<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1995
Commission file number 0-10619
HOLLYWOOD PARK, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 95-3667491
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) 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 registrant: (a) has 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) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ]
The number of outstanding shares of the registrant's common stock, as of the
date of the close of business on November 10, 1995: 18,369,634.
<PAGE>
Hollywood Park, Inc.
Table of Contents
Part I
<TABLE>
Item 1. Financial Information
<S> <C>
Consolidated Balance Sheets as of September 30,
1995 and December 31, 1994....................... 1
Consolidated Statements of Operations for the
three months ended September 30, 1995 and 1994... 2
Consolidated Statements of Operations for the
nine months ended September 30, 1995 and 1994.... 3
Consolidated Statements of Cash Flows for the
nine months ended September 30, 1995 and 1994.... 4
Notes to Consolidated Financial Statements........ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations..................... 9
Part II
Item 1. Legal Proceedings....................................... 14
Item 3. Default Upon Senior Securities.......................... 16
Item 5. Other Information....................................... 16
Item 6.a. Exhibits................................................ 16
Other Financial Information............................. 19
Signatures.............................................. 25
</TABLE>
<PAGE>
HOLLYWOOD PARK, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 20,789,000 $ 37,122,000
Restricted cash 872,000 699,000
Short term investments 6,210,000 0
Casino lease and related interest
receivable, net 18,690,000 11,745,000
Other receivables, net of
allowance for doubtful accounts of
$215,000 in 1995 and $159,000 in 1994 3,807,000 8,224,000
Prepaid expenses and other assets 9,630,000 5,243,000
Deferred tax assets 4,612,000 4,827,000
Current portion of notes receivable 33,000 31,000
------------ ------------
Total current assets 64,643,000 67,891,000
Notes receivable 866,000 891,000
Property, plant and equipment, net 164,154,000 160,264,000
Lease with TRAK East, net 1,212,000 1,110,000
Goodwill, net 5,713,000 5,813,000
Deferred tax assets 851,000 1,103,000
Other assets 9,572,000 9,501,000
------------ ------------
$247,011,000 $246,573,000
============ ============
- ----------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 7,425,000 $ 6,833,000
Accrued lawsuit settlement 5,200,000 0
Accrued liabilities 9,530,000 7,703,000
Accrued workers' compensation 2,211,000 2,117,000
Accrued slip and fall claims 1,411,000 1,273,000
Amounts due to horsemen for
purses, stakes and awards 37,000 516,000
Amounts payable to charities 271,000 501,000
Outstanding pari-mutuel tickets 1,021,000 1,546,000
Current portion of notes payable 28,945,000 5,299,000
Deferred tax liabilities 671,000 288,000
------------ ------------
Total current liabilities 56,722,000 26,076,000
Notes payable 15,629,000 42,800,000
Deferred tax liabilities 10,218,000 10,442,000
------------ ------------
Total liabilities 82,569,000 73,318,000
Commitments and contingencies - -
Stockholders' Equity:
Capital stock--
Preferred--$1.00 par value, authorized
250,000 shares; 27,499 issued and
outstanding 28,000 28,000
Common--$.10 par value, authorized
40,000,000 shares; 18,369,634 issued
and outstanding in 1995 and 1994 1,837,000 1,837,000
Capital in excess of par value 166,896,000 166,892,000
Accumulated deficit (4,319,000) (1,502,000)
------------ ------------
Total stockholders' equity 164,442,000 167,255,000
------------ ------------
$247,011,000 $246,573,000
============ ============
</TABLE>
- ---------
See accompanying notes to consolidated financial statements.
1
<PAGE>
HOLLYWOOD PARK, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three months ended September 30,
----------------------------------------
1995 1994
---------------- ------------------
(unaudited)
<S> <C> <C>
REVENUES:
Pari-mutuel commissions $10,066,000 $ 9,425,000
Lease and management fee - Sunflower 1,199,000 2,404,000
Lease - Casino 5,394,000 5,528,000
Admissions, programs, and other racing income 3,754,000 4,883,000
Concession sales 4,554,000 6,131,000
Other income 1,628,000 1,733,000
------------ ------------
26,595,000 30,104,000
------------ ------------
EXPENSES:
Salaries, wages and employee benefits 9,281,000 9,470,000
Operations of facilities 2,688,000 2,663,000
Cost of concession sales 6,038,000 7,965,000
Professional services 1,137,000 1,705,000
Rent 223,000 331,000
Utilities 1,493,000 1,798,000
Marketing 1,044,000 1,475,000
Administrative 2,675,000 2,728,000
------------ ------------
24,579,000 28,135,000
------------ ------------
Operating income 2,016,000 1,969,000
Lawsuit settlement 5,627,000 0
Casino pre-opening and training expenses 0 723,000
Turf Paradise acquisition costs 0 446,000
------------ ------------
Income (loss) before interest, income taxes,
depreciation and amortization (3,611,000) 800,000
Depreciation and amortization 2,824,000 2,862,000
Interest expense 958,000 881,000
------------ ------------
Loss before income tax benefit (7,393,000) (2,943,000)
Income tax benefit 1,756,000 545,000
------------ ------------
Net loss $ (5,637,000) $ (2,398,000)
============ ============
=================================================================================================
Dividend requirements on convertible preferred stock $ 481,000 $ 481,000
Net loss allocated to common shareholders $ (6,118,000) $ (2,879,000)
Per common share:
Net loss - primary $(0.33) $(0.16)
Net loss - fully diluted $(0.33) $(0.16)
Cash dividend per common share $ 0.00 $ 0.00
Number of shares - primary 18,369,634 18,369,607
Number of shares - fully diluted 20,661,126 20,661,099
</TABLE>
- --------------
See accompanying notes to consolidated financial statements.
2
<PAGE>
HOLLYWOOD PARK, INC.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1995 1994
----------- ------------
(unaudited)
<S> <C> <C>
REVENUES:
Pari-mutuel commissions $37,745,000 $35,332,000
Lease and management fee - Sunflower 4,344,000 6,102,000
Lease - Casino 18,064,000 5,528,000
Admissions, programs, and other racing income 13,026,000 14,192,000
Concession sales 15,359,000 13,692,000
Other income 5,341,000 4,139,000
----------- -----------
93,879,000 78,985,000
----------- -----------
EXPENSES:
Salaries, wages and employee benefits 29,718,000 25,602,000
Operations of facilities 8,268,000 6,924,000
Cost of concession sales 19,504,000 14,446,000
Professional services 5,657,000 5,019,000
Rent 901,000 1,226,000
Utilities 3,642,000 3,462,000
Marketing 3,728,000 4,101,000
Administrative 6,486,000 4,838,000
----------- -----------
77,904,000 65,618,000
----------- -----------
Operating income 15,975,000 13,367,000
Lawsuit settlement 5,627,000 0
Casino pre-opening and training expenses 0 2,337,000
Turf Paradise acquisition costs 0 627,000
----------- -----------
Income before interest, income taxes, depreciation
and amortization 10,348,000 10,403,000
Depreciation and amortization 8,478,000 6,883,000
Interest expense 2,886,000 1,842,000
----------- -----------
Income (loss) before income tax expense (1,016,000) 1,678,000
Income tax expense 358,000 642,000
----------- -----------
Net income (loss) $(1,374,000) $ 1,036,000
=========== ===========
=========================================================================================================
Dividend requirements on convertible preferred stock $ 1,443,000 $ 1,443,000
Net loss allocated to common shareholders $(2,817,000) $ (407,000)
Preferred common share:
Net loss - primary $(0.15) $(0.02)
Net loss - fully diluted $(0.15) $(0.02)
Cash dividend per common share $ 0.00 $ 0.00
Number of shares - primary 18,369,634 18,175,191
Number of shares - fully diluted 20,661,126 20,466,683
</TABLE>
- --------------
See accompanying notes to consolidated financial statements.
3
<PAGE>
HOLLYWOOD PARK, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
For the nine months ended September 30,
---------------------------------------
1995 1994
---------------- -----------------
(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,374,000) $ 1,036,000
Adjustment to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 8,495,000 6,886,000
Unrealized gain on short term bond investing 4,000 0
Changes in assets and liabilities, net of the effects of the
purchase of a business:
Increase in restricted cash (173,000) (1,157,000)
Increase in casino lease and related interest receivable, net (6,945,000) (6,358,000)
Decrease (increase) in other receivables, net 4,417,000 (866,000)
Increase in prepaid expenses and other assets (4,901,000) (5,879,000)
Decrease (increase) in deferred tax assets 467,000 (646,000)
Increase (decrease) in accounts payable 592,000 (1,524,000)
Increase in accrued lawsuit settlement 5,200,000 0
Increase in accrued liabilities 1,670,000 766,000
Increase in accrued workers' compensation 94,000 215,000
Increase in slip and fall claims 138,000 0
(Decrease) increase in amounts due to horsemen for purses,
stakes and awards (479,000) 650,000
Decrease in amounts payable to charities (230,000) (463,000)
Decrease in outstanding pari-mutuel tickets (525,000) (95,000)
Increase (decrease) in deferred tax liabilities 159,000 (61,000)
Loss on sale or disposal of property, plant and equipment 64,000 0
------------ ------------
Net cash provided by (used in) operating activities 6,673,000 (7,496,000)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (11,959,000) (25,681,000)
Receipts from sale of property, plant and equipment 108,000 0
Principal collected on notes receivable 23,000 23,000
Purchase of short term investments (19,829,000) (92,205,000)
Proceeds from short term investments 13,619,000 104,346,000
Cash acquired in the purchase of a busineess, net of
transaction and other costs 0 288,000
------------ ------------
Net cash used in investing activities (18,038,000) (13,229,000)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from unsecured notes payable 1,681,000 1,579,000
Payment of unsecured notes payable (3,820,000) (5,841,000)
Payment of secured notes payable (1,333,000) (1,459,000)
Payments under capital lease obligations (53,000) (45,000)
Turf Paradise equity transactions 0 15,000
Dividends paid to preferred stockholders (1,443,000) (1,443,000)
------------ ------------
Net cash used for financing activities (4,968,000) (7,194,000)
------------ ------------
Decrease in cash and cash equivalents (16,333,000) (27,919,000)
Cash and cash equivalents at the beginning of the period 37,122,000 60,625,000
------------ ------------
Cash and cash equivalents at the end of the period $ 20,789,000 $ 32,706,000
============ ============
</TABLE>
- ------------
See accompanying notes to consolidated financial statements.
4
<PAGE>
Hollywood Park, Inc.
Notes to Consolidated Financial Statements
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial information included herein has been prepared in conformity with
generally accepted accounting principles as reflected in the financial
statements included in the consolidated annual report on Form 10-K of Hollywood
Park, Inc. (the "Company" or "Hollywood Park") filed with the Securities and
Exchange Commission for the year ended December 31, 1994. This financial
information does not include certain footnotes and financial presentations
normally presented annually, and therefore, should be read in conjunction with
the 1994 Form 10-K.
