Affiliate. "Tenant
Affiliate" will mean any of the following: (i) any person directly or indirectly
controlling or controlled by or under common control with Tenant; (ii) any
person which succeeds to the interest of Tenant under this Lease by reason of
the merger, consolidation or dissolution of Tenant; and (iii) any person
acquiring all or substantially all of the operating assets of Tenant or any of
its divisions. "Person" will mean one or more human beings or legal entities or
other artificial persons, including, without limitation, partnerships,
corporations, firms, associations, groups, limited liability companies or
partnerships, trusts, estates and any combination of human beings and legal
entities.
8.04 Assignment Restrictions
-----------------------
Any attempt to assign or otherwise transfer this Lease without Landlord's
consent as required herein or to sublet space in the Premises shall be void and
shall, at the option of Landlord, terminate this Lease.
ARTICLE 9.
EMINENT DOMAIN
--------------
9.01 Effect on Lease
---------------
If the Premises or any portion thereof are taken or damaged, including
severance damage, under the power of eminent domain or by inverse condemnation
or for any public or quasi-public use, or voluntarily conveyed or transferred in
lieu of an exercise of eminent domain or while condemnation proceedings are
pending (all of which are herein called
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"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first occurs.
If so much of the Premises is taken by condemnation that the remainder is
unsuitable for Tenant's continued occupancy for the uses and purposes for which
the Premises are leased, Tenant shall have the option, exercisable only by
written notice to Landlord within thirty (30) days after Landlord shall have
given Tenant written notice of such taking (or in the absence of such notice,
within thirty (30) days after the condemning authority shall have taken title or
possession, whichever first occurs), to terminate this Lease as of the later of
the date the condemning authority takes such title or possession (whichever
first occurs) or the date Tenant vacates the Premises; provided, however, that
if Landlord disagrees with Tenant's determination that the portion of the
Premises remaining after condemnation is unsuitable for Tenant's occupancy, such
controversy shall be settled by arbitration in Los Angeles, California in
accordance with the commercial arbitration rules of the American Arbitration
Association then in effect. In the event that less than all of the Premises
shall be taken by condemnation and Tenant does not elect to terminate this Lease
in accordance with the foregoing, this Lease shall remain in full force and
effect as to the portion of the Premises remaining, except that the Base Rent
and applicable Additional Rent shall be reduced in the same ratio that the floor
area of the portion of the Premises taken by such condemnation bears to the
floor area of the Premises immediately before such condemnation.
9.02 Award
-----
In the event of any Taking, whether whole or partial, Landlord and Tenant
shall be entitled to receive and retain such separate awards and portions of
lump sum awards as may be allocated to their respective interests in any
condemnation proceedings.
9.03 Rebuilding
----------
In the event that this Lease is not terminated by reason of such
condemnation, Landlord shall, to the extent of the severance damages applicable
to the building of which the Premises are a part actually received by Landlord
and Tenant in connection with such condemnation, and subject to the provisions
of any Landlord's mortgage concerning the application of condemnation proceeds,
cause such restoration and repair to the remaining portion of the Premises to be
done as may be necessary to restore them to an architectural and usable whole
reasonably suitable for the conduct of the business of Tenant.
ARTICLE 10.
TENANT'S BREACH; LANDLORD'S REMEDIES
------------------------------------
10.01 Tenant's Breach
---------------
The occurrence of any one of the following events shall constitute an
"Event of Default" and a breach of this Lease by Tenant:
(a) The failure by Tenant to make any payment of Base Rent, Additional
Rent or other payment required to be made by Tenant hereunder, as and when due,
where such failure shall continue for a period of five (5) days after written
notice thereof from Landlord to Tenant; provided, however, that no such notice
shall be required if, during the preceding twelve (12) calendar months, Landlord
shall have provided three (3) such notices.
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(b) The failure by Tenant to observe or perform any of the material
covenants or obligations under this Lease to be observed or performed by Tenant,
other than as specified in subsections (a) and (d) of this Section 10.01, where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Landlord to Tenant (provided however, that if the default
involves a hazardous condition or substance, Tenant shall have such shorter cure
period as Landlord shall specify in writing in its written notice to Tenant of
the default if such shorter period is reasonable under then existing
circumstances, such as imminent danger of spread of contaminants or other danger
to persons or health); provided, however, that if the nature of such failure is
such that more than thirty (30) days are reasonably required for its cure, then
Tenant shall not be in default if Tenant shall commence such cure within said
30-day period and thereafter diligently prosecutes such cure to completion.
(c) The abandonment of the Premises (or a substantial portion thereof) by
Tenant.
(d) The appointment by any court of a receiver, interim trustee or
trustee to take possession of any asset or assets of Tenant, said receivership
or trusteeship remaining undischarged for a period of sixty (60) days.
(e) A general assignment by Tenant for the benefit of creditors.
(f) The filing of a voluntary petition by Tenant in bankruptcy or any
other petition under any section or chapter of the Bankruptcy Code or any
similar law, whether state, federal or foreign, for the relief of debtors.
(g) The filing against Tenant of an involuntary petition or any other
petition under any section or chapter of the Bankruptcy Code or any similar law,
whether state, federal or foreign, for the relief of debtors by the creditors of
Tenant, said petition remaining undischarged for a period of sixty (60) days.
(h) The levy, attachment, execution or judicial seizure of Tenant's
interest in this Lease or all or any part of the properties and assets of
Tenant, such attachment, execution or other seizure remaining undismissed or
undischarged for a period of fifteen (15) days after the levy thereof.
(i) The admission in writing by Tenant of its inability to pay its
respective debts or perform its obligations as they become due.
(j) The calling of a meeting of the creditors representing a significant
portion of the unsecured liabilities of Tenant for the purpose of effecting a
moratorium, extension, composition or any of the foregoing.
(k) The occurrence of any of the events specified in subsections (e)
through (l), inclusive, with respect to any general partner of Tenant (if Tenant
is a partnership) or any guarantor of Tenant's obligations under this Lease.
(l) The occurrence of any event which expressly constitutes an incurable
breach of this Lease.
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The notices specified in subsections (a) and (b) of this Section 10.01
shall be in lieu of, and not in addition to, any notices required under
California Code of Civil Procedure Section 1161 or any successor statute.
10.02 Landlord's Remedies
-------------------
In the event of an Event of Default under Section 10.01 then Landlord, in
addition to any other rights or remedies it may have at law, in equity or
otherwise, shall have the following rights:
(a) Landlord shall have the right to terminate this Lease and Tenant's
right to possession of the Premises by giving written notice of termination to
Tenant. No act by Landlord other than giving express written notice to Tenant
shall terminate this Lease or Tenant's right to possession of the Premises.
Should Landlord at any time terminate this Lease for any breach, in addition to
any other remedy it may have, it is hereby agreed by Landlord and Tenant that
the damages Landlord shall be entitled to recover under this Lease shall include
without limitation:
(i) The worth, at the time of award, of the unpaid Rent that has
been earned at the time of the termination of this Lease;
(ii) The worth, at the time of award, of the amount by which the
unpaid Rent that would have been earned after the date of termination of this
Lease until the time of award exceeds the amount of the loss of Rent that Tenant
proves could have been reasonably avoided;
(iii) The worth, at the time of award, of the amount by which the
unpaid Rent for the balance of the stated term hereof (determined without regard
to the termination of this Lease for Tenant's breach) after the time of award
exceeds the amount of the loss of Rent that Tenant proves could be reasonably
avoided; and
(iv) Any other amount necessary to compensate Landlord for all
detriment proximately caused by Tenant's breach, including, but not limited to,
the costs and expenses (including attorneys' fees, court costs, advertising
costs and brokers' commissions) of recovering possession of the Premises,
removing persons or property therefrom, placing the Premises in good order,
condition and repair, preparing and altering the Premises for reletting and all
other costs and expenses of reletting.
"The worth, at the time of award," as used in subparagraphs (i) and (ii)
above shall be computed by allowing interest at the Agreed Rate. "The worth at
the time of award," as referred to in subparagraph (iii) above shall be computed
by discounting the amount at the discount rate of the Federal Reserve Bank of
San Francisco at the time of award, plus one percent (1%). The terms "Rent" and
"Rents" as used in this Section 10.02 shall include the Rent, and all
Additional Rent and all other fees and charges required to be paid by Tenant
pursuant to the provisions of this Lease.
(b) Even though Tenant has breached or defaulted under this Lease and
abandoned the Premises, this Lease shall continue in effect for so long as
Landlord does not terminate by express written notice Tenant's right to
possession, and Landlord may enforce
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all of its rights and remedies under this Lease., including but not limited to
the right to recover all Rents as they become due hereunder.
(c) In addition, Landlord shall have the right to:
(1) Continue the Lease and Tenant's right to possession in effect
(under California Civil Code Section 1951.4) after Tenant's breach and
abandonment and recover the Rent as it becomes due, whether or not Tenant shall
have abandoned the Premises.
(2) Re-enter the Premises and remove all persons or property from the
Premises. Property may be stored or disposed of as provided under applicable
law. Acts of re-entry or maintenance or preservation, efforts to relet the
Premises, or the appointment of a receiver to protect the Landlord's interest
under the Lease, shall not constitute a termination of the Tenant's right to
possession unless Landlord has given a written notice of such election to
Tenant.
(3) Pursue any other remedy now or hereafter available to Landlord
under the laws or judicial decisions of the state wherein the Premises are
located.
(d) The expiration or termination of this Lease and/or the termination of
Tenant's right to possession shall not relieve Tenant from liability under any
indemnity provisions of this Lease as to matters occurring or accruing during
the term hereof or by reason of Tenant's occupancy of the Premises.
10.03 Right to Cure Tenant's Default
------------------------------
If, after the expiration of any cure or notice period, Tenant has failed to
do any act required to be done by Tenant hereunder, Landlord may (but without
being obligated to do so) cure such failure at Tenant's cost. If Landlord at
any time, by reason of Tenant's failure to comply with the provisions of this
Lease, pays any sum or does any act that requires the payment of any sum, the
sum paid by Landlord shall be due immediately from Tenant to Landlord at the
time the sum is paid and, if paid at a later date, shall bear interest at the
Agreed Rate from the date the sum is paid by Landlord until Landlord is
reimbursed by Tenant. Such sum, together with interest thereon, shall be
Additional Rent hereunder.
10.04 Landlord's Remedies Not Exclusive
---------------------------------
The several rights and remedies herein granted to Landlord shall be
cumulative and in addition to any others to which Landlord is or may be entitled
by law or in equity, and the exercise of one or more rights or remedies shall
not prejudice or impair the concurrent or subsequent exercise of any other
rights or remedies which Landlord may have and shall not be deemed a waiver of
any of Landlord's rights or remedies or to be a release of Tenant from any of
Tenant's obligations, unless such waiver or release is expressed in writing and
signed by Landlord.
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10.05 Receipt of Rents
----------------
Landlord's acceptance of full or partial payment of Rent following any
Event of Default shall not constitute a waiver of such Event of Default.
ARTICLE 11.
LANDLORD'S DEFAULT; TENANT'S REMEDIES
-------------------------------------
11.01 Landlord's Default
------------------
The failure by Landlord to observe or perform any of the material covenants
or obligations under this Lease to be observed or performed by Landlord where
such failure shall continue for a period of thirty (30) days after written
notice thereof from Tenant to Landlord shall constitute a default of this Lease
by Landlord; provided, however, that if the nature of such failure is such that
more than thirty (30) days are reasonably required for its cure, then Landlord
shall not be in default if Landlord shall commence such cure within said 30-day
period and thereafter diligently prosecutes such cure to completion.