The information furnished herein is unaudited; however, in the opinion of
management it reflects all normal recurring adjustments that are necessary to
present a fair statement of the results for the interim periods. It should be
understood that accounting measurements at the 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 racing business.
ACQUISITION OF SUNFLOWER RACING, INC. On March 23, 1994, the Company finalized
the transaction to acquire Sunflower Racing, Inc. ("Sunflower"), a greyhound and
thoroughbred racing facility located in Kansas City, Kansas. Sunflower,
operating as the Woodlands, became a wholly owned subsidiary of Hollywood Park,
with the transaction accounted for under the purchase method of accounting. The
acquisition price was $15,000,000; paid for with 591,715 shares of Hollywood
Park common stock, with a then market price of $25.35 per share. For financial
reporting purposes, the transaction was valued at $19.00 per Hollywood Park
common share, based on the size of the block of shares issued in the acquisition
relative to the current trading volume. Immediately following the acquisition,
the Company contributed $5,000,000 in cash to Sunflower to repay a portion of
the subordinated debt Sunflower owed to Mr. Hubbard, Chief Executive Officer of
the Company, in return for more favorable terms on the balance of the
subordinated debt. In December 1994, Sunflower received notice that it was to
receive a refund of property taxes paid during periods before the acquisition of
approximately $1,484,000 (at December 31, 1994, the estimated refund was
$1,641,000). The Sunflower financial statements as of the date of acquisition
were restated to include receipt of the $1,484,000. Of the approximately
$6,782,000 of restated excess acquisition cost over the recorded value of the
assets acquired, $1,310,000 was allocated to the racing facility lease and
management agreement Sunflower has with The Racing Association of Kansas East
("TRAK East") and will be amortized over the remaining 20 years of the lease,
with the balance of $5,472,000 allocated to goodwill to be amortized over 40
years.
An additional 55,574 shares of Hollywood Park common stock were issued to Mr.
Richard Boushka, a former Sunflower shareholder, as required by the agreement of
merger, because the market price of Hollywood Park's common stock 180 days after
the close of the acquisition, was more than 10% less than the market price on
the closing date of the acquisition. The agreement of merger also provided that
under certain circumstances the former Sunflower shareholders were entitled to
receive additional shares of Hollywood Park common stock. As of March 23, 1995,
the former Sunflower shareholders transferred their rights to such additional
consideration to Hollywood Park for nominal consideration, and have no further
entitlements to additional consideration.
ACQUISITION OF TURF PARADISE, INC. On August 11, 1994, the shareholders of Turf
Paradise, Inc. ("Turf Paradise") approved the Agreement of Merger, entered into
on March 30, 1994, by Hollywood Park and Turf Paradise and as amended on May 27,
1994, pursuant to which Turf Paradise became a wholly owned subsidiary of
Hollywood Park. Turf Paradise owns and operates a thoroughbred race track in
Phoenix, Arizona. The transaction was accounted for under the pooling of
interests method of accounting, with approximately $627,000 of merger related
costs incurred in total and expensed by both the Company and Turf Paradise. In
5
<PAGE>
connection with the merger, the Company paid a total of 1,498,016 newly issued
shares of Hollywood Park common stock, valued as of the date of issuance at
approximately $33,800,000. Each share of Turf Paradise common stock was valued
at $13.00 and was converted to approximately 0.577 shares of Hollywood Park
common stock, which had a then fair market value of $22.53 based on the weighted
average of all trades on the NASDAQ National Market System for the twenty
trading days up to and including August 10, 1994.
As required under the pooling of interests method of accounting, the
consolidated financial statements for the periods before the acquisition have
been restated to include the accounts and results of operations of Turf
Paradise.
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of operations
were prepared under the assumption that the acquisition of Sunflower had
occurred at the beginning of each of the periods shown. The historical results
of operations for both Sunflower and Turf Paradise were combined with the
Company's operating results and pro forma adjustments were made for the
following: amortization of the excess purchase price allocated to the lease with
TRAK East and to goodwill; interest expense reduction related to the reduction
in both the principal and interest rate on Sunflower's subordinated debt; the
termination of the management agreement Sunflower had with a former shareholder;
the wages and payroll taxes paid to a former Sunflower shareholder; directors
fees and income taxes.
Hollywood Park, Inc.
Unaudited Pro Forma Combined Consolidated
Results of Operations
<TABLE>
<CAPTION>
For the three months ended
September 30,
---------------------------------
1995 (a) 1994 (a)
------------ ------------
<S> <C> <C>
Revenues $ 26,595,000 $ 30,104,000
Operating income 2,016,000 1,969,000
Income (loss) before interest, income
taxes, depreciation and
amortization (3,611,000) 800,000
Net loss ($5,637,000) ($2,398,000)
=========== ===========
Dividend requirements on convertible
preferred stock 481,000 481,000
Net loss allocated to common
shareholders ($6,118,000) ($2,879,000)
Per common share:
Net loss - primary ($0.33) ($0.16)
Net loss - fully diluted ($0.33) ($0.16)
<CAPTION>
For the nine months ended
September 30,
---------------------------------
1995 (a) 1994
------------ ------------
<S> <C> <C>
Revenues $ 93,879,000 $ 84,212,000
Operating income 15,975,000 14,146,000
Income before interest, income taxes,
depreciation and amortization 10,348,000 11,393,000
Net income (loss) ($1,374,000) $ 1,209,000
=========== ===========
Dividend requirements on convertible
preferred stock 1,443,000 1,443,000
Net loss allocated to common
shareholders ($2,817,000) ($234,000)
Per common share:
Net loss - primary ($0.15) ($0.01)
Net loss - fully diluted ($0.15) ($0.01)
</TABLE>
_____
(a) The results for these periods are actual.
PRE-OPENING EXPENSES The Company expensed pre-opening costs associated with the
Hollywood Park Casino (the "Casino") which opened on July 1, 1994, under a third
party leasing agreement with Pacific Casino
6
<PAGE>
Management, Inc. ("PCM"), as incurred. These costs included such items as
project salaries, hiring costs and other pre-opening services.
EARNINGS PER SHARE Primary earnings per share were computed by dividing income
(loss) available to (allocated to) common shareholders (net income (loss) less
preferred dividend requirements) by the weighted average number of common shares
outstanding during the period. Fully diluted per share amounts were similarly
computed, but include the effect, when dilutive, of the conversion of the
convertible preferred stock and stock options.
The Company issued 1,498,016 shares of common stock to acquire Turf Paradise.
Earnings per share have been restated for prior periods as if these shares had
been outstanding during each period presented.
CASH FLOWS Cash and cash equivalents consisted of certificates of deposit and
short term investments with remaining maturities of 90 days or less.
RECLASSIFICATIONS Certain reclassifications have been made to the 1994 balances
to be consistent with the 1995 financial statement presentation.
NOTE 2 -- SHORT TERM INVESTMENTS
As of September 30, 1995, the Company had short term investments of $6,210,000.
Included in the short term portfolio were commercial paper investments of
$1,006,000, with a maturity of approximately six months, with ratings of Aaa by
Moodys and AAA by Standard and Poors.
The balance of the short term investments, $5,204,000, was invested in corporate
bonds, with an average maturity of three years. The portfolio consisted of
bonds rated from Ba3 to Caa by Moodys and from BB- to B- by Standard and Poors,
with some bonds not rated by either agency. Investments in corporate bonds
typically carry a greater amount of principal risk than investments previously
made by the Company and yield a correspondingly higher return.
The Company holds short term investments as available for sale as needed. On the
basis of the short term nature of the assets and their relative liquidity,
market value approximates cost.
NOTE 3 -- CASINO LEASE AND RELATED INTEREST RECEIVABLE
On August 3, 1995, California Governor Pete Wilson signed Senate Bill 100 ("SB"
100), which was effective upon signing, allowing Hollywood Park (and all other
pari-mutuel wagering facilities, which are public companies) to operate a card
club on the premises of the race track. Additionally, SB 100 places a state-
wide, three year moratorium (beginning January 1, 1996) on public votes or
referendums to approve the enactment of any city ordinance to allow additional
card clubs, and prohibits the amendment of any existing ordinances. With the
passage of SB 100, the Company has given notice, to PCM, of cancellation under
the terms of its lease agreement and intends to assume operations of the Casino
in the immediate future. As of September 30, 1995, the Company had received all
necessary approvals to operate the Casino; a provisional gaming Registration
from the California Attorney General and a provisional Operations Certificate
from the city of Inglewood.
The Casino opened on July 1, 1994, under a third party leasing arrangement
between Hollywood Park and PCM. Under current California law the lease rent
must be at a fixed amount. Recognizing that there was a maturing process for
the business, the lease allowed unpaid rent to accrue for up to nine months, or
$27,000,000, as computed under the original lease, and for PCM to retain a cash
reserve equivalent to six months of operating expenses. PCM elected to defer
all the lease rent due during the Casino's first nine months of operations. In
April 1995, the Company and PCM executed the First Amended and Restated Lease
Agreement, which retroactively lowered the monthly fixed lease payment from
$3,000,000 to $2,000,000 (or from $27,000,000 as computed under the original
lease down to $18,000,000 as computed under the revised
7
<PAGE>
lease, for the first nine months of operations). In addition, PCM executed a
promissory note to Hollywood Park for $18,690,000, representing nine months of
revised fixed monthly rent of $18,000,000 (formerly $27,000,000 as computed
under the original lease) with related interest at 8.0%, and approximately
$197,000 of additional rent. In August 1995, the Second Amended and Restated
Lease Agreement was executed which lowered the fixed monthly rent to $1,500,000
effective July 1, 1995. On April 17, 1995, PCM paid Hollywood Park $3,000,000
for additional rent related to PCM's use of food and beverage services from
Hollywood Park for the nine months ended March 31, 1995. PCM paid Hollywood Park
$6,000,000 of rent during the three months ended June 30, 1995, and $4,500,000
of rent during the three months ended September 30, 1995.
For the nine months ended September 30, 1995, $18,064,000 of lease revenue was
recognized representing $12,000,000 of rent, accounted for under the First
Amended and Restated Lease, of which PCM paid $6,000,000, and other
miscellaneous rent of $1,064,000 (of which $434,000 was paid as of September 30,
1995); and $4,500,000 of lease rent revenue due and paid by PCM for the three
months ended September 30, 1995, under the Second Amended and Restated Lease.
Also recorded was $500,000 of lease rent related to the July 1994 valuation
allowance. Lease rent of $3,000,000 less a valuation allowance of $1,500,000,
was recorded for July 1994, but with the April 1995 signing of the First Amended
and Restated Lease monthly lease rent was retroactively lowered to $2,000,000,
generating $500,000 of excess valuation allowance.
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held at September 30, 1995, and December 31, 1994,
consisted of the following:
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Land and land improvements $ 34,782,000 $ 29,621,000
Buildings and building improvements 175,292,000 166,516,000
Equipment 35,507,000 31,286,000
Construction in progress 4,064,000 983,000
------------ ------------
249,645,000 228,406,000
Less accumulated depreciation 85,491,000 68,142,000
------------ ------------
$164,154,000 $160,264,000
============ ============
</TABLE>
NOTE 5 -- SECURED AND UNSECURED NOTES PAYABLE
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Secured notes payable (a) $28,666,000 $30,011,000
Unsecured notes payable (a) 15,575,000 15,825,000
Unsecured notes payable 0 1,850,000
Capital lease obligations 0 52,000
Unsecured note payable - Gold Cup 333,000 361,000
------------ ------------
44,574,000 48,099,000
Less current maturities 28,945,000 5,299,000
------------ ------------
$15,629,000 $42,800,000
============ ============
</TABLE>
_____
(a) These notes relate to Sunflower and are non-recourse to Hollywood Park.
NOTE 6 -- SUPPLEMENTAL BALANCE SHEET INFORMATION
In 1995, Statement of Financial Accounting Standards No. 121 ("SFAS" 121) was
issued which establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those assets.
SFAS 121, which will be effective in 1996, addresses when impairment losses
should be recognized and how impairment losses should be measured. If the
Kansas Legislature does not approve other forms of gaming at Sunflower, it is
probable that Sunflower's assets will suffer an impairment that will
8
<PAGE>
require a significant asset write down that will have a materially adverse
effect on the Company's consolidated financial statements.
NOTE 7 - DEVELOPMENT EXPENSES
Included in Administrative expenses for the three and nine months ended
September 30, 1995, was $1,293,000 and $1,636,000 of development expenses,
respectively. These expenses, for both the three and the nine months ended
September 30, 1995, consisted primarily of costs related to the following
projects currently under evaluation: the environmental impact study for a
proposed stadium at Hollywood Park, and card clubs under consideration in the
cities of Stockton, Pomona and South San Francisco.
Included in Administrative expenses for the three and nine months ended
September 30, 1994, was $373,000 and $605,000 of development costs,
respectively. Development expense included the following projects then under
consideration: the initial financial and economic analysis of the proposed
stadium, numerous card clubs, and the music dome.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- -------------------------------------------------------------------------------
OF OPERATIONS
- -------------
RESULTS OF OPERATIONS
Three months ended September 30, 1995 compared to the three months ended
------------------------------------------------------------------------
September 30, 1994
------------------
Total revenues decreased by $3,509,000, or 11.7%, for the three months ended
September 30, 1995, compared to the three months ended September 30, 1994, with
$2,339,000, or 66.7% of the decrease attributable to revenue short-falls at
Sunflower, where Missouri riverboat gaming continues to have a seriously
negative impact on Sunflower's operating results. Pari-mutuel commissions
increased by $641,000, or 6.8%, due primarily to the recognition of unclaimed
pari-mutuel winning tickets from the 1994-1995 Turf Paradise race meet that
ended in May. Under Arizona law, Turf Paradise retains the revenue from
uncashed winning pari-mutuel tickets. In California the unclaimed outstanding
pari-mutuel winnings are paid to the state. Lease and management fee-Sunflower
decreased by $1,205,000, or 50.1%. Sunflower's live pari-mutuel handle, both
greyhounds and horses, was $13,470,000 for the three months ended September 30,
1995, a $14,420,000, or 51.7% decrease as compared to the three months ended
September 30, 1994. Lease-Casino revenue consisted of fixed lease rent of
$1,500,000 per month as of July 1995 per the Second Amended and Restated Lease
signed on August 31, 1995, and $500,000 of lease valuation allowance from July
1994. Lease rent recorded in July 1994, was $3,000,000 less a valuation
allowance of $1,500,000; with the April 1995 signing of the First Amended and
Restated Lease, lease rent was retroactively lowered to $2,000,000, generating
$500,000 of excess valuation allowance. Under the terms of the original 1994
lease, PCM was not required to make the lease rent payments during the first
nine months of operations and interest was accrued on the unpaid portions. PCM
paid the $4,500,000 of rent due for the three months ended September 30, 1995.
Admissions, programs and other racing income decreased by $1,129,000, or 23.1%,
due primarily to a 38.5% decline in attendance at Sunflower, one fewer live race
day at Hollywood Park, three fewer live race days at Turf Paradise, and fewer
Hollywood Park Advanced Training Program ("ATP") days in 1995 than in 1994.
During ATP Hollywood Park allows the horsemen to utilize the facility when there
is no live racing to train young horses and, in return, receives a daily fee.
Concession sales decreased by $1,577,000, or 25.7%, with 47.7% of the decrease
associated with attendance declines at Sunflower. The remainder of the decrease
primarily related to declines in on-track attendance at Hollywood Park and less
time to purchase concessions between pari-mutuel wagering opportunities, due to
the increase in simulcast races, and at the Casino under the First and Second
Amended and Restated Leases with PCM additional rent is no longer charged for
discounts offered to card players at the gaming tables. Generally the prices
charged on the gaming floor are 50% lower than the restaurant prices and under
the terms of the original 1994 lease PCM was billed for the discount.
Total operating expenses were $24,579,000 for the three months ended September
30, 1995, compared to $28,135,000 for the same period in 1994, a $3,556,000, or
12.6% decrease. Cost of concession sales
9
<PAGE>
decreased by $1,927,000, or 24.2%, due to attendance decreases at Sunflower and
Hollywood Park, and labor reductions at the Casino made after the first
operating quarter of 1994. Professional services decreased by $568,000, or
33.3%, primarily because of lower legal costs related to the Class Action
lawsuits and other related matters (see Item 1. Legal Proceedings) than accrued
for earlier in 1995. Utilities decreased by $305,000, or 17.0%, due primarily to
savings at the Casino related to turning off the outdoor signs during the
daylight hours in 1995, which were left on during the 1994 grand opening period.
Marketing costs decreased by $430,000, or 29.2%, due primarily to cost
reductions at Sunflower and savings at the Casino, where in 1994 live music was
provided, but not in 1995 due to increased evening pari-mutuel simulcasting.
As previously reported by the Company, six purported class actions (the "Class
Actions") are presently pending against the Company and certain of its directors
and officers (see Item 1. Legal Proceedings). In addition, on September 15,
1995, a Derivative Action was commenced against certain of the Company's
directors and officers. On September 19, 1995, the parties to the Class Actions
and the Derivative Action, executed Memoranda of Understanding, confirming the
parties' agreement in principle to settle the claims asserted and threatened
with respect to the Class Actions and the Derivative Action, subject to the
approval by the Company's Board of Directors (which was subsequently obtained)
and approval by each of the courts in the Class Actions and the Derivative
Action. Under the proposed settlement of the Class Actions, a total settlement
fund of $5,800,000 will be created for the benefit of the alleged class of
shareholders. Hollywood Park will contribute $3,450,000 to the settlement fund,
and the insurance carrier for the Company's directors and officers will
contribute $2,350,000. The proposed settlement of the Derivative Action
provides for a $2,000,000 payment to the Company from the insurance carrier for
the Company's directors and officers. With $1,000,000 of that amount paid to
the plaintiffs' attorneys as fees, costs and expenses; the remaining $1,000,000
will defray the Company's payment in the settlement of the Class Actions. The
Company also expects to complete a separat settlement with the former
controlling shareholder of Turf Paradise. Under this proposed settlement, the
Company will pay the former controlling shareholder of Turf Paradise $2,750,000,
in full settlement of all purported claims against the Company and its directors
and officers. The Company does not believe that the settlement with the former
controlling shareholder of Turf Paradise is preferential to the amounts being
paid to other Turf Paradise shareholders under the Class Actions. Hollywood
Park denies any wrongdoing or liability with respect to the claims asserted in
the Class Actions, the Derivative Action, and the purported claims of the former
controlling shareholder of Turf Paradise. If a resolution of the Class Actions,
the Derivative Action and the purported claims of the former controlling
shareholder of Turf Paradise cannot be achieved on terms acceptable and not
materially adverse to the Company, the Company will assert various defenses and
contest vigorously all purported claims and allegations. Also included in
lawsuit settlement expense was $427,000 of legal costs incurred, by the Company
related to the Class Actions, the Derivative Action and the purported claims of
the former controlling shareholder of Turf Paradise.
The 1994 Casino pre-opening and training costs of $723,000 were chiefly related
to wages paid during the on-the-job training of staff hired to open the Casino
on July 1, 1994. There were no similar costs in 1995. The Turf Paradise
acquisition costs were a result of the August 11, 1994, acquisition of Turf
Paradise by Hollywood Park; there were no similar costs in 1995.
Income tax benefit increased by $1,211,000, due to the additional accrued
expense of the lawsuit settlement.
Nine months ended September 30, 1995 compared to the nine months ended
----------------------------------------------------------------------
September 30, 1994
------------------
The 1995 consolidated financial statements include the results of operations at
Hollywood Park, Sunflower, Turf Paradise and the Casino. Sunflower was a newly
acquired subsidiary as of March 23, 1994, accounted for under the purchase
method of accounting, and Hollywood Park's historical results of operations were
not restated to include Sunflower's operating results; therefore, the 1994
statement of operations does not include Sunflower's results for the first
quarter. Turf Paradise was a newly acquired subsidiary as of August 11, 1994,
accounted for under the pooling of interests method of accounting, and as
required under this method of reporting the 1994 results have been restated to
include the operating results of Turf Paradise. The Casino began operations on
July 1, 1994; therefore, there are no comparable results of operations for the
nine months ended September 30, 1994.
10
<PAGE>
Total revenues increased by $14,894,000, or 18.9%, during the nine months ended
September 30, 1995, as compared to the nine months ended September 30, 1994.
Included in the 1995 revenues was $18,064,000 of Casino fixed lease rent revenue
compared to $5,528,000 in 1994, which covers just three months of operations in
the comparable 1994 period. Pari-mutuel commissions increased by $2,413,000, or
6.8%. The 1995 Hollywood Park Spring/Summer race meet was run under the new
California racing law that removed all restrictions on simulcasting between
northern and southern California, generating a significant increase in simulcast
and off-track pari-mutuel commissions. Lease and management fee - Sunflower
continues to be severely negatively impacted by riverboat gaming in Missouri.