11.02 Tenant's Remedies
-----------------
(a) In the event of Landlord's default under Section 11.01 after the
expiration of any applicable cure period, in addition to any other rights or
remedies it may have at law, in equity or otherwise, Tenant, acting reasonably,
shall have the right but not the obligation to cure Landlord's default, at
Landlord's expense. If Tenant at any time, by reason of Landlord's failure to
comply with the provisions of this Lease, pays any sum or does any act that
requires the payment of any sum, the sum paid by Tenant shall be due immediately
from Landlord to Tenant at the time the sum is paid and, if paid at a later
date, shall bear interest at the Agreed Rate from the date the sum is paid by
Tenant until Tenant is reimbursed by Landlord. In no event will such deduction
be the basis of forfeiture of this Lease nor constitute a default in the payment
of Rent unless Tenant fails to pay the amount of such deduction within ten (10)
days after Tenant's receipt of notice of a final adjudication that such amount
is owing to Landlord.
(b) Tenant may recover from Landlord any and all damages or expenses
suffered or incurred by Tenant as a result of such Landlord's Default; and
(c) Tenant may obtain and enforce an order of specific performance
against Landlord, or may enforce any other remedy available to Tenant at law or
in equity.
11.03 Tenant's Remedies Not Exclusive
-------------------------------
The several rights and remedies herein granted to Tenant shall be
cumulative and in addition to any others to which Tenant is or may be entitled
by law or in equity (provided, however, that Tenant waives any offset rights it
may have), and the exercise of one or more rights or remedies shall not
prejudice or impair the concurrent or subsequent exercise of any other rights or
remedies which Tenant may have and shall not be deemed a waiver of any of
Tenant's rights or remedies or to be a release of Landlord from any of
Landlord's obligations, unless such waiver or release is expressed in writing
and signed by Tenant.
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11.04 Payment of Rents
----------------
Tenant's full or partial payment of Rent following any default of Landlord
under this Lease shall not constitute a waiver of such default.
ARTICLE 12.
HAZARDOUS SUBSTANCES
--------------------
12.01 Tenant's Obligations.
--------------------
Tenant will not generate, bring onto, use, store or dispose of any
Hazardous Substance (as hereinafter defined) on or about the Premises except for
such substances that are reasonably required in the ordinary course of Tenant's
business conducted on the Premises or otherwise approved in writing by Landlord.
Tenant will use, store and dispose of all such Hazardous Substances in
compliance with all applicable statutes, ordinances and regulations in effect
during the Lease Term that relate to public health and safety and protection of
the environment ("Environmental Laws"). Tenant will, at its sole cost and
expense, clean-up and remediate any Hazardous Substance released on or about the
Premises by Tenant and will indemnify, defend and hold harmless Landlord from
and against any and all damages, liabilities, judgments, costs, claims, liens,
expenses, penalties and attorneys fees, relating to Hazardous Substances, if
any, brought onto the Premises by Tenant or Tenant's agents or employees.
12.02 Notice of Release or Investigation.
----------------------------------
If during the Term of this Lease either party becomes aware of (i) any
actual or threatened release of any Hazardous Substance on, under, or about the
Premises, or (ii) any inquiry, investigation, proceeding or claim by any
government agency or other person regarding the presence or alleged presence of
any Hazardous Substance on, under or about the Premises, that party will give
the other party written notice of the release, inquiry, investigation,
proceeding or claim within five (5) days after learning about it and will
simultaneously furnish to the other party copies of any correspondence, claims,
notices of violations, reports or other writings received or sent by the party
providing notice that pertain to the release or investigation.
12.03 Definition of "Hazardous Substance".
-----------------------------------
For purposes of this Lease, the term "Hazardous Substance" means: (i)any
"hazardous substance," as that term is defined in the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) (42
United States Code sections 9601-9675); (ii) "hazardous waste," as that term is
defined in the Resource Conservation and Recovery Act of 1976 (RCRA) (42 United
States Code sections 6901-6992k); (iii) any pollutant, contaminant, or
hazardous, dangerous, or toxic chemical, material, or substance, within the
meaning of any other applicable federal, state, or local law, regulation,
ordinance, or requirement (including consent decrees and administrative orders
imposing liability or standards of conduct concerning any hazardous, dangerous,
or toxic waste, substance, or material, now or hereafter in effect); (iv)
petroleum, crude oil or any fraction thereof; (v) radioactive material,
including any source, special nuclear, or byproduct material as defined in 42
United States Code sections 2011-2297g-4; (vi) asbestos
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in any form or condition; and (vii) polychlorinated biphenyls ("PCBs") and
substances or compounds containing PCBs.
ARTICLE 13.
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT
---------------------------------------------
Concurrently with the mutual execution of this Lease, Landlord, Tenant and
each Landlord's mortgagee shall execute and deliver a Non-Disturbance,
Subordination and Attornment Agreement in substantially the form attached as
Exhibit D to this Lease ("Non-Disturbance Agreement"). If a non-disturbance
- ---------
agreement reasonably satisfactory to Tenant is not executed by each existing
Landlord's mortgagee and by Landlord by said date, Tenant may at any time
thereafter and prior to its actual receipt of such an executed non-disturbance
agreement terminate this Lease upon written notice to Landlord. At the
election of any subsequent mortgagee of Landlord, the rights of Tenant hereunder
will be subject and subordinate to such mortgagee's Encumbrance (as hereinafter
defined); provided, however, that such subordination of Tenant's rights will
only be effective if prior to or concurrently therewith, Tenant receives a
commercially reasonable Non-Disturbance Agreement executed by Landlord and such
mortgagee, which Non-Disturbance Agreement Tenant also agrees to execute. If
Landlord's interest in the Premises is acquired by any ground lessor,
beneficiary under a deed of trust, mortgagee, or purchaser at the foreclosure
sale, Tenant shall attorn to any transferee of or successor to Landlord's
interest in the Property who has previously delivered to Tenant a Non-
Disturbance, Subordination and Attornment Agreement consistent with this Article
13. For purposes of this Lease, the term "Encumbrance" will mean each deed of
trust, mortgage, or other written security device or agreement which now
encumbers, or may in the future encumber the Premises or any part thereof, and
the note or other obligation it secures, and each lease of which Landlord is the
lessee which covers, or may in the future cover, the Premises or any part
thereof; and the terms "Landlord's mortgagee" and "mortgagee of Landlord"
include the mortgagee under each such mortgage, the beneficiary under each such
deed of trust, and the lessor under each such ground lease.
ARTICLE 14.
TAXES AND OTHER CHARGES
-----------------------
14.01 Payment of Taxes
----------------
Landlord shall pay all real estate taxes and general and special assessment
levied and assessed against the Property and the improvements thereon.
14.02 Tenant's Obligations
--------------------
(a) Tenant shall reimburse Landlord, as Common Area Charges under
Section 3.02, for any and all real estate taxes and general or special
assessments levied and assessed against the Premises or upon, allocable to, or
measured by or on the gross or net rent payable hereunder, but excluding (i)
inheritance, estate, succession or transfer taxes of Landlord, (ii) income,
excise, franchise or gross profits taxes on Landlord or any other taxes imposed
on or measured by the net income of Landlord from all sources.
(b) Tenant shall pay prior to delinquency all taxes assessed against and
levied upon trade fixtures, furnishings, equipment and all other personal
property of Tenant contained in the Premises or elsewhere. Tenant shall
cause said trade fixtures, furnishings,
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equipment and all other personal property to be assessed and billed separately
from the real property or Landlord. If any of Tenant's said personal property
shall be assessed with Landlord's real property, Tenant shall pay Landlord the
taxes attributable to Tenant within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Tenant's property.
14.03 Right to Contest
----------------
Landlord shall, at the request of Tenant and at Tenant's sole cost and
expense, seek a reduction in the assessed valuation of the Premises or otherwise
contest any real property taxes or assessments applicable to the Premises. If
so requested by Tenant, Landlord will join in such proceeding or contest or
permit it to be brought in Landlord's name, and will otherwise cooperate with
Tenant in connection with any such proceeding or contest. In the event Landlord
is successful in any such proceeding or contest, Landlord will promptly pay over
to Tenant the amount of any refund or rebate of overpaid taxes received by
Landlord from the taxing authority attributable to the Premises.
ARTICLE 15.
UTILITY AND OTHER SERVICES
--------------------------
15.01 Utility Charges
---------------
Landlord shall make application and otherwise arrange, and pay or cause to
be paid all charges for water, sewer, gas, electricity, light, power, telephone
and any other utility services used in or on or supplied to or for the Premises,
or any part thereof. Tenant shall pay a pro rata share of such charges based
upon Tenant's use. The Parties shall act in good faith to agree on Tenant's pro
rata share on an annual basis. Landlord at its sole cost and expense shall use
commercially reasonable efforts to cause the providers of all such utilities to
install separate meters for the utilization thereof at the Premises. From and
after the completion of such separate metering, all future utility expenses in
respect thereof (including any taxes thereon) shall be paid by Tenant directly
to such provider. Upon the request of Landlord, Tenant shall deliver to
Landlord copies of all invoices or bills for such charges with evidence
reasonably satisfactory to Landlord that such charges have been paid.
15.02 Security; Landlord Nonresponsibility; Indemnity
-----------------------------------------------
Tenant expressly agrees that Tenant shall have the sole responsibility for
providing surveillance and security relating to the Premises and the persons
therein and the activities conducted in and about Premises, including, without
limitation, surveillance necessary to maintain the integrity of the casino
activities, and Landlord shall have no responsibility with respect thereto.
Under no circumstances, and in no event, shall Landlord be liable to Tenant, any
Subtenant or any other person by reason of any theft, burglary, robbery,
assault, trespass, arson, unauthorized entry, vandalism, or any other act of any
person (other than a duly authorized agent of Landlord) occurring in or about
the Premises, and Tenant shall indemnify Landlord and its agents, contractors
and employees and hold each of them harmless from and against any and all
losses, liabilities, judgments, costs or expenses (including reasonable
attorneys' fees and other costs of investigation or defense) which they may
suffer or incur by reason of any claim asserted by any person arising out of, or
related to, any of the foregoing.
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ARTICLE 16.
GENERAL PROVISIONS
------------------
16.01 Estoppel Certificates
---------------------
Either party shall, without charge, at any time and from time to time,
within ten (10) business days after request by the other party, deliver a
written certificate duly executed and acknowledged, certifying to the requesting
party, or any other person or entity specified by the requesting party:
(a) That this Lease is unmodified and in full force and effect, or if
there has been any modification, that the same is in full force and effect as so
modified, and identifying any such modification;
(b) Whether or not to the knowledge of the certifying party there are
then existing any offsets or defenses in favor of such party against the
enforcement of any of the terms, covenants and conditions of this Lease and, if
so, specifying the same, and also whether or not to the knowledge of the
certifying party, the requesting party has observed and performed all of the
terms, covenants and conditions on its part to be observed and performed, and,
if not, specifying the same;
(c) The dates to which Base Rent, Additional Rent and all other charges
hereunder have been paid; and
(d) Any other matter which reasonably relates to the tenancy created
hereby and the contractual relationship between Landlord and Tenant.
The failure of the certifying party to deliver such certificate within five
(5) business days after a second written request shall constitute a default
hereunder and shall be conclusive upon Landlord, Tenant and any other person,
firm or corporation for whose benefit the certificate was requested, that this
Lease is in full force and effect without modification except as may be
represented by the requesting party, and that there are no uncured defaults on
the part of the requesting party. If the certifying party does not deliver such
certificate to the requesting party or such person designated by the requesting
party within such 10-day period, the certifying party shall be liable to the
requesting party for all damages, losses, costs and expenses proximately
resulting from the certifying party's failure to timely deliver such
certificate. If the certifying party makes any false statement or claim in any
such certificate, the certifying party shall be liable to the requesting party
for all damages, losses, costs and expenses proximately resulting therefrom.