For the nine months ended September 30, 1995, as compared to the nine months
ended September 30, 1994, Sunflower's total live pari-mutuel handle decreased by
$49,637,000, or 54.9%. On April 29, 1995, the Kansas Legislature adjourned,
leaving Senate Bill 27 ("SB" 27), which would have permitted slot machines at
race tracks, including Sunflower, in conjunction with the Kansas Lottery, in the
Senate Federal and State Affairs Committee. SB 27 passed the House of
Representatives and carries over to the 1996 legislative session, which runs
from January 8, 1996, through April 6, 1996. The Company continues to
rigorously examine its legislative, legal and operational options with the goal
of enabling Sunflower to sustain itself through the next legislative session and
compete with riverboat gaming in the longer term. This requires the continued
co-operation of employees, horsemen, dogmen, regulators, bankers and creditors
(see Liquidity and Capital Resources, Sunflower). Casino lease revenue of
$18,064,000 was recorded for the nine months ended September 30, 1995, which
included lease rent of $2,000,000 for each of the six months ended June 30,
1995, per the First Amended and Restated Lease, which retroactively lowered the
monthly lease rent to $2,000,000 from $3,000,000; and lease rent of $1,500,000
for each of the three months ended September 30, 1995, per the Second Amended
and Restated Lease, signed in August 1995, which further lowered the monthly
rent, as of July 1, 1995, to $1,500,000. Also recorded was $500,000 of lease
rent related to the July 1994 valuation allowance. Lease rent recorded for July
1994 was $3,000,000 less a valuation allowance of $1,500,000, but with the April
1995 signing of the First Amended and Restated Lease monthly lease rent was
retroactively lowered to $2,000,000, generating $500,000 of excess valuation
allowance. For the nine months ended September 30, 1995, PCM made lease rent
payments of $10,500,000. Admissions, programs and other racing income decreased
by $1,166,000, or 8.2%, due primarily to declines in 1995 on-track attendance at
Sunflower of 44.0%, one fewer live race day at Hollywood Park and fourteen fewer
live race days in 1995 at Turf Paradise. Concession sales increased by
$1,667,000, or 12.2%. Racing generated concession sales decreased due to
declines in on-track attendance, with the net increase attributable to sales at
the Casino. Other income increased by $1,202,000, or 29.0%. Revenue declines
at Hollywood Park due to the cancellation of the Forum Parking Agreement, were
offset primarily due to Casino gift shop and health club sales. A new Forum
Parking Agreement was executed on October 24, 1995, covering the one year period
from October 1, 1995, through September 30, 1996, with a minimum annual rent of
$1,200,000, compared to $1,800,000 per the prior agreement. The new Forum
Parking Agreement is for a shorter time period than the original Forum Parking
Agreement, which covered twelve years, to provide flexibility regarding the
proposed stadium development and other cross marketing benefits.
Total operating expenses, exclusive of acquisition costs associated with Turf
Paradise and Casino pre-opening and training expenses and inclusive of
$8,178,000 of Casino operating expenses (representing nine months of operations,
for which there were just three months of activity in the comparable period in
1994), increased by $12,287,000, or 18.7%, during the nine months ended
September 30, 1995, as compared to the nine months ended September 30, 1994.
Salaries, wages and employee benefits increased by $4,116,000, or 16.1%,
primarily due to Casino operations. Operations of facilities increased by
$1,344,000, or 19.4%, primarily because of increased slip and fall insurance
reserves and Casino operations. Cost of Concession sales increased by
$5,058,000, or 35.0%; cost reductions at the race tracks, due to declines in on-
track attendance, were exceeded by cost of concession sales at the Casino.
Professional services increased by $638,000, or 12.7%, essentially due to legal
costs incurred related to the Company's expansion projects, including the
proposed stadium. All costs associated with projects in the evaluation stages
are expensed as incurred. Rent expense decreased by $325,000, or 26.5%,
primarily due to the conclusion of Hollywood Park's lease on the infield message
board. Marketing costs decreased by $372,000, or 9.1%, due primarily to savings
related to reductions in advertising for Friday night racing at Hollywood Park.
Administrative costs increased by $1,648,000, or 34.1%, principally because of
costs incurred related to card club initiative campaign costs for
11
<PAGE>
South San Francisco (which was defeated in September) and Pomona (which was
defeated in November), the 1994 receipt of a refund of overpayment of purses
(there was no similar refund in 1995) and costs generated by Casino operations.
Lawsuit settlement expense for the nine months ended September 30, 1995, was the
same as for the three months ended September 30, 1995, (see Results of
Operations - Three months ended September 30, 1995, compared to the three months
ended September 30, 1994).
The 1994 Casino pre-opening and training costs of $1,614,000 were primarily
related to wages and benefits for senior management and the on-the-job training
of staff hired to open the Casino on July 1, 1994. There were no similar costs
in 1995. The Turf Paradise acquisition costs were a result of the August 11,
1994, acquisition by Hollywood Park; there were no similar costs in 1995.
Depreciation expense increased by $1,595,000, or 23.2%, a result of Casino
operations and costs associated with the first quarter of 1995 at Sunflower with
no corresponding amount in 1994. Interest expense increased by $1,044,000, or
56.7%, due to interest from the first quarter of 1995 on Sunflower's debt
obligations with no corresponding amount in 1994.
Income tax expense decreased by $284,000, primarily due to the additional
expense of the lawsuit settlement.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents decreased by $16,333,000 during the nine months ended
September 30, 1995, as compared to the nine months ended September 30, 1994.
The decrease was primarily related to land acquisitions, purchases of short term
investments, debt service payments on the secured and unsecured loan facilities,
capital expenditures and dividends paid on the Company's convertible preferred
stock. Cash and cash equivalents decreased by $27,919,000 during the nine
months ended September 30, 1994, as compared to the corresponding period in the
prior year, primarily because of capital expenditures for the construction of
the Casino and the acquisition of Sunflower.
HOLLYWOOD PARK On August 2, 1995, the final agreements were signed to begin the
construction phase of development of a card club in an existing hotel and
adjoining convention center in Compton, California. Hollywood Park paid the
city of Compton approximately $2,006,000 to acquire the convention center
parcel, which will be renovated to house the card club. On August 3, 1995, the
Company paid Compton Entertainment, Inc. ("CEI") $2,000,000 for the assignment
of the development agreement CEI had with the city of Compton (see Item 5. Other
Information) and an additional $500,000 for a five year option to purchase CEI's
gaming license.
On September 15, 1995, Hollywood Park paid approximately $3,411,000 to purchase
5.92 acres adjacent to the Inglewood property. On October 27, 1995, Hollywood
Park finalized the acquisition of an additional 37.33 acres, also adjacent to
the Inglewood property, for a total cost of approximately $7,500,000. Upon
execution of the purchase of the 37.33 acres, Hollywood Park paid the seller
$4,100,000 and signed a non-interest bearing, promissory note, with a single
payment due on September 1, 1996. The additional acreage may be used for
development projects currently under evaluation.
Other capital expenditures of approximately $6,600,000 for the nine months ended
September 30, 1995, included initial costs for the Compton card club and normal
and necessary improvements at the Hollywood Park, Sunflower and Turf Paradise
properties.
During the nine months ended September 30, 1995, Hollywood Park did not draw any
funds from its various credit facilities with Bank of America National Trust and
Savings Association ("Bank of America"). On April 14, 1995, the Company
executed an unsecured loan of up to $75,000,000 with Bank of America. The loan
facility consists of a $60,000,000 line of credit (the "Line of Credit") and a
$15,000,000 revolver (the "Revolver").
12
<PAGE>
The Line of Credit is an interest only, one year revolving facility, under which
the Company may borrow, pay and reborrow principal amounts without penalty. On
or before April 14, 1996, the Company has the option to convert the Line of
Credit to a term repayment line of credit, at a maximum amount of $60,000,000,
with a seven year term period from the date of conversion, which would require
repayment in eighty-four successive equal monthly installments. The Line of
Credit has a maximum interest rate equal to Bank of America's prime rate plus
0.25%.
The Revolver, inclusive of a within line facility for standby letters of credit
of up to a maximum of $5,000,000, is available for two years, ending May 1,
1997, during which the Company can borrow, pay and reborrow principal amounts
without penalty. The Revolver has an interest rate equal to Bank of America's
prime rate.
The Casino opened on July 1, 1994, under a third party lease agreement with PCM.
With the August 3, 1995, signing of SB 100 (see Item 5. Other Information) the
Company has given notice of cancellation under the terms of its lease and
intends to assume operation of the Casino in the immediate future. Consistent
with the terms of the original 1994 lease, PCM deferred all the original lease
rent due of $27,000,000 through March 31, 1995. In April 1995, Hollywood Park
and PCM executed the First Amended and Restated Lease Agreement, which
retroactively lowered the monthly lease rent from $3,000,000 to $2,000,000. In
addition, PCM executed a promissory note to Hollywood Park for $18,690,000,
representing nine months of revised monthly rent of $18,000,000, (formerly
$27,000,000 as computed under the original lease) with related interest at 8.0%,
and approximately $197,000 of additional rent. In August 1995 the Second
Amended and Restated Lease was signed that lowered the fixed monthly rent to
$1,500,000, as of July 1, 1995. On April 17, 1995, PCM paid Hollywood Park
$3,000,000 for additional rent related to PCM's use of food and beverage
services from Hollywood Park for the nine months ended March 31, 1995. PCM paid
the Company $6,000,000 for lease rent due for the three months ended June 30,
1995, and $4,500,000 for lease rent due the three months ended September 30,
1995.
During the nine months ended September 30, 1995, the Company paid dividends of
$1,443,000 on its convertible preferred stock. Dividend payments of $481,000
were made on February 15, 1995, May 15, 1995, and August 18, 1995, representing
$17.50 per share ($0.175 per depositary share) per payment date. On October 1,
1995, Hollywood Park declared a quarterly dividend of $481,000, or $17.50 per
share of convertible preferred stock ($0.175 per depositary share), payable
November 15, 1995, to holders of record on October 15, 1995. Dividends of
$1,443,000 were paid during the nine months ended September 30, 1994.
On April 20, 1995, Hollywood Park Operating Company purchased a U.S. Treasury
Security with a par value of $2,401,000, as security for its self-insurance
workers' compensation program with the state of California. On June 12, 1995,
the Company began investing in corporate bonds, ($5,204,000 invested as of
September 30, 1995) with a Moodys rating of Ba3 to Caa and Standard & Poors
rating of BB- to B-, though some of the bonds are not rated by either agency.
Investments in corporate bonds carry a greater amount of principal risk than
investments historically made by the Company and yield a correspondingly higher
return.
SUNFLOWER In 1991, Sunflower converted a $40,000,000 construction loan to a
term note payable with a group of five local and national banks (the "Banks").
On March 24, 1994, an Amended and Restated Credit and Security Agreement (the
"Senior Credit") was executed due to the change in ownership of Sunflower. The
Senior Credit has been amended three times, most recently in October 1995 by the
Standstill Agreement (discussed below); on December 19, 1994, to allow for the
Sunflower promissory note (discussed below), and for the waiver of the default
or event of default resulting from the failure to maintain a fixed charge
coverage ratio as of December 31, 1994; and on August 1, 1994, to amend the
definition of fixed charge coverage. The Senior Credit is non-recourse to
Hollywood Park, except with respect to the guarantee under the Standstill
Agreement.
During the nine months ended September 30, 1995, Sunflower continued to
experience intense competition from riverboat gaming in Missouri, which has had
a very significant negative impact on Sunflower's earnings, and thus its ability
to meet its obligations on the Senior Credit. On December 19, 1994, in
anticipation of insufficient cash flow from daily operations, Sunflower executed
a promissory note to Hollywood Park,
13
<PAGE>
allowing for the advancement of up to $3,000,000, for the payment of its Senior
Credit obligations. On January 3, 1995, and again on March 31, 1995, Hollywood
Park advanced $1,250,000, to Sunflower, for total advances of $2,500,000.
As of September 30, 1995, the outstanding balance of the Senior Credit was
$28,666,000. On March 31, 1995, though current on principal and interest due on
the Senior Credit, Sunflower was in technical default of the fixed charge
coverage ratio covenant; however, Sunflower was unable to pay the July 3, 1995,
Senior Credit principal and interest due of approximately $1,200,000.
On April 29, 1995, the Kansas Legislature adjourned, leaving SB 27, which would
have permitted slot machines at race tracks, including Sunflower, in conjunction
with the Kansas Lottery, in the Senate Federal and State Affairs Committee. SB
27 passed the House of Representatives and now carries over to the 1996
legislative session, which runs from January 8, 1996, through April 6, 1996.
The Company is currently conducting a rigorous examination of its legislative,
legal and operational options with the goal of enabling Sunflower to sustain
itself through the next legislative session and get other gaming approved which
will allow it to compete with riverboat gaming in the longer term. If the
Kansas Legislature does not approve other forms of gaming at Sunflower, it is
probable that Sunflower's assets will suffer an impairment that will require a
significant asset write down that will have a materially adverse effect on the
Company's consolidated financial statements.
As of October 27, 1995, Sunflower and the Banks executed a Standstill Agreement,
which among other things, provides for the extension of the Senior Credit
maturity. The Senior Credit maturity has been extended to the termination date
of the Standstill Agreement, which is the earlier of July 1, 1996; default of
the Standstill Agreement; or the close of the 1996 Kansas Legislative session
without the adoption, and full approval, of legislation permitting slot machines
or other casino gaming at Kansas race tracks, including Sunflower. The
Standstill Agreement also provides for the deferral of 100% of the principal
payments and 50% of the interest payments due under the Senior Credit from April
1995 through the termination date of the Standstill Agreement. Sunflower has
paid approximately $560,000 to cover the 50% interest obligations for the period
April 1, 1995, through September 30, 1995. Hollywood Park has executed a
guarantee of Sunflower's 50% interest obligations, effective only if Sunflower
does not pay the 50% interest obligations, but has not guaranteed any of
Sunflower's principal payment obligations.
TURF PARADISE On April 13, 1995, Turf Paradise repaid the outstanding balance
of its unsecured revolving loan facility with Bank One of Arizona, and
terminated the $2,500,000 facility. On June 1, 1995, Turf Paradise executed a
$2,500,000 promissory note to Hollywood Park. As of October 31, 1995, Turf
Paradise's outstanding balance on the promissory note was $1,000,000.
Hollywood Park is continually evaluating future growth opportunities in the
gaming and entertainment industry. The Company expects that funding for growth
opportunities, dividend requirements on the convertible preferred stock,
payments on notes payable or capital expenditure needs will come from existing
cash balances, cash generated from operating activities and borrowings from the
credit facilities. In the opinion of management, these resources will be
sufficient to meet the Company's anticipated cash requirements.
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
As previously reported by the Company, and described in the Company's Form 10-Q
for the quarterly period ended June 30, 1995, six purported class actions are
presently pending against the Company and certain of its directors and officers
in the United States District Court, Central District of California (the
"District Court") and consolidated in a single action entitled In re Hollywood
---------------
Park Securities Litigation, Master File No. CV-94-6551-
- --------------------------
14
<PAGE>
ABC (GHKx). The plaintiffs in the Class Actions purport to assert violations of
the federal securities laws based upon, among other things, the allegation that
the defendants made overly optimistic statements and projections concerning the
Company.
Counsel for certain plaintiffs in the Class Actions advised the Company of such
plaintiffs' intention to add or pursue purported derivative claims against
certain of the Company's directors and officers in connection with, among other
things, the matters alleged in the Class Actions. By order of the District
Court, dated February 27, 1995, the parties engaged in an extensive mediation
process in an effort to settle the Class Actions and all related potential and
threatened claims. The Company denied all liability and advised the plaintiffs
of its intent to assert various defenses and to contest vigorously all purported
claims and allegations. After engaging in the court-ordered mediation process,
the parties reached an agreement in principle to settle all pending and
threatened claims, including the Class Actions.
On September 15, 1995, an action entitled William R. Barney, Jr. v. Randall D.
------------------------------------
Hubbard, et al., Case No. 692583 (the "Derivative Action"), was commenced in the
- ---------------
Superior Court of the State of California for the County of San Diego. The
Derivative Action is a purported stockholder derivative action allegedly brought
on behalf of the Company against certain of the Company's directors and
officers, and based, in part, on the allegation that such directors and officers
breached their fiduciary duties in connection with matters alleged in or
relating to the Class Actions.
On September 19, 1995, the parties to the Class Actions and the Derivative
Action executed Memoranda of Understanding confirming their earlier agreement in
principle to settle the claims asserted and threatened with respect to the Class
Actions and the Derivative Action. Under the proposed settlement of the Class
Actions, a settlement fund of $5,800,000 will be created for the benefit of the
alleged class of shareholders, with contributions from the Company and the
insurance carrier for the Company's directors and officers. After giving
consideration to an additional cash payment to be made to the Company from the
insurance carrier for the Company's directors and officers in the settlement of
the Derivative Action, the Company's net settlement payment in the Class Actions
is expected to be less than $2,500,000. The proposed settlement of the
Derivative Action provides for a $2,000,000 payment to the Company from the
insurance carrier for the Company's directors and officers. With $1,000,000 of
that amount paid to the plaintiffs' attorneys as fees, costs and expenses; the
remaining $1,000,000 will defray the Company's payment in the settlement of the
Class Actions. The proposed settlement of the Derivative Actions includes
provisions enhancing the Company's financial controls and modifying certain
terms to its acquisition of Sunflower.
The Company also expects to consummate a separate settlement with the former
controlling stockholder of Turf Paradise, which was acquired by the Company on
August 11, 1994. Other former Turf Paradise shareholders will be entitled to
participate in the settlement of the Class Actions, but the former controlling
stockholder of Turf Paradise has agreed to be excluded from that settlement.
The Company does not believe that the settlement with the former controlling
shareholder of Turf Paradise is preferential to the amounts being paid to other
Turf Paradise shareholders under the Class Action. Under the proposed
settlement with the former controlling stockholder of Turf Paradise, the Company
will pay to such stockholder, in full settlement of all purported claims against
the Company and its directors and officers, $2,750,000.
The Company is currently in the process of finalizing and evaluating the above
settlements. If final settlements are reached and approved by the Company's
Board of Directors (which was subsequently obtained), the proposed settlements
would be conditioned upon approval by each of the courts in the Class Actions
and in the Derivative Action. If a resolution of the purported claims of the
former controlling stockholder of Turf Paradise, the Class Actions and in the
Derivative Action cannot be achieved on terms acceptable and not materially
adverse to the Company, then the Company will assert various defenses and
vigorously defend any and all claims against it relating to such matters.
ITEM 2. CHANGE IN SECURITIES
- ----------------------------
None
15
<PAGE>
ITEM 3. DEFAULT UPON SENIOR SECURITIES
- --------------------------------------
As of September 30, 1995, the outstanding balance of Sunflower's Senior Credit
was $28,666,000. The Senior Credit is non-recourse to the parent company,
Hollywood Park, Inc., except with respect to the guarantee under the Standstill
Agreement (described below). On March 31, 1995, though current on principal and
interest due on the Senior Credit, Sunflower was in technical default of the
fixed charge coverage ratio covenant; however, Sunflower was unable to pay the
July 3, 1995, Senior Credit principal and interest payment of approximately
$1,200,000. As of October 27, 1995, Sunflower and the Banks executed a
Standstill Agreement, which, among other things, provides for the extension of
the Senior Credit maturity. The Senior Credit maturity has been extended to the
termination date of the Standstill Agreement, which is the earlier of July 1,
1996; default of the Standstill Agreement; or the close of the 1996 Kansas
Legislative session, without the adoption, and full approval of legislation
permitting slot machines or other casino gaming at Kansas race tracks, including
Sunflower. The Standstill Agreement also provides for the deferral of 100% of
the principal payments and 50% of the interest payments under the Senior Credit,
from April 1995 through the termination date of the Standstill Agreement.
Sunflower has paid approximately $560,000 to cover the 50% interest obligations
for the period April 1, 1995, through September 30, 1995. Hollywood Park has
executed a guarantee of Sunflower's 50% interest obligations, effective only if
Sunflower does not pay the 50% interest obligations, but has not guaranteed any
of Sunflower's principal payment obligations.
ITEM 5. OTHER INFORMATION
- -------------------------
On August 3, 1995, California Governor Pete Wilson signed SB 100, which was
effective upon signing, allowing Hollywood Park (and all other pari-mutuel
wagering facilities, which are public companies) to operate a card club on the
premises of the race track. Additionally, SB 100 places a state-wide, three
year moratorium (beginning January 1, 1996) on public votes or referendums to
approve the enactment of any city ordinance to allow additional card clubs, and
prohibits the amendment of any existing ordinances. The Hollywood Park Casino
opened on July 1, 1994, under a third party lease arrangement with PCM. The
Company has given notice of cancellation under its lease agreement and intends
to assume operation of the Casino in the immediate future.
In April 1995, the Company and PCM executed the First Amended and Restated Lease
Agreement, which retroactively lowers the fixed monthly lease rent payment from
$3,000,000 to $2,000,000. PCM executed a promissory note to Hollywood Park for
$18,690,000, representing nine months of revised fixed monthly lease rent of
$18,000,000 (formerly $27,000,000 under the original lease) with related
interest at 8.0%, and approximately $197,000 of additional rent. On April 17,
1995, PCM paid Hollywood Park $3,000,000 for additional rent related to PCM's
use of food and beverage services from Hollywood Park for the nine months ended
March 31, 1995. PCM paid Hollywood Park $6,000,000 of lease rent during the
three months ended June 30, 1995.
In August 1995, the Company and PCM executed the Second Amended and Restated
Lease Agreement subject to approval by the Attorney General, which lowered the
fixed monthly rent payment from $2,000,000 to $1,500,000 effective July 1, 1995.
PCM paid $4,500,000 in rent for the three months ended September 30, 1995. As
of September 30, 1995, the Company had received all necessary approvals to
operate the Casino; a provisional gaming Registration from the California
Attorney General, and a provisional Operations Certificate from the city of
Inglewood.
ITEM 6.A EXHIBITS
- -----------------
<TABLE>
<CAPTION>
Exhibit
Number Description of Exhibit
- ------ ----------------------
<C> <S>
2.1 Agreement of Merger by and among Hollywood Park, Inc., HP Acquisition,
Inc., Sunflower Racing, Inc., R.D. Hubbard and Richard J. Boushka,
dated February 24, 1994, executed on March 23, 1994, is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
</TABLE>
16
<PAGE>
<TABLE>
<C> <S>
2.2 Agreement of Merger by and among Hollywood Park, Inc., HP Acquisition,
Inc., and Turf Paradise, Inc., dated March 30, 1994, is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994.
3.1 Certificate of Incorporation of Hollywood Park, Inc., is hereby
incorporated by reference to the Company's Registration Statement on
Form S-1 dated January 29, 1993.