16.02 Landlord's Right of Entry
-------------------------
Landlord and its authorized representatives may, at reasonable times and on
not less than forty-eight (48) hours prior written notice to Tenant, and
accompanied by a representative of Tenant, enter the Premises to: (i) inspect
the Premises; (ii) show the Premises to prospective purchasers or mortgagees
and, during the last nine (9) months of the Lease Term, to prospective tenants;
(iii) serve, post and keep posted notices or non-responsibility or other notices
required by law or permitted by this Lease; (iv) perform any repairs,
replacements or maintenance required of Landlord hereunder; or (v) perform any
covenants of Tenant that Tenant fails to perform, in accordance with Section
10.03. To the
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extent reasonably practicable, Landlord will exercise its rights under this
Section 16.02 in such a manner as to minimize the Impact on Tenant's business in
and occupancy of the Premises. Notwithstanding anything to the contrary herein,
Landlord and its authorized representatives may enter the Premises without any
advance notice when necessary to address an emergency situation which poses a
threat of imminent bodily harm or substantial property damage.
16.03 Waiver
------
No waiver of any breach of any covenant or condition herein contained shall
be effective unless such waiver is in writing, signed by the aggrieved party and
delivered to the breaching party. The waiver by the aggrieved party of any such
breach or breaches, or the failure by the aggrieved party to exercise any right
or remedy in respect of any such breach or breaches, shall not constitute a
waiver or relinquishment for the future of any such covenant or condition or of
any subsequent breach of any such covenant or condition nor bar any right or
remedy of the aggrieved party in respect of any such subsequent breach. The
receipt of any Rent after the expiration of any cure period provided for in this
Lease (regardless of any endorsement on any check or any statement in any letter
accompanying any payment of Rent) by Landlord shall not operate as an accord and
satisfaction or a waiver of the right of Landlord to enforce the payment of
Rents previously due or as a bar to the termination of this Lease or the
enforcement of any other remedy for default in the payment of such Rents
previously due, or for any other breach of this Lease by Tenant.
16.04 Surrender of Premises; Holding Over
-----------------------------------
Tenant shall, at the end of the Term, surrender the Premises to Landlord
together with any personal property therein belonging to Landlord and
alterations made thereto, in good order, repair, and condition, except for
damage caused by casualty or by subsidence or other earth movement,
obsolescence, ordinary physical depreciation, or ordinary wear and tear, or by
Landlord's failure to perform its obligations under this Lease, and except for
the matters and things which Landlord is required to do or repair under this
Lease. Tenant shall have the right at any time on or before the termination of
this Lease to remove from the Premises all merchandise, signs, fixtures,
furniture, furnishings, partitions, and equipment installed and owned by Tenant;
provided, however, Tenant shall repair any damage to the Premises caused by any
such removal. Heating, ventilating, air conditioning, plumbing, bulkheads,
partition walls, ceilings, electrical and sprinkler equipment, and other
permanent fixtures and alterations shall not be removed by Tenant. If Tenant
holds over after the expiration or earlier termination of the Term, Tenant will
become a tenant from month to month upon the same terms as herein provided
except that Base Rent shall be an amount equal to one hundred and fifty percent
(150%) of the Base Rent payable prior to such expiration or termination. Such
month to month tenancy will continue until the tenancy is terminated at the end
of any month by the giving of at least thirty (30) days written notice by either
party hereto to the other.
16.05 Notices
-------
Wherever in this Lease one party to this Lease is required or permitted to
give or serve a notice, statement, request or demand to or on the other, such
notice, statement, request or demand shall be given or served upon the party to
whom directed in writing and shall be delivered personally or forwarded by
registered or certified mail, postage prepaid,
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<PAGE>
return receipt requested, or by prepaid express mail or overnight courier,
addressed to Landlord or Tenant, as the case may be, at the address of that
party set forth below with copies to be sent concurrently as follows:
If to Tenant: Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, CA 90301
Attention: G. Michael Finnigan
With a copy to: Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, CA 90067
Attention: Sandra G. Kanengiser
If to Landlord: Churchill Downs Incorporated
700 Central Avenue
Louisville, KY 40208
Attention: Robert L. Decker
With a copy to: Gibson, Dunn & Crutcher LLP
333 South Grand Avenue
Los Angeles, CA 90071
Attention: D. Eric Remensperger
Either party may change its address for notice by written notice given to
the other in the manner hereinabove provided. Any such notice, statement,
request or demand shall be deemed to have been duly given or served on the date
personally delivered or two (2) business days after the date deposited in the
United States mail in accordance with this Section 16.05.
16.06 Partial Invalidity; Construction
--------------------------------
If any term or provision of this Lease or the application thereof to any
person or circumstance shall to any extent be held to be invalid 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 has been
held invalid or unenforceable, shall not be affected thereby, and each term and
provision of this Lease shall be valid and be enforced to the fullest extent
permitted by law. This Lease shall be governed by and construed under the laws
of the State of California. When required by the context of this Lease, the
singular shall include the plural, and the neuter shall include the masculine
and feminine.
16.07 Captions
--------
The captions and headings in this Lease are inserted only as a matter of
convenience and for reference, and they in no way define, limit or describe the
scope of this Lease or the intent of any provision hereof.
-28-
<PAGE>
16.08 Memorandum of Lease
-------------------
Concurrently herewith the parties have executed a Memorandum of Lease which
will be promptly recorded in the Official Records of the City and County of Los
Angeles. This Lease and said Memorandum of Lease will be construed together as
one instrument provided, however, that the terms, covenants and conditions of
this Lease will control over such Memorandum.
16.09 Readerboard Signs
-----------------
Tenant shall retain its exposure on the Readerboard Signs consistent with
the fixed and electronic exposure currently dedicated to the Hollywood Park-
Casino. In the event Landlord sells or otherwise transfers its rights in the
Readerboard Signs, such sale or transfer shall be subject to Tenant's rights
hereunder for the term of the Lease and the Extension Period. Landlord shall be
entitled to retain all revenue received from third parties for the use of the
Readerboard Signs and shall bear sole responsibility for the maintenance and
repair and payment of all utility and other expenses of the Readerboard Signs.
16.10 Signage
-------
Subject to compliance with Applicable Laws, Tenant may install its signs on
the Premises at its sole cost and expense. Tenant will be responsible for the
maintenance and repair of such signs, and will remove such signs at its expense
at the end of the Term. Tenant shall be responsible for repairs to the
improvements (including the roof) arising as a result of the maintenance or
removal of signage. Any such signage installed after the Commencement Date
visible from outside of the Premises shall be subject to Landlord's prior
approval, not to be unreasonably withheld or delayed. Landlord will not take
any action on or about the Property that will obstruct the visibility of such
signs.
16.11 Brokers' Commissions
--------------------
Each party represents and warrants to the other party that it has had no
dealings with any broker, finder or agent in connection with the subject matter
of this Lease or any of the transactions contemplated hereby. Each party agrees
to defend, indemnify and hold harmless the other party from any claim, suit,
liability, cost or expense (including attorneys' fees) with respect to brokerage
or finder's fees or commissions or other similar compensation alleged to be
owing on account of such party's dealings (or alleged dealings) with any real
estate broker, agent, finder or other person.
16.12 Attorneys' Fees
---------------
(a) In the event of any litigation between Landlord and Tenant alleging a
breach of this Lease by either party, or seeking a declaration of the rights of
the parties hereunder, the losing party shall pay to the prevailing party its
costs of litigation including reasonable attorneys' fees.
(b) Each party shall reimburse the other party, upon demand, for all
costs and expenses (including attorneys' fees) incurred by such party in
connection with any bankruptcy proceeding, or other proceeding under Title 11 of
the United States Code (or any successor or similar law) involving the other
party.
-29-
<PAGE>
16.13 Counterparts
------------
This Lease may be executed in two or more counterparts, each of which may
be deemed an original, but all of which together shall constitute one and the
same instrument.
16.14 Sole Agreement
--------------
This Lease contains all of the agreements of the parties hereto with
respect to the matters covered hereby, and no prior agreements, oral or written,
or understandings or representations of any nature whatsoever pertaining to any
such matters shall be effective for any purpose unless specifically incorporated
in the provisions of this Lease or said agreements.
16.15 Successors and Assigns
----------------------
Subject to the provisions hereof relative to assignment, this Lease shall
be binding upon and inure to the benefit of the successors and assigns of the
respective parties hereto, and the terms "Landlord" and "Tenant" shall include
the respective successors and assigns of such parties. In the event Landlord
sells or otherwise transfers its interest as Landlord in and to this Lease
(other than a transfer or assignment to a lender for purposes of security),
Landlord will be released from all liability and obligations under this Lease
that accrue after the effective date of transfer, subject to the following
restrictions: (i) Landlord will not be released from its obligations under this
Lease unless the transferee assumes in writing, for the benefit of Tenant,
Landlord's obligations under this Lease from and after the date of transfer; and
(ii) nothing contained herein shall release or be construed to release Landlord
from any of its obligations or liabilities under this Lease that accrue before
the date of transfer.
16.16 Time is of the Essence
----------------------
Time is of the essence with respect to the performance or observance of
each of the obligations, covenants and agreements of each of Landlord and Tenant
under this Lease.
16.17 Survival of Covenants
---------------------
Except with respect to those conditions, covenants and agreements of this
Lease which by their express terms are applicable only to, or which by their
nature could only be applicable after, a certain date or time during the term
hereof, all of the conditions, covenants and agreements of this Lease shall be
deemed to be effective as of the date of this Lease. Any obligation arising
during the Term of this Lease under any provision hereof, which by its nature
would require Landlord and/or Tenant to take certain action after the expiration
of the Term or other termination of this Lease, including any termination
resulting from the breach of this Lease by Landlord or Tenant, shall be deemed
to survive the expiration of the Term or other termination of this Lease to the
extent of requiring any action to be performed after the expiration of the Term
or other termination hereof which is necessary to fully perform the obligation
that arose prior to such expiration or termination.
-30-
<PAGE>
16.18 Landlord's Consent or Approval
------------------------------
Where any provision of this Lease requires the consent or approval of
Landlord to any action to be taken or of any instrument or document submitted or
furnished by Tenant or otherwise, such consent or approval shall not be
unreasonably withheld or delayed by Landlord unless such provision entitles
Landlord to the discretionary withholding of any such consent or approval
required thereby. The consent or approval of Landlord to or of any such act,
instrument or document shall not be deemed a waiver of, or render unnecessary,
Landlord's consent or approval to or of any subsequent similar or dissimilar
acts to be taken or instruments or documents to be submitted or furnished by
Tenant hereunder.
16.19 Entire Agreement
----------------
This Lease together with its exhibits, contains all the agreements of the
parties hereto and supersedes any previous negotiations. There have been no
representations made by the Landlord or Tenant or understandings made between
the parties other than those set forth in this Lease and its exhibits. This
Lease may not be modified except by a written instrument duly executed by the
parties hereto.
16.20 Joint and Several Obligations
-----------------------------
If more than one person or entity is Tenant or Landlord, the obligations
imposed on that party shall be joint and several. If either Landlord or Tenant
is a partnership, the obligations of each general partner shall be joint and
several.
16.21 No Offer
--------
The submission of this document for examination and discussion does not
constitute an offer to lease, or a reservation of, or option for, the Premises.
This document will become effective and binding only upon execution and delivery
by Landlord and Tenant.
16.22 Corporate Resolution
--------------------
If either party hereto is a corporation, it will deliver to the other
party, upon execution of this Lease, a certified copy of a resolution of its
board of directors authorizing the execution of this Lease and naming the
officer or officers who are authorized to execute this Lease on behalf of the
corporation.