3.2 Amended By-laws of Hollywood Park, Inc., are hereby incorporated by
reference to the Company's Registration Statement on Form S-1 dated
January 29, 1993.
4.5 Convertible Preferred Stock Depository Stock Agreement between
Hollywood Park, Inc. and Chemical Trust Company of California, dated
February 9, 1993, is hereby incorporated by reference to the Company's
Registration Statement on Form S-1 dated January 29, 1993.
4.6 Hollywood Park Stock Option Plan is hereby incorporated by reference to
Exhibit A to the Notice of Annual Meeting of Stockholders and Proxy
Statement relating to the Annual Meeting of Stockholders of Hollywood
Park, Inc., held on May 17, 1993.
10.1 Directors Deferred Compensation Plan for Hollywood Park, Inc. is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1991.
10.2 Lease Agreement dated January 1, 1989, by and between Hollywood Park
Realty Enterprises, Inc. and Hollywood Park Operating Company, as
amended, is hereby incorporated by reference to the Joint Annual
Report on Form 10-K for the fiscal year ended December 31, 1989, of
Hollywood Park Operating Company and Hollywood Park Realty
Enterprises, Inc.
10.3 Aircraft rental agreement dated November 1, 1993, by and between
Hollywood Park, Inc., and R.D. Hubbard Enterprises, Inc., is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1993.
10.4 Hollywood Park Casino lease agreement dated June 15, 1994, by and
between Hollywood Park, Inc. and Pacific Casino Management, Inc., is
hereby incorporated by reference to the Current Report on Form 8-K
dated June 15, 1994.
10.5 Amended and Restated Credit Agreement dated March 23, 1994, by and
between Sunflower Racing, Inc. and First Union National Bank of North
Carolina, Bank One Lexington, Texas Commerce Bank, Home State Bank of
Kansas City and Intrust Bank, N.A., is hereby incorporated by
reference to the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1994.
10.6 Pledge Agreement dated March 23, 1994, by and between Hollywood Park,
Inc., First Union National Bank of North Carolina, (as agent for the
ratable benefit of itself and the Banks named in the Amended and
Restated Credit Agreement included as Exhibit 10.6) is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for quarter ended June 30, 1994.
10.7 Subordination and Amendment Agreement dated March 23, 1994, by and
between R.D. Hubbard and Sunflower Racing, Inc., is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended June 30, 1994.
10.8 Ground Lease Agreement dated August 4, 1994, by and between Hollywood
Park, Inc. and QBM Investment Corporation, is hereby incorporated by
reference to the Company's Annual Report on Form 10-K for the year
ended December 31, 1994.
10.9 Agreement Respecting Pyramid Casino dated December 3, 1994, by and
between Hollywood Park, Inc. and Compton Entertainment, Inc., is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
10.10 Amendment of Oil and Gas Lease dated January 10, 1995, by and among
Hollywood Park, Inc., and Casex Co., Nunn Ltd., and Votex Energy &
Mineral is hereby incorporated by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
10.11 Agreement to sell contingent rights to additional consideration
payable by Hollywood Park, Inc. related to the Agreement of Merger by
and among Hollywood Park, Inc., HP Acquisition Inc., Sunflower Racing,
Inc., R.D. Hubbard and Richard J. Boushka, dated February 24, 1994,
executed on March 23 1994, by and among Hollywood Park, Inc., R.D.
Hubbard and Richard J. Boushka, dated March 23, 1995, is hereby
incorporated by reference to the Company's Annual Report on Form 10-K
for the year ended December 31, 1994.
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
10.12 Business Loan Agreement dated April 14, 1995, by and between Hollywood
Park, Inc., and Bank of America National Trust and Savings Association,
is hereby incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995.
10.13 Amendment to Agreement Respecting Pyramid Casino dated April 14, 1995,
by and between Hollywood Park, Inc., and Compton Entertainment, Inc.,
is hereby incorporated by reference to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995.
10.14 Amended and Restated Lease dated August 31, 1995, by and between
Hollywood Park, Inc., and Pacific Casino Management.
10.15 Amended and Restated Agreement Respecting Pyramid Casino dated July
14, 1995, by and between Hollywood Park, Inc. and Compton
Entertainment, Inc.
10.16 Amended and Restated Disposition and Development Agreement of Purchase
and Sale, and Lease with Option to Purchase, dated August 2, 1995, by
and between The Community Redevelopment Agency of the City of Compton
and Compton Entertainment, Inc.
10.17 Guaranty, dated July 31, 1995, by Hollywood Park, Inc. in favor of the
Community Redevelopment Agency of the City of Compton.
10.18 Lease by and between HP Compton, Inc. and Compton Entertainment, Inc.,
dated August 3, 1995.
10.19 Standstill Agreement, dated October 27, 1995, by and between Sunflower
Racing, Inc., and First Union National Bank of Florida, Bank One
Lexington, N.A., Bank Midwest, N.A., Intrust Bank, N.A., and FCLT
Loans, L.P.
22.1 Subsidiaries of Hollywood Park, Inc.: HP Compton, Inc., a California
corporation, HP Casino, Inc., a California corporation, Hollywood Park
Operating Company, a Delaware corporation (and its subsidiaries:
Hollywood Park Fall Operating Company, a Delaware corporation and
Hollywood Park Food Services, Inc., a California corporation):
Sunflower Racing, Inc., a Kansas corporation (and its subsidiary
Sunflower Food and Beverage, Inc., a Kansas corporation): and Turf
Paradise, Inc., an Arizona corporation.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
There were no Reports on Form 8-K filed
during the quarter.
</TABLE>
18
<PAGE>
Hollywood Park, Inc.
Racing Data
HOLLYWOOD PARK RACE TRACK
<TABLE>
<CAPTION>
1995 1994
------------------------ ------------------------
<S> <C> <C>
LIVE RACING DATES:
Spring/Summer meeting ("S/S") April 28 through July 24 April 27 through July 25
Autumn meeting ("A") Nov. 15 through Dec. 24 Nov. 9 through Dec. 24
LIVE RACE DAYS INCLUDING CHARITY DAYS (A):
Spring/Summer meeting 67 68
Autumn meeting 30 34
-- ---
97 102
== ===
LIVE RACE DAYS BY QUARTER:
First quarter 0 0
Second quarter (S/S) 48 48
Third quarter (S/S) 19 20
Fourth quarter (A) 30 34
-- ---
97 102
== ===
SIMULCAST RACE DAYS BY QUARTER 1995:
<CAPTION>
1Q 2Q 3Q 4Q TOTAL
--- --- --- --- -----
<S> <C> <C> <C> <C> <C>
Santa Anita thoroughbred 65 19 0 6 90
Del Mar thoroughbred 0 0 43 0 43
Fairplex Pomona thoroughbred 0 0 17 2 19
Oak Tree from Santa Anita thoroughbred 0 0 0 32 32
Los Alamitos Harness - night races 36 0 0 0 36
Los Alamitos Quarter Horse - night races 0 45 53 53 151
Cal Expo Harness - night races 1 36 11 0 48
Bay Meadows - northern California (b) 21 11 28 46 106
Golden Gate Fields - northern California (b) 44 47 0 15 106
Fairs - northern California (b) 0 16 60 12 88
--- --- --- --- ---
TOTAL 167 174 212 166 719
=== === === === ===
SIMULCAST RACE DAYS BY QUARTER 1994:
<CAPTION>
1Q 2Q 3Q 4Q TOTAL
--- --- --- --- -----
<S> <C> <C> <C> <C> <C>
Santa Anita thoroughbred 66 19 0 5 90
Del Mar thoroughbred 0 0 43 0 43
Fairplex Pomona thoroughbred 0 0 16 3 19
Oak Tree from Santa Anita thoroughbred 0 0 0 27 27
Los Alamitos Harness - night races 36 2 0 2 40
Los Alamitos Quarter Horse - night races 0 48 49 44 141
Cal Expo Harness - night races -- -- -- -- --
Bay Meadows - northern California (b) -- -- -- -- --
Golden Gate Fields - northern California (b) -- -- -- -- --
Fairs - northern California (b) -- -- -- -- --
--- --- --- --- ---
TOTAL 102 69 108 81 360
=== === === === ===
</TABLE>
______
(a) There are three charity days in both the Spring/Summer and Autumn meetings,
for a total of six charity days per year.
(b) Simulcasting from northern California runs year round and is simulcast
concurrently with either live on-track racing or with southern California
simulcasting.
19
<PAGE>
SUNFLOWER -- OPERATING AS THE WOODLANDS
Sunflower, operating as the Woodlands race track, under Kansas racing law is not
granted any race days and does not generate any pari-mutuel commissions. The
Kansas Racing Commission granted Sunflower the facility ownership and manager
licenses, with all race days until 2014 granted to TRAK East, a Kansas not-for-
profit corporation. Sunflower has an agreement with TRAK East to provide the
physical race tracks along with management and consulting services for twenty-
five years with options to renew for one or more successive five year terms.
The Agreement and Restatement of Lease and Management Agreement was entered into
as of September 14, 1989. Sunflower had guaranteed that the minimum net
revenues to be retained by TRAK East, which are for distribution to charities,
would not be less than $500,000, but in the absence of legislative relief (see
Part II, Item 5. Other Information) Sunflower is currently having discussions
with TRAK East to reduce the amount retained for charities.
1995 RACE DAYS AND PERFORMANCES BY QUARTER:
<TABLE>
<CAPTION>
Live On-track Simulcast
------------------------ ---------
Race Days Performances Race Days
--------- ------------ ---------
<S> <C> <C> <C>
GREYHOUNDS
First quarter 73 103 44
Second quarter 78 104 77
Third quarter 76 101 76
Fourth quarter 65 78 65
--- --- ---
292 386 262
=== === ===
THOROUGHBREDS
First quarter 0 -- 63
Second quarter 0 -- 66
Third quarter 32 -- 64
Fourth quarter 13 -- 66
--- --- ---
45 -- 259
=== === ===
</TABLE>
1994 RACE DAYS AND PERFORMANCES BY QUARTER:
<TABLE>
<CAPTION>
Live On-track Simulcast
------------------------ ---------
Race Days Performances Race Days
--------- ------------ ---------
<S> <C> <C> <C>
GREYHOUNDS
First quarter 69 104 68
Second quarter 82 123 80
Third quarter 78 107 71
Fourth quarter 71 102 69
--- --- ---
300 436 288
=== === ===
THOROUGHBREDS
First quarter 0 -- 60
Second quarter 0 -- 76
Third quarter 36 -- 77
Fourth quarter 26 -- 65
--- --- ---
62 -- 278
=== === ===
</TABLE>
The following pari-mutuel wagering data is related to TRAK East at Sunflower.
Sunflower does not generate any pari-mutuel wagering related revenue, but
instead receives a lease and management fee from TRAK East.