-31-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of
the day and year first above written.
LANDLORD: Churchill Downs Incorporated
a Kentucky corporation
By:_____________________
Title:
TENANT: Hollywood Park, Inc.
a Delaware corporation
By:______________________
Title:
-32-
<PAGE>
EXHIBIT D
LICENSE AGREEMENT
This LICENSE AGREEMENT ("Agreement") is made and entered into this _______
day of __________, 1999 ("Effective Date"), by and between CHURCHILL DOWNS,
INCORPORATED, a Kentucky corporation, with its principal place of business at
______________________________ ("Licensor"), and HOLLYWOOD PARK, INC., a
Delaware corporation, with its principal place of business at
___________________________ ("Licensee") with reference to the following facts:
A. Licensee is selling to Licensor, pursuant to that certain Asset
Purchase Agreement between Hollywood Park, Inc. and Churchill Downs,
Incorporated, dated ______________, 1999 ("Asset Purchase Agreement"), real and
personal property, tangible and intangible, used by Licensee in the operation of
a horse racing facility known as the Hollywood Park Racetrack and card club
casino known as the Hollywood Park-Casino in Inglewood, California. The property
sold includes, among other things, the Core Hollywood Park Marks.
B. Pursuant to the Asset Purchase Agreement, Licensor and Licensee have
agreed to enter into a lease (the "Lease") under which Licensee or a sublessee
of Licensee shall continue to operate the casino business under the Hollywood
Park-Casino name on a portion of the real property purchased by Licensor.
C. In accord with the Asset Purchase Agreement, Licensee desires to obtain
and Licensor wishes to grant to Licensee an exclusive license to use the
Hollywood Park Marks in connection with Casino Operations on the leased property
and a non-exclusive license to use the Hollywood Park Marks in connection with
all Ancillary Goods and Services.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises set forth herein, the parties hereby agree as follows:
1. Definitions. As used in this Agreement, the following terms, whether in
-----------
singular or plural form, shall have the following meanings. Any capitalized
terms used in this Agreement, but not defined in this Section 1 shall have the
meanings ascribed to them elsewhere in this Agreement or in the Asset Purchase
Agreement, as applicable.
1.1 "Ancillary Goods and Services" means all goods and services related to
the Casino Operations or the enhancement or promotion thereof, including without
limitation the provision of guest services to Hollywood Park-Casino patrons and
potential patrons beyond those typically associated with casinos, such as
entertainment, credit, financial, entertainment, meeting, party, convention,
concierge, barber and beauty salon, catering, resort, travel arrangement, and
transportation services; the publication of books and magazines related to
gaming; and all merchandising efforts, such as the sale of branded clothing,
jewelry, playing cards, dice, drinking glasses, toys and souvenirs, provided
such merchandise is either (a) offered for sale at the Hollywood Park-Casino or
other casinos owned or operated by Licensee, its affiliates or the Casino
Operator, (b) sold to existing
<PAGE>
Hollywood Park-Casino patrons or (c) provided for free or at a substantial
discount in connection with the promotion of the Casino Business.
1.2 "Casino Operations" means the ownership and operation of the Hollywood
Park-Casino, including without limitation the marketing, sale, distribution and
provision of all the goods and services customarily attendant to the operation
of a full-service card club and casino, and any other use of the property
permitted under the Lease. For the avoidance of doubt, "Casino Operations"
include, among other things, casino and gaming services, as well as, restaurant,
bar, nightclub, cashier and gift shop services if offered at Hollywood Park-
Casino.
1.3 "Casino Site" shall have the meaning ascribed to it in Section 2.6.1.
1.4 "Core Hollywood Park Marks" mean the marks identified on Attachment A.
---------------
1.5 "Corporate Name" shall have the meaning ascribed to it in Section 2.3.
1.6 "Existing Site" shall mean the Internet site located at the URL
"www.hollywoodpark.com."
1.7 "New Hollywood Park Marks" mean any proposed Hollywood Park Mark
approved by Licensor pursuant to Section 2.5.
1.8 "Offensive Proceedings" shall have the meaning ascribed to it in
Section 6.
1.9 "Term" shall have the meaning ascribed to it in Section 7.
1.10 "Hollywood Park Marks" mean the Core Hollywood Park Marks and New
Hollywood Park Marks, collectively.
2. Grant of Licenses.
-----------------
2.1 Casino Operations. Licensor hereby grants to Licensee for the
-----------------
duration of the Term an exclusive, royalty-free, world-wide license to use the
Hollywood Park Marks in connection with Casino Operations.
2.2 Ancillary Uses. Licensor hereby grants to Licensee for the duration
--------------
of the Term a non-exclusive, royalty-free, world-wide license to use the
Hollywood Park Marks upon and in connection with Ancillary Goods and Services.
2.3 Corporate Name. Without limiting the generality of the foregoing
--------------
license grants, until the earlier of the date (i) Licensee, in its sole
discretion, formally changes its name and (ii) eighteen (18) months after the
Effective Date, Licensee may continue to use its corporate name, "Hollywood
Park, Inc." (the "Corporate Name"), to identify itself in all agreements,
instruments, corporate documents, press releases, company publications,
letterhead, business cards, marketing materials and other materials of any sort
and otherwise make customary use of the Corporate Name in the ordinary course of
Licensee's business, whether or not such use is related to Casino Operations.
-2-
<PAGE>
2.4 Right to Sublicense. Subject to all the terms and conditions of this
-------------------
Agreement, Licensee may sublicense any of the rights granted herein to third
parties in the ordinary course of Casino Operations, providing Ancillary Goods
and Services, or advertising, marketing, merchandising and promoting the Casino
Business, including, for example, without limitation the right to use the
Hollywood Park Marks in the manufacture of merchandise to be sold at Hollywood
Park Casino.
2.5 Proposed Hollywood Park Marks. Licensee shall not use any proposed
-----------------------------
additional Hollywood Park Mark except to the extent it is approved as provided
in this Section 2.5. Licensee shall inform Licensor of any proposed additional
Hollywood Park Mark Licensee desires to use in connection with Casino Operations
or Ancillary Goods and Services. Licensor shall approve or reject the proposed
use of the proposed Hollywood Park Mark within fifteen (15) days of such notice
from Licensee. Licensor shall not unreasonably withhold or delay its approval
of the use of any such proposed Hollywood Park Mark and failure by Licensor to
respond within fifteen (15) days shall be deemed approval by Licensor of the
proposed Hollywood Park Mark for the proposed use. Existing Obligations.
--------------------
Notwithstanding anything to the contrary in the foregoing, all rights granted to
Licensee in this Agreement shall be subject to the terms and conditions of any
and all existing licenses and other obligations related to the Hollywood Park
Marks as of the Effective Date. Such existing licenses and obligations include
those listed and attached hereto as Attachment B.
------------
2.6 Web Site.
--------
2.6.1 Interim Sharing Period. Until the earlier of (a) the date
----------------------
Licensee registers a domain name and establishes an alternate Internet site for
the Casino Business ("Casino Site") and (b) three months from the Effective
Date, Licensor and Licensee shall share the Existing Site, with Licensor
controlling the relative amount of space devoted to the Racetrack Business on
the Existing Site as of the Closing Date and Licensee controlling the relative
amount of space devoted to the Casino Business on the Existing Site as of the
Closing Date. Each party may, however, expand their respective portions of the
Existing Site without restriction, provided that each party bears any additional
development, hosting and other fees associated with its expansion of the
Existing Site. The parties shall split equally any routine maintenance fees and
other expenses equally applicable to both Licensor's and Licensee's portion of
the Existing Site. All expenses associated with the Existing Site shall
otherwise be prorated between the parties in accord with each party's relative
amount of space on the Existing Site. Licensor and Licensee shall cooperate
fully with each other and any developer or outside consultant engaged to
maintain the Existing Site to ensure that the Existing Site continues to operate
as a seamless, integrated whole.
2.6.2 Establishment of Casino Site. So long as the Casino Site
----------------------------
and Existing Site are both operational and Licensee or its subtenant continues
to operate the Casino Business under the Hollywood Park-Casino name, (a)
Licensee may, free of charge, place, and Licensor shall take all action
necessary to cause to be placed, on the home page of the Existing Site a
hyperlink, which, if selected, will automatically point the end user's browser
to the Casino Site, and (b) Licensor may, free of charge, place, and Licensor
shall take all action necessary to cause to be placed, on
-3-
<PAGE>
the home page of the Casino Site a hyperlink, which, if selected, will
automatically point the end user's browser to the Existing Site. Any links
hereunder shall be placed prominently in the initially visible screen space on
the home page of the site containing such link. Each party may from time to time
update (x) its icon representing the hyperlink to its site, subject to the other
party's reasonable design requirements, and (y) the URL information for its
site, and the other party shall promptly incorporate such updated information
into the link on its site.
2.6.3 Notice on the Existing Site. The parties shall consult with
---------------------------
each other to determine if their respective Internet sites should contain a
statement explaining the relationship of Licensor and Licensee to users of the
Existing Site.
3. Limitations on Use. Licensor may not use any of the Core Hollywood Park
------------------
Marks, the mark "Hollywood Park" or any mark containing the term "Hollywood
Park" in connection with casino, card club or gaming services. Notwithstanding
the foregoing, Licensor may use any such marks in connection with "Non-
Parimutuel Gaming" as that term is defined in and as permitted under Section
11.7 of the Asset Purchase Agreement. Subject to the other terms and conditions
of this Agreement, Licensor is otherwise free to use and license the mark
"Hollywood Park" in its discretion. For the avoidance of doubt, unless Licensor
specifically authorizes such use pursuant to Section 2.5, Licensee may not use
the mark "Hollywood Park" apart from the mark "Hollywood Park-Casino" or other
Core Hollywood Park Marks identified on Attachment A.
4. Reservation of Rights. Licensee acknowledges and agrees that (i) the
---------------------
Hollywood Park Marks and all goodwill associated therewith are and shall remain
the sole property of Licensor, (ii) nothing in this Agreement shall convey to
Licensee any right of ownership in the Hollywood Park Marks, (iii) Licensee
shall not in any manner take any action that would impair the value of, or
goodwill associated with, such marks, and (iv) all rights not expressly granted
to Licensee are reserved to Licensor. Licensee acknowledges and agrees that all
use of Hollywood Park Marks by Licensee shall inure to the benefit of Licensor.
5. Quality Control.
---------------
5.1 Quality Standard. The parties acknowledge and agree that it is
----------------
necessary for Licensor to maintain uniform standards governing the quality of
goods and services offered under its trademarks. Accordingly, Licensee agrees
that the goods and services it offers under the Hollywood Park Marks shall have
a standard quality equivalent to the quality of comparable goods and services
offered by Licensee as of the Effective Date, subject to reasonable variations
resulting from business, legal and technical requirements.
5.2 Inspection. Licensee shall, upon Licensor's reasonable request, (i)
----------
make available for Licensor's inspection samples of the goods, marketing
materials, packaging and any other materials bearing the Hollywood Park Marks
pursuant to the licenses granted herein and (ii) permit Licensor to inspect
Licensee's operation upon reasonable notice and at mutually convenient times.
5.3 Rejection. If at any time any of the goods or services sold,
---------
provided or marketed under the Hollywood Park Marks do not meet the quality
standard set forth in Section 5.1 as reasonably determined by Licensor, Licensor
shall have the right to require Licensee to discontinue the use of the
applicable Hollywood Park Mark in connection with the sale or provision of such
good or service upon written notice, unless modifications
-4-
<PAGE>
satisfactory to Licensor are made within forty-five (45) days after Licensor's
written notice of disapproval.