20
<PAGE>
TRAK EAST - AT SUNFLOWER
<TABLE>
<CAPTION>
For the three months ended September 30,
-----------------------------------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
GREYHOUNDS HORSES
------------------------- -------------------------
<S> <C> <C> <C> <C>
Pari-mutuel handle:
On-track $10,944,000 $23,654,000 $ 2,526,000 $ 4,236,000
Simulcast 3,067,000 2,230,000 6,805,000 7,559,000
----------- ----------- ----------- -----------
$14,011,000 $25,884,000 $ 9,331,000 $11,795,000
=========== =========== =========== ===========
Pari-mutuel commissions:
On-track $ 1,408,000 $ 2,910,000 $ 211,000 $ 418,000
Simulcast 328,000 219,000 719,000 792,000
----------- ----------- ----------- -----------
$ 1,736,000 $ 3,129,000 $ 930,000 $ 1,210,000
=========== =========== =========== ===========
<CAPTION>
For the nine months ended September 30,
-----------------------------------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
GREYHOUNDS HORSES
------------------------- -------------------------
<S> <C> <C> <C> <C>
Pari-mutuel handle:
On-track $38,264,000 $86,190,000 $ 2,526,000 $ 4,237,000
Simulcast 7,648,000 7,785,000 22,567,000 26,932,000
----------- ----------- ----------- -----------
$45,912,000 $93,975,000 $25,093,000 $31,169,000
=========== =========== =========== ===========
Pari-mutuel commissions:
On-track $ 4,902,000 $10,614,000 $ 211,000 $ 418,000
Simulcast 816,000 752,000 2,350,000 2,811,000
----------- ----------- ----------- -----------
$ 5,718,000 $11,366,000 $ 2,561,000 $ 3,229,000
=========== =========== =========== ===========
</TABLE>
TURF PARADISE
Turf Paradise has one continuous live thoroughbred race meet that starts in
September and runs through May. During 1995 Turf Paradise raced live for the
period January 1 through May 22 and resumed live racing on September 30 and will
run through December 31. Turf Paradise operates as a simulcast facility for
Arizona's Prescott Downs during the period May 26 through September 4. In 1994,
Turf Paradise raced live from January 1 through May 23 and resumed live racing
on September 23 running through December 31. Turf Paradise operated as a
simulcast facility for the period May 27 through September 5, in 1994. In
addition to running live thoroughbred races, Turf Paradise offers two quarter
horse races a day during the first three months of the live meet (September
through November) and a limited number of Arabian races each spring. Turf
Paradise also accepts simulcast signals during live racing on Fridays, Saturdays
and Sundays. As of September 1994, Turf Paradise began operating as a simulcast
facility during the two dark days (days without live racing during the live race
meet) of each week during the live on-track racing season.
<TABLE>
<CAPTION>
LIVE ON-TRACK RACE DAYS DARK DAY SIMULCASTING SIMULCASTING - PRESCOTT
----------------------- --------------------- -----------------------
1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
First quarter 67 75 23 0 0 0
Second quarter 37 40 14 0 30 29
Third quarter 1 4 18 11 56 56
Fourth quarter 66 65 25 25 0 0
--- --- -- -- -- --
171 184 80 36 86 85
=== === == == == ==
</TABLE>
21
<PAGE>
HOLLYWOOD PARK, INC.
Calculation of Earnings Per Share
<TABLE>
<CAPTION>
For the three months ended September 30,
---------------------------------------------------------
Primary Assuming full dilution (a)
-------------------------- --------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average number of common shares outstanding 18,369,634 18,369,607 18,369,634 18,369,607
Average common shares due to assumed
conversion of convertible preferred shares 0 0 2,291,492 2,291,492
----------- ----------- ----------- -----------
Total shares 18,369,634 18,369,607 20,661,126 20,661,099
=========== =========== =========== ===========
Net loss $(5,637,000) $(2,398,000) $(5,637,000) $(2,398,000)
Less dividend requirements on convertible
preferred shares 481,000 481,000 0 0
----------- ----------- ----------- -----------
Net loss allocated to common shareholders $(6,118,000) $(2,879,000) $(5,637,000) $(2,398,000)
=========== =========== =========== ===========
Net loss per share $(0.33) $(0.16) $(0.27) $(0.12)
=========== =========== =========== ===========
<CAPTION>
For the nine months ended September 30,
---------------------------------------------------------
Primary Assuming full dilution (a)
---------------------------------------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average number of common shares outstanding 18,369,634 18,175,191 18,369,634 18,175,191
Average common shares due to assumed
conversion of convertible preferred shares 0 0 2,291,492 2,291,492
----------- ----------- ----------- -----------
Total shares 18,369,634 18,175,191 20,661,126 20,466,683
=========== =========== =========== ===========
Net income (loss) $(1,374,000) $ 1,036,000 $(1,374,000) $ 1,036,000
Less dividend requirements on convertible
preferred shares 1,443,000 1,443,000 0 0
----------- ----------- ----------- -----------
Net income (loss) available to (allocated to)
common shareholders $(2,817,000) $ (407,000) $(1,374,000) $ 1,036,000
=========== =========== =========== ===========
Net income (loss) per share $(0.15) $(0.02) $(0.07) $(0.05)
=========== =========== =========== ===========
</TABLE>
- ------------
(a) The computed values assuming full dilution are anti-dilutive; therefore, the
primary share values are presented on the face of the consolidated statements of
operations.
22
<PAGE>
HOLLYWOOD PARK, INC.
Selected Financial Data by Operational Location
(unaudited)
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
September 30, September 30,
---------------------------- ----------------------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Hollywood Park, Inc. and Race Track $48,078,000 $48,142,000 $14,750,000 $16,058,000
Sunflower Racing, Inc. 7,858,000 10,931,000 2,385,000 4,724,000
Turf Paradise, Inc. 11,547,000 11,567,000 1,480,000 977,000
Hollywood Park, Inc. - Casino Division 26,396,000 8,345,000 7,980,000 8,345,000
----------- ----------- ----------- -----------
93,879,000 78,985,000 26,595,000 30,104,000
----------- ----------- ----------- -----------
EXPENSES:
Hollywood Park, Inc. and Race Track 41,848,000 40,128,000 13,634,000 13,655,000
Lawsuit settlement 5,627,000 0 5,627,000 0
Casino pre-opening and training costs 0 2,337,000 0 723,000
Turf Paradise acquisition costs 0 627,000 0 446,000
Sunflower Racing, Inc. 7,146,000 7,519,000 2,544,000 3,961,000
Turf Paradise, Inc. 9,537,000 9,207,000 1,859,000 1,755,000
Hollywood Park, Inc. - Casino Division 19,373,000 8,764,000 6,542,000 8,764,000
----------- ----------- ----------- -----------
83,531,000 68,582,000 30,206,000 29,304,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INTEREST, INCOME TAXES,
DEPRECIATION AND AMORTIZATION:
Hollywood Park, Inc. and Race Track 6,230,000 8,014,000 1,116,000 2,403,000
Lawsuit settlement (5,627,000) 0 (5,627,000) 0
Casino pre-opening and training costs 0 (2,337,000) 0 (723,000)
Turf Paradise acquisition costs 0 (627,000) 0 (446,000)
Sunflower Racing, Inc. 712,000 3,412,000 (159,000) 763,000
Turf Paradise, Inc. 2,010,000 2,360,000 (379,000) (778,000)
Hollywood Park, Inc. - Casino Division 7,023,000 (419,000) 1,438,000 (419,000)
----------- ----------- ----------- -----------
10,348,000 10,403,000 (3,611,000) 800,000
----------- ----------- ----------- -----------
DEPRECIATION AND AMORTIZATION:
Hollywood Park, Inc. and Race Track 4,097,000 4,042,000 1,378,000 1,363,000
Sunflower Racing, Inc. 1,853,000 1,350,000 616,000 645,000
Turf Paradise, Inc. 1,009,000 941,000 311,000 304,000
Hollywood Park, Inc. - Casino Division 1,519,000 550,000 519,000 550,000
----------- ----------- ----------- -----------
8,478,000 6,883,000 2,824,000 2,862,000
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Hollywood Park, Inc. and Race Track 142,000 96,000 44,000 28,000
Sunflower Racing, Inc. 2,723,000 1,659,000 913,000 836,000
Turf Paradise, Inc. 21,000 87,000 1,000 17,000
Hollywood Park, Inc. - Casino Division 0 0 0 0
----------- ----------- ----------- -----------
2,886,000 1,842,000 958,000 881,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT):
Hollywood Park, Inc. and Race Track 1,991,000 3,876,000 (306,000) 1,012,000
Lawsuit settlement (5,627,000) 0 (5,627,000) 0
Casino pre-opening and training costs 0 (2,337,000) 0 (723,000)
Turf Paradise acquisition costs 0 (627,000) 0 (446,000)
Sunflower Racing, Inc. (3,864,000) 403,000 (1,688,000) (718,000)
Turf Paradise, Inc. 980,000 1,332,000 (691,000) (1,099,000)
Hollywood Park, Inc. - Casino Division 5,504,000 (969,000) 919,000 (969,000)
----------- ----------- ----------- -----------
(1,016,000) 1,678,000 (7,393,000) (2,943,000)
Income tax expense (benefit) 358,000 642,000 (1,756,000) (545,000)
----------- ----------- ----------- -----------
Net income (loss) $(1,374,000) $ 1,036,000 $(5,637,000) $(2,398,000)
=========== =========== =========== ===========
Dividend requirements on convertible preferred stock $ 1,443,000 $ 1,443,000 $ 481,000 $ 481,000
----------- ----------- ----------- -----------
Net income (loss) available to (allocated to)
common shareholders $(2,817,000) $ (407,000) $(6,118,000) $(2,879,000)
=========== =========== =========== ===========
Per common share:
Net income (loss) - primary $ (0.15) $ (0.02) $ (0.33) $ (0.16)
Net income (loss) - fully diluted $ (0.15) $ (0.02) $ (0.33) $ (0.16)
Number of shares - primary 18,369,634 18,175,191 18,369,634 18,369,607
Number of shares - fully diluted 20,661,126 20,466,683 20,661,126 20,661,099
</TABLE>
23
<PAGE>
HOLLYWOOD PARK, INC.