5.4 Compliance with Laws. Licensee shall comply with all applicable
--------------------
laws and regulations and obtain all appropriate government approvals pertaining
to the sale, distribution and advertising of the goods and services under the
Hollywood Park Marks.
6. Infringement Proceedings. Each party agrees to notify the other party of
------------------------
any unauthorized use of the Hollywood Park Marks by third parties promptly as
such use shall come to such notifying party's attention. Licensor shall
initially have the sole right and discretion to bring proceedings alleging
infringement of Hollywood Park Marks, passing off, trademark dilution, unfair
competition and other claims related to the Hollywood Park Marks against such
third parties ("Offensive Proceedings") and to defend proceedings brought or
threatened against Licensor or Licensee based on use of Hollywood Park Marks.
Licensee shall take such steps as Licensor may reasonably request, at Licensor's
expense, to assist Licensor in protecting Licensor's rights in the Hollywood
Park Marks. In the event that Licensor notifies Licensee that Licensor elects
not to prosecute an Offensive Proceeding, Licensee may, subject to Licensor's
approval, not to be unreasonably withheld, bring such proceeding, with all
reasonable expenses incurred in connection therewith to be borne by Licensee.
Licensor shall cooperate fully in any such proceeding brought by Licensee.
7. Term. This Agreement shall continue in force and effect for the term of
the Lease and any renewals, extensions or replacements thereof (the "Term").
8. Cooperation. Licensee agrees to provide Licensor with reasonable
assistance as Licensor may require in the procurement of any protection of
Licensor's rights to the Hollywood Park Marks. Licensee shall cause to appear on
all written materials on or in connection with which the Hollywood Park Marks
are used such proprietary notices as Licensor may reasonably request.
9. Termination
9.1 If Licensee breaches any of the material provisions herein, Licensor
shall have the right to terminate this Agreement upon forty-five (45) days
written notice, provided that Licensee fails to cure such violation during the
forty-five (45) day period.
9.2 If Licensee files a petition in bankruptcy or is adjudicated a
bankrupt or if a petition in bankruptcy is filed against Licensee or if it
becomes insolvent, or makes an assignment for the benefit of its creditors or an
arrangement pursuant to any bankruptcy law, or if Licensee discontinues all of
its business to which this Agreement relates, or if a receiver is appointed for
it or its business, this Agreement shall automatically terminate without notice
of any type. In the event this Agreement is so terminated, Licensee, its
receivers, representatives, trustees, agents, administrators, successors, or
assigns shall have no right to sell, exploit, or in any way deal with or in any
of the Hollywood Park Marks.
9.3 Termination of this Agreement under the provisions of this Section 9
shall be without prejudice to any rights that Licensor may otherwise have
against Licensee.
-5-
<PAGE>
9.4 Upon termination of this Agreement, Licensee agrees (i) to
discontinue all use of the Hollywood Park Marks and any mark confusingly similar
thereto, (ii) to cooperate with Licensor or its appointed agent to apply to the
appropriate authorities to cancel recordation of this Agreement with all
applicable governmental authorities, (iii) to destroy or sell off all printed
and other materials bearing the Hollywood Park Marks, and (iv) to cooperate
generally with Licensor to ensure that all rights in the Hollywood Park Marks
and the goodwill connected therewith shall remain the property of Licensor.
10. Miscellaneous
-------------
10.1 Indemnification. Licensee hereby indemnifies and agrees to defend
---------------
and hold harmless forever Licensor and its agents, representatives, successors
and assigns from and against any and all claims, demands, losses, costs,
expenses and liabilities of any kind (including reasonable attorneys' fees)
arising out of Licensee's exercise of the rights granted by Licensor hereunder.
Licensor hereby indemnifies and agrees to defend and hold harmless forever
Licensee and its agents, representatives, successors and assigns from and
against any and all claims, demands, losses, costs, expenses and liabilities of
any kind (including reasonable attorneys' fees) arising out of the breach of
this Agreement by Licensor.
10.2 No Joint Venture. Nothing contained herein shall be construed to
----------------
place the parties in the relationship of partners or joint venturers or
principal and agent or employer and employee, and no party shall have the power
to obligate or bind the other party in any manner whatsoever.
10.3 Remedies. The parties recognize the unique and special nature and
--------
value of the use of the Hollywood Park Marks and agree that it is extremely
difficult and impractical to ascertain the extent of the detriment to Licensor
which would be caused in the event of any use of the Hollywood Park Marks
contrary to the terms of this Agreement. The parties further acknowledge that
Licensor will have no adequate remedy at law in the event Licensee uses the
Hollywood Park Marks in any way not permitted hereunder, and that Licensor shall
be entitled to equitable relief by way of temporary and permanent injunction,
and such other and further relief at law or equity as any arbitrator or court of
competent jurisdiction may deem just and proper, in addition to any and all
other remedies provided for herein.
10.4 Waivers. Either party may, by written notice to the other party, (i)
-------
extend the time for the performance of any of the obligations or other actions
of the other party under this Agreement, (ii) waive compliance with any of the
conditions or covenants of the other contained in this Agreement, or (iii) waive
performance of any of the obligations of the other under this Agreement. With
regard to any power, remedy or right provided herein or otherwise available to
any party hereunder, (i) no waiver or extension of time will be effective unless
expressly contained in a writing signed by the waiving party, and (ii) no
alteration, modification, or impairment will be implied by reason of any
previous waiver, extension of time, or delay or omission in exercise of rights
or other indulgence.
10.5 Amendments, Supplements. This Agreement may be amended or at
-----------------------
supplemented any time by the mutual written consent of the parties.
-6-
<PAGE>
10.6 Incorporation by Reference. Attachment A and Attachment B attached
-------------------------- ------------ ------------
hereto are hereby incorporated by reference and made a part hereof.
10.7 Entire Agreement. This Agreement and the documents incorporated by
----------------
reference constitute the entire agreement between the parties hereto with
respect to the subject matter hereof and supersede all prior agreements and
understandings, oral and written, between the parties hereto with respect to the
subject matter hereof. No representation, warranty, promise, inducement or
statement of intention has been made by either party that is not embodied in
this Agreement or such other documents, and neither party shall be bound by, or
be liable for, any alleged representation, warranty, promise, inducement or
statement of intention not embodied herein or therein.
10.8 Binding Effect, Benefits. This Agreement shall inure to the benefit
------------------------
of and be binding upon the parties hereto and their respective permitted
successors, sublicensees and assigns. Notwithstanding anything contained in
this Agreement to the contrary, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto and their
respective permitted successors, sublicensees and assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
10.9 Assignability. Licensor may freely assign this Agreement. Except as
-------------
expressly provided in Section 2.4, Licensee may not assign this Agreement or its
rights hereunder without the prior written consent of Licensor. Notwithstanding
the foregoing, Licensee may freely assign its rights and obligations under this
Agreement (a) to any person or entity that controls, is controlled by, or is
under common control with Licensee, (b) to any person or entity that purchases
all or substantially all of the Casino Business, whether such purchase is
accomplished by transfer of stock, assets or any other means, or (c) in
connection with any permissible assignment of the Lease.
10.10 Notices. All notices under this Agreement shall be in writing and
-------
shall be delivered by personal service or telegram, telecopy or certified mail
(if such service is not available, then by first class mail), postage prepaid,
or overnight courier to such address as may be designated from time to time by
the relevant party, and which will initially be as set forth below. All notices
shall be deemed given when received. No objection may be made to the manner of
delivery of any notice actually received in writing by an authorized agent of a
party. Notices shall be addressed as follows or to such other address as the
party to whom the same is directed will have specified in conformity with the
foregoing:
(a) If to Licensee:
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Attention: Mr. G. Michael Finnigan
(b) If to Licensor:
Churchill Downs Incorporated
700 Central Avenue
Louisville, Kentucky 40208
-7-
<PAGE>
Attention: Mr. Robert L. Decker
10.11 Governing Law; Jurisdiction. This Agreement has been negotiated and
---------------------------
entered into in the State of California, and all questions with respect to the
Agreement and the rights and liabilities of the parties hereunder will be
governed by the laws of that state, regardless of the choice of laws provisions
of California or any other jurisdiction. Any and all disputes between the
parties that may arise pursuant to this Agreement will be heard and determined
before an appropriate federal or state court located in Los Angeles, California.
The parties hereto acknowledge that such courts have the jurisdiction to
interpret and enforce the provisions of this Agreement and the parties waive any
and all objections that they may have as to jurisdiction or venue in any of the
above courts.
10.12 Costs and Attorneys' Fees. In any dispute between the parties
-------------------------
concerning any provision of this Agreement or the rights and duties of any
person under it, the party prevailing in any such dispute will be entitled, in
addition to such other relief as may be granted, to the reasonable attorneys'
fees and court and arbitration costs incurred by reason of such arbitration or
litigation of such dispute. For purposes of this Section 10.12, the prevailing
party is the party that most closely obtains the relief it sought, whether or
not the suit or other legal proceeding is settled or carried out to its
conclusion.
10.13 Rules of Construction.
---------------------
10.13.1 Headings. The section headings in this Agreement are
--------
inserted only as a matter of convenience, and in no way define, limit, extend or
interpret the scope of this Agreement or of any particular section.
10.13.2 Tense and Case. Throughout this Agreement, as the context
--------------
may require, references to any word used in one tense or case shall include all
other appropriate tenses or cases.
10.13.3 Severability. If any term or provision of this Agreement
------------
or the application thereof to any person or circumstances shall, to any extent,
be invalid or unenforceable (other than provisions going to the essence of this
Agreement), the remainder of this Agreement, or the application of such term or
provision to persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected thereby, and each such term and
provision of this Agreement shall be valid and be enforced to the fullest extent
permitted by law.
10.13.4 Agreement Negotiated. The parties hereto are sophisticated
--------------------
and have been represented by lawyers who have carefully negotiated
the provisions of this Agreement. As a consequence, the parties do not believe
the presumption of California Civil Code Section 1654 and similar laws or rules
relating to the interpretation of contracts against the drafter of any
particular clause should be applied in this case and therefore waive its
effects.
10.14 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officers of the parties hereto as of the date first above
written.
LICENSOR: CHURCHILL DOWNS, INCORPORATED
By:__________________________
Its:_________________________
LICENSEE: HOLLYWOOD PARK, INC.
By:__________________________
Its:_________________________
-9-
<PAGE>
ATTACHMENT A
------------
Core Hollywood Park Marks
1. Core Hollywood Park Marks: The Core Hollywood Park Marks licensed pursuant
----- ------
to this Agreement are:
HOLLYWOOD PARK CASINO
Horse Logo - a copy of which is attached hereto
[other marks may be added pending the identification of all marks to be
transferred to Churchill Downs under the Asset Purchase Agreement during
the diligence period]
2. Registrations Related to the Core Hollywood Park Marks:
------------------------------------------------------
<TABLE>
<CAPTION>
Country Mark Reg. or App. No. Int'l Classes 1st Use
- ------- ---- ---------------- ------------- -------
<S> <C> <C> <C> <C>
U.S. HOLLYWOOD PARK Reg. No. 1,850,076 (8/16/94) 41 6/10/38
</TABLE>
-10-
<PAGE>
ATTACHMENT B
------------
Existing Licenses and Other Obligations Regarding the Hollywood Park Marks
1. Agreement executed as of August 31, 1995 between Hollywood Casino Corp. and
Hollywood Park Operating Co. et. al., a copy of which is attached hereto.
-11-
<PAGE>
Exhibit E
Office Lease Term Sheet
1. Premises. As outlined on Exhibit "E-1".
--------
2. Term. (a) With respect to the "Gaming Offices" shown on Exhibit "E-1", on
----
or before November 15, 1999; (b) with respect to the "Realty Offices" shown
on Exhibit "E-1", initially two years; thereafter term will renew
automatically for successive one-year terms.
3. Termination Rights With Respect To Realty Offices. Anytime after initial
-------------------------------------------------
two year term: By Buyer, upon 180 days advance written notice if Buyer
requires space for its operations; or by Seller, upon 90 days advance
written notice.
4. Rent. Seller shall pay Buyer the sum of $500.00 per month during the term.
----
Rent to include payment for routine janitorial service and utilities, other
than telephone.
-1-
<PAGE>
EXHIBIT "E-1"
Treasury offices
[MAP OF THE TREASURY OFFICES WILL APPEAR HERE]
<PAGE>
[GAMING OFFICE SPACE]
<PAGE>
Exhibit "F"
Hollywood Park Operating Company
and
Subsidiaries (the Race Track Business)
Financial Statements as of March 31, 1999
<PAGE>
HOLLYWOOD PARK OPERATING COMPANY & SUBS
Balance Sheets
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
------------ ------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $1,136,000 $0
Cash restricted 710,000 487,000
Other receivables, net 1,871,000 6,181,000
Prepaid expenses and other assets 12,341,000 5,845,000
Inter-company receivable 124,036,000 137,601,000
------------ ------------
Total current assets 140,094,000 149,754,000
------------ ------------
Property, plant and equipment, net 21,701,000 22,573,000
Other assets 29,000 29,000
------------ ------------
$161,824,000 $172,356,000
============ ============
Liabilities and Stockholder Equity
Current Liabilities
Accounts payable $2,797,000 $3,887,000
Accrued liabilities 5,870,000 8,936,000
Accrued workers' compensation 1,543,000 1,571,000
Amounts due horsemen for purses, stakes and awards 0 0
Amounts payable to charities 282,000 282,000
Outstanding pari-mutuel tickets 1,589,000 1,850,000
Current portion of notes payable 43,000 37,000
------------ ------------
Total current liabilities 12,124,000 16,563,000
Notes payable 125,228,000 125,228,000
------------ ------------
Total liabilities 137,352,000 141,791,000
Commitments and contingencies 0 0
Stockholder equity:
Capital stock --
Common - $.10 par value, authorized 100 shares:
100 issued and outstanding 0 0
Capital in excess of par value 1,000 1,000
Accumulated earnings 24,471,000 30,564,000
------------ ------------
24,472,000 30,565,000
------------ ------------
$161,824,000 $172,356,000
============ ============
</TABLE>
<PAGE>
Hollywood Park Operating Company & Subs
Budget Vs. Actual - Variance Analysis
Three Months Ended March 31, 1999
<TABLE>
<CAPTION>
% Actual Budget Actual
Description Variance 1999 1999 1998
----------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Live racing days -- 0 0 0
ITW racing days 0.00% 21 21 22
Simulcast Racing Events 10.53% 42 38 40
Handle (on-track) -- 0 0 0
Attendance (on-track) -- 0 0 0
Handle (within CA) -- 0 0 0
Attendance (within CA) -- 0 0 0
Handle (outside CA) -- 0 0 0
Handle (simulcast) 2.35% 27,173,957 26,550,000 27,846,021
Attendance (simulcast) 0.54% 106,839 107,423 116,029
Revenues:
Pari-mutuel commissions (on-track) -- $ 0 $ 0 $ 0
Pari-mutuel commissions (within CA) -- 0 0 0
Pari-mutuel commissions (outside CA) -- 0 0 0
Off-track license fees -- 0 0 (33,233)
Simulcast wagering comm. 2.35% 543,479 531,000 532,406
Admissions, parking & programs 4.41% 370,641 355,000 472,540
Advance training program 0.15% 325,500 326,000 310,000
Other racing income 11.00% 67,707 61,000 57,635
Concessions Sales - racing 11.74% 237,422 269,000 274,677
Interest and other income 65.91% 384,920 232,000 312,765
------------ ------------ ------------ ------------
Gross revenues 8.78% 1,929,669 1,774,000 1,926,790
------------ ------------ ------------ ------------
Expenses by cost centers:
Operations 11.04% 279,832 252,000 248,321
Forum Parking 63.05% 88,049 54,000 66,207
Parimutuel 33.73% 1,988 3,000 884
Security 2.67% 152,812 157,000 165,843
Racing 1.74% 51,889 51,000 53,020
Advance Training Program 3.31% 297,790 308,000 303,040
Breeders' Cup -- 0 0 0
General Maintenance 0.46% 317,525 319,000 316,641
Track Crew 10.34% 152,263 138,000 125,116
Janitorial 18.87% 104,661 129,000 110,627
Marketing 5.41% 93,643 99,000 86,973
Turf Club 30.13% 10,410 8,000 9,168
Group Sales 6.68% 22,402 21,000 20,645
Public Relations 0.73% 33,240 33,000 30,798
Television and Matrix 10.12% 50,331 56,000 55,129
Print Shop 0.85% 21,178 21,000 18,395
Warehouse and Purchasing 9.18% 14,194 13,000 13,151
Accounting 8.05% 53,330 58,000 49,461
Data Processing 37.52% 24,991 40,000 43,067
Administration 0.22% 439,964 439,000 449,120
Laundry 16.78% 4,993 6,000 6,432
Gift Shop 44.75% 1,105 2,000 1,322
Cost of Concession Sales - racing 2.89% 265,466 258,000 286,837
------------ ------------ ------------ ------------
Gross operating expenses 0.69% 2,482,056 2,465,000 2,460,197
Less - Charities -- 0 0 0
------------ ------------ ------------ ------------
Net operating expenses 0.69% 2,482,056 2,465,000 2,460,197
------------ ------------ ------------ ------------
Loss before corporate expenses 20.06% (552,387) (691,000) (533,408)
------------ ------------ ------------ ------------
Loss - corporate expenses
Interest expense 0.09% 1,136,038 1,135,000 1,033,880
Depreciation and amortization 2.27% 363,071 355,000 352,418
------------ ------------ ------------ ------------
Net loss before taxes 5.94% $ (2,051,497) $ (2,181,000) $(1,919,706)
------------ ------------ ------------ ------------
Loss interest expense 0.09% (1,136,038) (1,135,000) (1,033,880)
------------ ------------ ------------ ------------
Net loss excluding interest expense 12.48% $ (918,459) $ (1,046,000) $ (885,826)
------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
Actual Budget Actual %
Description 1999 1999 1998 Variance
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C>
Live racing days 0 0 0 --
ITW racing days 64 65 65 -1.54%
Simulcast Racing Events 119 117 118 1.71%
Handle (on-track) 0 0 0 --
Attendance (on-track) 0 0 0 --
Handle (within CA) 0 0 0 --
Attendance (within CA) 0 0 0 --
Handle (outside CA) 0 0 0 --
Handle (simulcast) 79,891,364 74,300,000 75,905,231 7.53%
Attendance (simulcast) 326,318 308,675 323,585 5.72%
Revenues:
Pari-mutuel commissions (on-track) $ 0 $ 0 $ 0 --
Pari-mutuel commissions (within CA) 0 0 0 --
Pari-mutuel commissions (outside CA) 0 0 0 --
Off-track license fees 0 0 62,663 --
Simulcast wagering comm. 1,597,827 1,486,000 1,464,115 7.53%
Admissions, parking & programs 1,130,074 1,006,000 1,305,174 12.33%
Advance training program 945,000 945,000 900,000 0.00%
Other racing income 204,006 174,000 162,923 17.24%
Concessions Sales - racing 696,171 729,000 739,655 4.50%
Interest and other income 925,955 717,000 887,002 29.14%
------------ ------------ ------------ ------------
Gross revenues 5,499,033 5,057,000 5,521,532 8.74%
------------ ------------ ------------ ------------
Expenses by cost centers:
Operations 820,135 744,000 750,288 -10.23%
Forum Parking 213,347 163,000 177,172 -30.89%
Parimutuel 3,157 3,000 2,604 -5.23%
Security 467,825 473,000 496,232 2.36%
Racing 144,877 136,000 142,843 -6.53%
Advance Training Program 896,252 902,000 882,398 3.63%
Breeders' Cup 0 0 0 --
General Maintenance 844,538 857,000 846,548 1.45%
Track Crew 380,701 377,000 394,951 -0.98%
Janitorial 317,218 383,000 390,259 17.18%
Marketing 262,546 279,000 290,582 5.90%
Turf Club 27,249 27,000 25,703 -0.92%
Group Sales 67,970 60,000 66,402 -13.28%
Public Relations 97,027 100,000 97,114 2.97%
Television and Matrix 148,035 166,000 167,823 10.82%
Print Shop 54,769 52,000 47,181 -5.33%
Warehouse and Purchasing 43,039 41,000 47,092 -4.97%
Accounting 162,236 166,000 165,576 2.27%
Data Processing 78,682 119,000 124,148 33.88%
Administration 1,387,741 1,335,000 1,299,117 -3.95%
Laundry 16,331 21,000 23,399 22.23%
Gift Shop 3,889 3,000 2,523 -26.63%
Cost of Concession Sales - racing 785,504 759,000 803,330 -3.49%
------------ ------------ ------------ ------------
Gross operating expenses 7,190,068 7,166,000 7,243,285 -0.34%
Less - Charities 0 0 0 --
------------ ------------ ------------ ------------
Net operating expenses 7,190,068 7,166,000 7,243,285 -0.34%
------------ ------------ ------------ ------------
Loss before corporate expenses (1,691,038) (2,109,000) (1,721,783) 19.82%
------------ ------------ ------------ ------------
Loss - corporate expenses
Interest expense 3,251,629 3,241,000 3,057,698 -0.33%
Depreciation and amortization 1,090,057 1,065,000 1,064,609 -2.35%
------------ ------------ ------------ ------------
Net loss before taxes $ (6,032,722) $ (6,415,000) $ (5,844,060) 5.96%
------------ ------------ ------------ ------------
Loss interest expense (3,251,629) (3,241,000) (3,057,698) -0.33%
------------ ------------ ------------ ------------
Net loss excluding interest expense $ (2,781,093) $ (3,174,000) $ (2,786,362) 12.38%
------------ ------------ ------------ ------------
</TABLE>
<PAGE>
Exhibit "G"
Parking License
1. Area: Remainder Parcels.
----
2. Termination Rights: By Seller (or its Affiliate) upon 60 days advance
------------------
written notice of sale or intent to develop; or by Buyer upon 30 days
advance written notice that Seller (or its Affiliate) intends to
commence development, or
3. Perimeter Fencing: Upon termination, Seller (or its Affiliate) to
-----------------
install chain link or other fence at property line of Remainder
Parcel(s) and Real Property. Prior to Commencement, Buyer to be
responsible for keeping patrons off of Remainder Parcel(s).
4. Maintenance and Repair: Seller (or its Affiliate) will have no
----------------------
obligation to maintain the condition or repair the Remainder Parcels.
Buyer to use "AS IS."
5. Rent: None, however, all Common Area Maintenance Charges under the
----
Casino Lease will abate throughout the term of the Parking License.
6. Use: Subject to paragraph 7, Seller shall make sufficient portions of
---
the Remainder Parcels available to Buyer's patrons on a non-exclusive
basis on racing days where the estimated attendance at a racing event is
anticipated to exceed 15,000 individuals.
7. Commencement: Upon written notice from Buyer, subject to availability
------------
due to commitments made to third parties prior to Buyer's notice.
-1-
<PAGE>
EXHIBIT 10.42
AMENDMENT NO. 1 TO AMENDED AND
RESTATED REDUCING REVOLVING LOAN AGREEMENT
This Amendment No. 1 to Amended and Restated Reducing Revolving Loan
Agreement (this "Amendment") is entered into with reference to the Amended
Reducing Revolving Loan Agreement dated as of October 14, 1998 among Hollywood
Park, Inc. ("Borrower"), the Banks party thereto, Societe Generale and Bank of
Scotland, as Managing Agents, First National Bank of Commerce, as Co-Agent, and
Bank of America National Trust and Savings Association, as Administrative Agent
(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 Administrative Agent, acting with the consent of all
of the Banks pursuant to Section 11.2 of the Loan Agreement, agree as follows:
----
1. Section 1.1. Section 1.1 of the Loan Agreement is amended to add the
----------- ---
following new definition:
"Annualized Indiana Project Adjusted EBITDA" means, with respect to
------------------------------------------
the Indiana Project and as of any date upon which the Indiana Project
has been open for business for at least one (1) full Fiscal Quarter
but less than four (4) full Fiscal Quarters, Adjusted EBITDA
attributable to the Indiana Project annualized using the following
conventions: (i) if the Indiana Project has been open for business for
less than one (1) full Fiscal Quarter, no annualization adjustment
shall be made and this definition shall not apply, (ii) if the Indiana
Project has been open for business for one (1) full Fiscal Quarter
(and not more than one (1) Fiscal Quarter), Adjusted EBITDA
attributable to the Indiana Project for that Fiscal Quarter shall be
multiplied by four, (iii) if the Indiana Project has been open for
business two (2) full Fiscal Quarters (and not more than two (2)
Fiscal Quarters), Adjusted EBITDA attributable to the Indiana Project
for those Fiscal Quarters shall be multiplied by two and (iv) if the
Indiana Project has been open for business for three (3) full Fiscal
Quarters, Adjusted EBITDA attributable to the Indiana Project for
those Fiscal Quarters shall be multiplied by four thirds (4/3). To
the extent that Adjusted EBITDA attributable to the Indiana Project is
included within this definition, it shall not also be included within
Adjusted EBITDA.
-1-
<PAGE>
2. Section 1.1. Section 1.1 of the Loan Agreement is further amended by
----------- ---
deleting the definition of "Phoenix Eagle Property."
3. Section 1.1. Section 1.1 of the Loan Agreement is further amended by
----------- ---
revising the following definitions to read as follows:
"Funded Debt Ratio" means, as of the last day of each Fiscal Quarter,
-----------------
the ratio of (a) Average Quarterly Funded Debt to (b) the sum of (i)
----- -- --- --
Adjusted EBITDA for the fiscal period consisting of that Fiscal
Quarter and the three immediately preceding Fiscal Quarters plus (ii)
----
any Annualized Indiana Project Adjusted EBITDA as of such date.
"Interest Coverage Ratio" means, as of the last day of each Fiscal
-----------------------
Quarter, the ratio of (a) the sum of (i) Adjusted EBITDA for the
----- -- --- --
fiscal period consisting of that Fiscal Quarter and the three
immediately preceding Fiscal Quarters plus (ii) any Annualized Indiana
----
Project Adjusted EBITDA as of such date minus (I) the aggregate
-----
Maintenance Capital Expenditures made in that fiscal period and minus
-----
(II) Cash Income Taxes paid in that fiscal period and minus (III)
-----
Distributions consisting of dividends on capital stock of Borrower
made in Cash during that fiscal period to (b) Interest Charges for
--
that fiscal period.
"Phoenix Excess Property" means up to 100 undeveloped acres of the
-----------------------
Phoenix Property that may, upon request of Borrower, be released from
the Lien of the Phoenix Deed of Trust in connection with the sale
thereof to a Person that is not an Affiliate of Borrower, subject to
the conditions set forth therein and to compliance with Section 2.13.
----
"Reduction Amount" means with respect to each Reduction Date, (a) if
----------------
the Facility Increase has not occurred, the amount set forth below
opposite the period in which that Reduction Date occurs (subject to
the last sentence of Sections 2.5 and 2.7):
--- ---
-2-
<PAGE>
Period Amount
------ ------
March 31, 2001
through December 31, 2002 $10,000,000
March 31, 2003
through September 30, 2003 $16,666,667
and (b) if the Facility Increase has occurred, the Reduction Amount
for the period (i) March 31, 2001 through December 31, 2002 shall be
the sum of $10,000,000 plus 5% of the Facility Increase Amount and
--- -- ----
(ii) March 31, 2003 through September 30, 2003 shall be the sum of
--- --
$16,666,667 plus 8.333% of the Facility Increase Amount.
----
"Senior Funded Debt Ratio" means, as of the last day of each Fiscal
------------------------
Quarter, the ratio of (a) Average Quarterly Senior Funded Debt to (b)
----- -- --
the sum of (i) Adjusted EBITDA for the fiscal period consisting of
--- --
that Fiscal Quarter and the three immediately preceding Fiscal
Quarters plus (ii) any Annualized Indiana Project Adjusted EBITDA as
----
of such date.
4. Section 1.1. Section 1.1 of the Loan Agreement is further amended by
----------- ---
revising clause (c) of the definition of "Unrestricted Subsidiary" to read as
-
follows:
"(c) so long as (i) Section 5.11(b) has not become applicable or (ii)
---------- -------
the aggregate net Investments made by Borrower in the CMC Louisiana
Subsidiaries are less than $10,000,000, the CMC Louisiana
Subsidiaries,"
5. Section 2.5. As of May 21, 1999, Borrower permanently and irrevocably
-----------
(subject to Section 2.11) reduced the Commitment to $200,000,000 pursuant to
----
Section 2.5. The last sentence of Section 2.5 shall not, however, apply to this
--- ---
reduction of the Commitment.
-3-
<PAGE>
6. Section 2.7. Section 2.7 of the Loan Agreement is hereby amended to
----------- ---
read as follows:
"2.7 [Intentionally Deleted]"
7. Section 2.11. Section 2.11 of the Loan Agreement is hereby amended
------------ ----
(a) by striking the proviso in the first sentence thereof, (b) by striking the
date "October 15, 1999" in the second line thereof and substituting the date
"December 31, 2000" in its place, (c) by striking the figures "$75,000,000" in
the fourth line thereof and substituting in their place the figures
"$100,000,000", (d) by striking subclause (i) of clause (a) thereof and
substituting in its place the words "[Intentionally Deleted]" and (e) by
striking the figures "$75,000,000" in the third line of clause (f) and
-
substituting in their place the figures "$100,000,000."
8. Section 2.13. Section 2.13 of the Loan Agreement is amended by (a)
------------ ----
deleting the words "the Phoenix Eagle Property" in clause (c) of the first
-
sentence thereof and substituting therefor the words "[Intentionally Deleted]"
and (b) adding a new sentence immediately following the initial sentence of such
Section, to read as follows:
"In addition, subject to the prior written approval of the Requisite
Banks (which approval may be subject to such conditions, including
---------
requirements for application of proceeds, as the Requisite Banks may
in their sole discretion determine are appropriate), the
Administrative Agent shall execute such documents as are reasonably
required to release from the Lien of the Phoenix Deed of Trust the
Phoenix Excess Property (in addition to the portions thereof described
-----------
in the first sentence of this Section 2.13); provided that such
---- -------- ----
release must be in connection with a Disposition thereof to a Person
that is not an Affiliate of Borrower.
9. Section 5.13. Section 5.13 of the Loan Agreement is amended to read
------------ ----
as follows:
"5.13 Intercompany Notes. Execute a promissory note (in a form
------------------
reasonably acceptable to the Administrative Agent) evidencing any
Indebtedness of Borrower or a
-4-
<PAGE>
Restricted Subsidiary to any Restricted Subsidiary which is in an
amount of $5,000,000 or more, and cause each payee of such promissory
note to deliver the same to Borrower; provided that Borrower shall,
--------
immediately upon request by the Administrative Agent, deliver the same
to the Administrative Agent, with an endorsement in blank, as Pledged
Collateral (General).
10. Section 6.5(d). Section 6.5(d) of the Loan Agreement is hereby
-------------- ------
amended by striking the figures "$10,000,000" and substituting the figures
"$15,000,000" in their place.
11. Section 6.11. Section 6.11 of the Loan Agreement is amended to read
------------ ----
as follows:
"6.11 Interest Coverage Ratio. Permit the Interest Coverage Ratio,
-----------------------
as of the last day of any Fiscal Quarter ending after the Closing
Date, to be less than the ratio set forth below opposite such Fiscal
Quarter or the period during which such Fiscal Quarter ends:
<TABLE>
<CAPTION>
Fiscal Quarter or Period Ratio
------------------------ ------------
<S> <C>
Closing Date through
March 31, 1999 1.70 to 1.00
June 30, 1999 through
March 31, 2000 1.50 to 1.00
June 30, 2000 1.40 to 1.00
September 30, 2000 1.50 to 1.00
December 31, 2000 1.75 to 1.00
March 31, 2001 and
thereafter 2.00 to 1.00
</TABLE>
12. Section 6.12. Section 6.12 of the Loan Agreement is amended to read
------------ ----
as follows:
-5-
<PAGE>
"6.12 Senior Funded Debt Ratio. Permit the Senior Funded Debt
------------------------
Ratio, as of the last day of any Fiscal Quarter ending after the
Closing Date, to be greater than 2.00 to 1.00.
13. Section 6.13. Section 6.13 of the Loan Agreement is amended to read
------------ ----
as follows:
"6.13 Funded Debt Ratio. Permit the Funded Debt Ratio, as of the
-----------------
last day of any Fiscal Quarter ending after the Closing Date, to be
greater than the ratio set forth below opposite such Fiscal Quarter or
the period during which such Fiscal Quarter ends:
<TABLE>
<CAPTION>
Fiscal Quarter or Period Ratio
------------------------ ------------
<S> <C>
Closing Date through
December 31, 1998 4.75 to 1.00
March 31, 1999 through
September 30, 1999 5.00 to 1.00
December 31, 1999 through
March 31, 2000 5.25 to 1.00
June 30, 2000 5.75 to 1.00
September 30, 2000 5.00 to 1.00
December 31, 2000 4.50 to 1.00
March 31, 2001 and
thereafter 4.00 to 1.00
</TABLE>
14. Section 6.14. Section 6.14(d) of the Loan Agreement is amended by
------------ -------
striking the first two lines thereof (through the figures "$150,000,000") and
substituting therefor the following:
"Capital Expenditures (excluding capitalized interest, pre-opening
---------
expenses and funds disbursed pursuant to community development
agreements) for the acquisition of land for and construction of the
Indiana Project not in excess of $165,000,000;"
-6-
<PAGE>
15. Section 6.15. Section 6.15(c) of the Loan Agreement is amended by
------------ -------
striking the figures "$10,000,000" in the second line thereof and substituting
the figures "$15,000,000" in their place.
16. Section 6.15. Section 6.15(h) of the Loan Agreement is amended by
------------ -------
striking the figures "$20,000,000" in the fifth line thereof and substituting in
their place the figures "$50,000,000."
17. Section 6.18. Section 6.18 of the Loan Agreement is amended to read
------------ ----
as follows:
6.18 Redemption or Repurchase of Louisiana First Mortgage Notes.
----------------------------------------------------------
Redeem or repurchase all or any portion of the Louisiana First
Mortgage Notes, except (a) such amounts as are payable to the holders
------
thereof pursuant to their "change of control" rights with respect to
the Merger and (b) such principal amounts thereof as may be
repurchased for an aggregate repurchase price not exceeding
$50,000,000; provided that Borrower hereby acknowledges that payment
--------
of such amounts shall constitute an Investment in the CMC Louisiana
Subsidiaries and, if such amounts exceed $10,000,000, the CMC
Louisiana Subsidiaries shall become Restricted Subsidiaries.
18. Waiver of Section 6.8. Compliance with the sale and leaseback
---------------------
prohibition contained in Section 6.8 of the Loan Agreement is hereby waived as
---
respects the sale and leaseback of the "Hollywood Park-Casino" described in
Paragraph 20 hereof.
19. Intercompany Notes. Concurrently herewith, the Administrative Agent
------------------
shall deliver possession of the Intercompany Notes in its possession to
Borrower, subject to the proviso to Section 5.13.
------- ----
20. Release of Certain Collateral. The Administrative Agent is hereby
-----------------------------
authorized to execute and deliver such documents as are reasonably required to
release from the Lien of the Hollywood Park Deed of Trust that portion of the
Hollywood Park Property consisting of the "Hollywood Park Race Track,"
"Hollywood Park-Casino" and adjacent parking lots; provided that (a) such
--------
release is in connection with a Disposition thereof to Churchill Downs
Incorporated (or an Affiliate thereof) substantially on the terms publicly
announced by Borrower on May 6, 1999, (b) Borrower concurrently leases back the
"Hollywood Park-Casino" pursuant to a lease that the Administrative Agent
determines is consistent with the revised projections delivered by Borrower in
connection with this Amendment and is otherwise reasonably acceptable, (c)
Borrower promptly thereafter executes and delivers to the Administrative Agent a
deed of trust in the form
-7-
<PAGE>
of the Model Deed of Trust covering such leasehold interest, together with a
related landlord consent substantially in the form of the Model Landlord Consent
and Agreement and appropriate title insurance policies (including the related
ALTA survey) and endorsements acceptable to the Administrative Agent and (d) the
conditions precedent set forth in the last sentence of Section 2.13 have been
----
satisfied.
21. 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.
22. Conditions Precedent. The effectiveness of this Amendment is
--------------------
conditioned upon the receipt (a) by each Lender of the amendment fee set forth
in a letter to that Lender from the Administrative Agent (which letter shall be
approved by Borrower) and (b) by the Administrative Agent of the following
documents, each properly executed by a Responsible Official of each party
thereto and dated as of the date hereof:
(i) Counterparts of this Amendment executed by all parties hereto;
(ii) Written consent of all of the Banks as required under Section
11.2 of the Loan Agreement in the form of Exhibit A to this
----
Amendment;
(iii) Written consent of the Subsidiary Guarantors in the form of
Exhibit B to this Amendment; and
(iv) Such minor corrections of documents heretofore delivered by
Borrower or a Subsidiary Guarantor on the Closing Date as may be
reasonably requested by the Administrative Agent.
23. Confirmation. In all respects, the terms of the Loan Agreement (as
------------
amended hereby) are hereby confirmed.
-8-
<PAGE>
IN WITNESS WHEREOF, Borrower and the Administrative Agent have
executed this Amendment as of June 8, 1999 by their duly authorized
representatives.
HOLLYWOOD PARK, INC.
By: /s/ Bruce C. Hinckley
------------------------
Bruce C. Hinckley
Chief Financial Officer
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, as Administrative
Agent
By: _________________________________
Janice Hammond
Vice President
-9-
<PAGE>
Exhibit A to Amendment
CONSENT OF BANK
---------------
Reference is hereby made to that certain Amended and Restated Reducing
Revolving Loan Agreement dated as of October 14, 1998 among Hollywood Park, Inc.
("Borrower"), the Banks party thereto, Societe Generale and Bank of Scotland as
Managing Agents, First National Bank of Commerce, as Co-Agent, and Bank of
America National Trust and Savings Association, as Administrative Agent (the
"Loan Agreement").
The undersigned Bank hereby consents to the execution and delivery of
Amendment No. 1 to Amended and Restated Reducing Revolving Loan Agreement by the
Administrative Agent on its behalf, substantially in the form of the most recent
draft thereof presented to the undersigned Bank.
Dated: June __, 1999
BANK OF AMERICA
---------------
[Name of Institution]
By: ________________________________
Jon Varnell
Managing Director
--------------------------------
[Printed Name and Title]
-10-
<PAGE>
Exhibit B to Amendment
CONSENT OF SUBSIDIARY GUARANTORS
--------------------------------
Reference is hereby made to that certain Amended and Restated Reducing
Revolving Loan Agreement dated as of October 14, 1998 among Hollywood Park, Inc.
("Borrower"), the Banks party thereto, Societe Generale and Bank of Scotland as
Managing Agents, First National Bank of Commerce, as Co-Agent, and Bank of
America National Trust and Savings Association, as Administrative Agent (the
"Loan Agreement").
Each of the undersigned Subsidiary Guarantors hereby consents to
Amendment No. 1 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 8, 1999
"Guarantors"
HOLLYWOOD PARK OPERATING COMPANY, HOLLYWOOD PARK FOOD
COMPANY, SERVICES, INC.,
a Delaware corporation a California corporation
By: /s/ Bruce C. Hinckley By: /s/ Bruce C. Hinckley
- --------------------------------- ------------------------------
Title: Title:
Vice President Vice President
- --------------------------------- ------------------------------
-11-
<PAGE>
HOLLYWOOD PARK FALL HP/COMPTON, INC.,
OPERATING CO., a California corporation
a Delaware corporation
By: /s/ Bruce C. Hinckley By: /s/ Bruce C. Hinckley
- --------------------------------- --------------------------------
Title: Vice President Title: Chief Financial Officer
- --------------------------------- --------------------------------
HP YAKAMA, INC., TURF PARADISE, INC.,
a Delaware corporation an Arizona corporation
By: /s/ Bruce C. Hinckley By: /s/ Bruce C. Hinckley
- --------------------------------- --------------------------------
Title: Treasurer Title: Vice President
- --------------------------------- --------------------------------
CRYSTAL PARK HOTEL AND BOOMTOWN, INC.,
CASINO DEVELOPMENT COMPANY, LLC, a Delaware corporation
a California limited liability company
By: HP/COMPTON, INC., By: /s/ Bruce C. Hinckley
a California corporation, --------------------------------
its managing member Title: Chief Financial Officer
--------------------------------
By: /s/ Bruce C. Hinckley
- ----------------------------------
Title: Chief Financial Officer
- ----------------------------------
-12-
<PAGE>
BOOMTOWN HOTEL & CASINO, MISSISSIPPI-I GAMING, L.P.,
INC., a Nevada corporation a Mississippi limited partnership
By: /s/ Bruce C. Hinckley By: BAYVIEW YACHT CLUB,
- -------------------------------- INC.,
Title: Chief Financial Officer a Mississippi corporation,
- -------------------------------- its general partner
By: /s/ Bruce C. Hinckley
------------------------------------
Title: Chief Financial Officer
------------------------------------
BAYVIEW YACHT CLUB, INC., LOUISIANA-I GAMING, L.P.,
a Mississippi corporation a Louisiana partnership in commendam
By: LOUISIANA GAMING
By: /s/ Bruce C. Hinckley ENTERPRISES, INC.,
- -------------------------------- its general partner
Title: Chief Financial Officer
- --------------------------------
By: /s/ Bruce C. Hinckley
------------------------------------
Title: Chief Financial Officer
------------------------------------
BOOMTOWN HOOSIER, INC., LOUISIANA GAMING ENTERPRISES, INC.,
a Nevada corporation a Louisiana corporation
By: /s/ Bruce C. Hinckley By: /s/ Bruce C. Hinckley
- -------------------------------- ------------------------------------
Title: Vice President and CFO Title: Chief Financial Officer
- -------------------------------- ------------------------------------
-13-
<PAGE>
INDIANA VENTURES, LLC, SWITZERLAND COUNTY DEVELOPMENT CORP.,
a Nevada limited liability company a Nevada corporation
By: BOOMTOWN HOOSIER, INC.
a Nevada corporation, By: /s/ Bruce C. Hinckley
as Managing Member -------------------------------------
Title: Chief Financial Officer
-------------------------------------
By: /s/ Bruce C. Hinckley
- -------------------------------
Title: Chief Financial Officer
- -------------------------------
CASINO MAGIC CORP., MARDI GRAS CASINO CORP.,
a Minnesota corporation a Mississippi corporation
By: /s/ Bruce C. Hinckley By: /s/ Bruce C. Hinckley
- ---------------------------------- -------------------------------------
Title: Chief Financial Officer Title: Chief Financial Officer
- ---------------------------------- -------------------------------------
BILOXI CASINO CORP., CASINO MAGIC FINANCE CORP.,
a Mississippi corporation a Mississippi corporation
By: /s/ Bruce C. Hinckley By: /s/ Bruce C. Hinckley
- ---------------------------------- -------------------------------------
Title: Chief Financial Officer Title: Treasurer
- ---------------------------------- -------------------------------------
BAY ST. LOUIS CASINO CORP., CASINO ONE CORPORATION,
a Mississippi corporation a Mississippi corporation
By: /s/ Bruce C. Hinckley By: /s/ Bruce C. Hinckley
- ---------------------------------- -------------------------------------
Title: Treasurer Title: Chief Financial Officer
- ---------------------------------- -------------------------------------
-14-
<PAGE>
Exhibit 11
- ----------
Hollywood Park, Inc.
Computation of Earnings Per Share
<TABLE>
<CAPTION>
For the three months ended June 30,
--------------------------------------------------------------------------
Basic Diluted (a)
-------------------------------------------------------------------------
1999 1998 1999 1998
--------- -------- -------- -------
(in thousands, except per share data)
<S> <C> <C> <C> <C>
Average number of common shares outstanding 25,871 26,285 25,871 26,285
Average common shares due to assumed conversion of
stock options 0 0 258 143
--------- -------- -------- --------
Total shares 25,871 26,285 26,129 26,428
========= ======== ======== ========
Net income allocated to shareholders $9,711 $8,129 $9,711 $8,129
========= ======== ======== ========
Net income per share $0.38 $0.31 $0.37 $0.31
========= ======== ======== ========
For the six months ended June 30,
--------------------------------------------------------------------------
Basic Diluted (a)
----------------------- ----------------------
1999 1998 1999 1998
--------- -------- -------- --------
(in thousands, except per share data)
Average number of common shares outstanding 25,836 26,281 25,836 26,281
Average common shares due to assumed conversion of
stock options 0 0 (277) 490
--------- -------- -------- --------
Total shares 25,836 26,281 25,559 26,771
========= ======== ======== ========
Net income allocated to shareholders $13,844 $6,895 $13,844 $6,895
========= ======== ======== ========
Net income per share $0.54 $0.26 $0.54 $0.26
========= ======== ======== ========
</TABLE>
________
(a) When the computed dilluted values are anit-dilutive, the basic per share
values are presented on the face of the consolidated statements of operations.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000356213
<NAME> HOLLYWOOD PARK, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 127,530,000
<SECURITIES> 16,143,000
<RECEIVABLES> 31,112,000
<ALLOWANCES> 2,602,000
<INVENTORY> 0
<CURRENT-ASSETS> 219,007,000
<PP&E> 847,640,000
<DEPRECIATION> (250,087,000)
<TOTAL-ASSETS> 1,008,876,000
<CURRENT-LIABILITIES> 148,623,000
<BONDS> 612,014,000
0
0
<COMMON> 2,597,000
<OTHER-SE> 244,807,000
<TOTAL-LIABILITY-AND-EQUITY> 1,008,876,000
<SALES> 29,235,000
<TOTAL-REVENUES> 371,527,000
<CGS> 32,663,000
<TOTAL-COSTS> 316,506,000
<OTHER-EXPENSES> 1,137,000
<LOSS-PROVISION> 1,257,000
<INTEREST-EXPENSE> 30,053,000
<INCOME-PRETAX> 23,831,000
<INCOME-TAX> 9,987,000
<INCOME-CONTINUING> 13,844,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,844,000
<EPS-BASIC> 0.54
<EPS-DILUTED> 0.54
</TABLE>