Pari-mutuel Wagering Data
(unaudited)
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
September 30, September 30,
----------------------------- -----------------------------
1995 1994 1995 1994
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
HOLLYWOOD PARK
- -------------------------------------
Pari-mutuel handle:
On-track $135,461,000 $195,435,000 $ 41,110,000 $ 76,954,000
Off-track - shared handle wagering 325,247,000 385,081,000 95,597,000 150,047,000
Simulcast 299,217,000 228,933,000 105,175,000 100,692,000
------------ ------------ ------------ ------------
Total $759,925,000 $809,449,000 $241,882,000 $327,693,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $ 8,567,000 $ 10,130,000 $ 2,582,000 $ 3,353,000
Off-track - shared handle wagering 10,544,000 11,660,000 3,108,000 3,837,000
Off-track - independent handle 1,524,000 827,000 448,000 120,000
Simulcast 8,605,000 4,419,000 2,811,000 1,538,000
------------ ------------ ------------ ------------
Total $ 29,240,000 $ 27,036,000 $ 8,949,000 $ 8,848,000
============ ============ ============ ============
TURF PARADISE
- -------------------------------------
Pari-mutuel handle:
On-track $ 18,609,000 $ 24,605,000 $ 341,000 $ 663,000
Off-track - shared handle wagering 46,772,000 36,650,000 280,000 474,000
Simulcast 38,152,000 29,330,000 9,028,000 6,918,000
------------ ------------ ------------ ------------
Total $103,533,000 $ 90,585,000 $ 9,649,000 $ 8,055,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $ 2,550,000 $ 3,059,000 $ 67,000 $ 83,000
Off-track - shared handle wagering 2,993,000 3,089,000 37,000 64,000
Off-track - independent handle 507,000 159,000 0 0
Simulcast 2,455,000 1,989,000 1,013,000 430,000
------------ ------------ ------------ ------------
Total $ 8,505,000 $ 8,296,000 $ 1,117,000 $ 577,000
============ ============ ============ ============
COMBINED
- -------------------------------------
Pari-mutuel handle:
On-track $154,070,000 $220,040,000 $ 41,451,000 $ 77,617,000
Off-track - shared handle wagering 372,019,000 421,731,000 95,877,000 150,521,000
Simulcast 337,369,000 258,263,000 114,203,000 107,610,000
------------ ------------ ------------ ------------
Total $863,458,000 $900,034,000 $251,531,000 $335,748,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $ 11,117,000 $ 13,189,000 $ 2,649,000 $ 3,436,000
Off-track - shared handle wagering 13,537,000 14,749,000 3,145,000 3,901,000
Off-track - independent handle 2,031,000 986,000 448,000 120,000
Simulcast 11,060,000 6,408,000 3,824,000 1,968,000
------------ ------------ ------------ ------------
Total $ 37,745,000 $ 35,332,000 $ 10,066,000 $ 9,425,000
============ ============ ============ ============
</TABLE>
24
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HOLLYWOOD PARK, INC.
(Registrant)
By: /s/ R.D. Hubbard Dated: November 10, 1995
-----------------------------------
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ G. Michael Finnigan Dated: November 10, 1995
-----------------------------------
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
25
<PAGE>
Hollywood Park, Inc.
Exhibit Index
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
10.14 Amended and Restated Lease dated August 31, 1995, by and
between Hollywood Park, Inc. and Pacific Casino Management, Inc. 1
10.15 Amended and Restated Agreement Respecting Pyramid Casino dated
July 14, 1995, by and between Hollywood Park, Inc. and Compton
Entertainment, Inc. 66
10.16 Amended and Restated Disposition and Development Agreement of
Purchase and Sale, and Lease with Option to Purchase, dated
August 2, 1995, by and between The Community Redevelopment
Agency of the City of Compton and Compton Entertainment, Inc. 96
10.17 Guaranty, dated July 31, 1995, by Hollywood Park in favor of
the Community Redevelopment Agency of the City of Compton. 177
10.18 Lease by and between HP Compton, Inc. and Compton Entertainment,
Inc., dated August 3, 1995. 187
10.19 Standstill Agreement, dated October 27, 1995, by and between
Sunflower Racing, Inc., and First Union National Bank of
Florida, Bank One Lexington, N.A., Bank Midwest, N.A., Intrust
Bank, N.A. and FCLT Loans, L.P. 236
27.1 Financial Data Schedule
</TABLE>
26
<PAGE>
Exhibit 10.14
AMENDED AND RESTATED LEASE
by and between
HOLLYWOOD PARK, INC.,
a Delaware corporation,
as "Landlord"
and
PACIFIC CASINO MANAGEMENT, INC.,
a California corporation,
as "Tenant"
Dated: August 31, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
AMENDED AND RESTATED LEASE............................................... 1
RECITALS................................................................. 1
Article 1. LEASE OF PREMISES............................................ 1
1.01 Premises..................................................... 1
1.02 Landlord's Obligations....................................... 2
Article 2. TERM; POSSESSION; ACCEPTANCE................................. 2
2.01 Term......................................................... 2
2.02 Termination Right............................................ 2
2.03 Intentionally Deleted........................................ 2
2.04 Acceptance of Premises; Premises Remodeling.................. 3
Article 3. RENT......................................................... 3
3.01 Monthly Rent................................................. 3
3.02 Initial Monthly Rent......................................... 3
3.03 Rent Arrearages.............................................. 3
3.04 Legal Tender................................................. 4
3.05 Additional Rent; Rent Defined................................ 4
3.06 Interest on Late Payments.................................... 4
Article 4. RECORDS AND ACCOUNTING....................................... 4
4.01 Reports...................................................... 4
4.02 Landlord's Audit............................................. 5
4.03 Independent Business......................................... 5
Article 5. USE AND OPERATION OF PREMISES................................ 5
5.01 Specific Use of Premises..................................... 5
5.02 Conduct of Business.......................................... 5
5.03 Compliance with Restrictions and Laws........................ 6
5.04 Prohibited Uses.............................................. 6
5.05 Restrictions on Activities................................... 7
5.06 Rules and Regulations........................................ 7
Article 6. MAINTENANCE, REPAIRS and ALTERATIONS......................... 8
6.01 Landlord's Maintenance and Repair Obligations................ 8
6.02 Tenant's Maintenance and Repair Obligations.................. 8
</TABLE>
2
<PAGE>
<TABLE>
<S> <C>
6.03 Damage to Premises........................................... 8
6.04 Damage to Building or Other Premises......................... 9
6.05 Repair of Damage; Rent Abatement............................. 9
6.06 Alterations; Improvements; Additions......................... 10
6.07 Ownership of Improvements, Fixtures, Furnishings and
Equipment.................................................... 10
6.08 Mechanic's Liens............................................. 11
Article 7. INSURANCE, EXONERATION and INDEMNITY......................... 11
7.01 Liability Insurance.......................................... 11
7.02 Fire and Extended Coverage Insurance......................... 12
7.03 Insurance Policies........................................... 12
7.04 Waiver of Subrogation........................................ 13
7.05 Exoneration and Indemnity.................................... 14
Article 8. ASSIGNMENT, SUBLETTING, HYPOTHECATION........................ 15
8.01 Consent Required............................................. 15
8.02 Indirect Transfers........................................... 15
8.03 Obligations of Transferees and Subtenants.................... 15
8.04 Continued Liability; No Waiver............................... 16
Article 9. EMINENT DOMAIN............................................... 16
9.01 Effect on Lease.............................................. 16
9.02 Award........................................................ 17
9.03 Rebuilding................................................... 17
Article 10. TENANT'S BREACH; LANDLORD'S REMEDIES......................... 17
10.01 Tenant's Breach.............................................. 17
10.02 Landlord's Remedies.......................................... 18
10.03 Right to Cure Tenant's Default............................... 20
10.04 Landlord's Remedies Not Exclusive............................ 20
10.05 Receipt of Rents............................................. 20
10.06 Limitation on Landlord's Remedies; Personal Obligations of
LeBaron and Klosterman....................................... 20
Article 11. LANDLORD'S DEFAULT; TENANT'S REMEDIES........................ 21
11.01 Landlord's Default........................................... 21
11.02 Tenant's Remedies............................................ 21
11.03 Limitation on Tenant's Remedies.............................. 22
11.04 Tenant's Remedies Not Exclusive.............................. 22
11.05 Payment of Rents............................................. 22
Article 12. MORTGAGE OF LANDLORD'S INTEREST.............................. 22
12.01 Subordination................................................ 22
12.02 Tenant's Obligations With Respect to Landlord's Mortgage..... 22
12.03 Definition of Landlord's Mortgage and Landlord's Mortgagee... 23
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Article 13. COMMON AREAS................................................. 23
13.01 Definition of Common Areas................................... 23
13.02 Maintenance of Common Areas.................................. 24
13.03 Use of Common Areas.......................................... 24
Article 14. PARKING...................................................... 24
14.01 Parking Area................................................. 24
14.02 Valet Parking Charges........................................ 24
14.03 Validations.................................................. 24
14.04 Employee Parking............................................. 25
Article 15. TAXES AND OTHER CHARGES...................................... 25
15.01 Tenant's Taxes............................................... 25
Article 16. UTILITY AND OTHER SERVICES................................... 25
16.01 Furnishing of Services....................................... 25
Article 17. SIGNS; DISPLAYS; ADVERTISING................................. 26
17.01 Signs........................................................ 26
17.02 Displays..................................................... 26
17.03 Advertised Name.............................................. 26
Article 18. GENERAL PROVISIONS........................................... 26
18.01 Estoppel Certificates........................................ 26
18.02 Landlord's Right of Entry.................................... 27
18.03 Landlord's Installations, Access and Food Services........... 27
18.04 Changes in the Center........................................ 28
18.05 Waiver....................................................... 28
18.06 Surrender of Premises; Holding Over.......................... 28
18.07 Notices...................................................... 29
18.08 Partial Invalidity; Construction............................. 29
18.09 Captions..................................................... 30
18.10 Short Form Lease............................................. 30
18.11 Brokers' Commissions......................................... 30
18.12 Attorneys' Fees.............................................. 30
18.14 Counterparts................................................. 31
18.15 Sole Agreement............................................... 31
18.16 Successors and Assigns....................................... 31
18.17 Time is of the Essence....................................... 31
18.18 Survival of Covenants........................................ 31
18.19 Landlord's Consent or Approval............................... 31
18.20 Joint and Several Obligations................................ 32
18.21 No Offer..................................................... 32
18.22 Corporate Resolution......................................... 32
18.23 Relationship to Original Lease............................... 32
</TABLE>
4
<PAGE>
AMENDED AND RESTATED LEASE
THIS AMENDED AND RESTATED LEASE is made and entered into this 31 day of
August, 1995, by and between HOLLYWOOD PARK, INC., a Delaware corporation,
hereinafter called "Landlord", and PACIFIC CASINO MANAGEMENT, INC., a
California corporation, hereinafter called "Tenant".
RECITALS
--------
A. Landlord is the owner of a sports and entertainment center on
approximately 335 acres (the "Property") of land in Inglewood, California,
commonly known as Hollywood Park (the "Center"). The Center is depicted on
the site plan attached hereto as Exhibit "A-1".
B. Landlord has developed a portion of the Pavilion Building at the Center
(the "Pavilion"), as a card club (the "Premises").
C. Tenant is a California corporation formed for the primary purpose of
operating a card club on the Premises and is licensed as a card club operator.
D. Landlord and Tenant entered into that certain Lease, dated June 15,
1994 (the "Original Lease"), pursuant to which Landlord is leasing the
Premises to Tenant, together with all fixtures, furniture, equipment and
supplies required to operate a card club, until it can obtain its own license
to operate a card club.
E. Landlord and Tenant now desire to amend and restate the Lease in its
entirety.
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto hereby agree as follows:
<PAGE>
Article 1.
LEASE OF PREMISES
-----------------
1.01 Premises
--------
(a) Subject to the terms and conditions and reservations provided
herein, Landlord hereby grants, demises and leases to Tenant, and Tenant
hereby hires from Landlord, the premises in the Center identified on Exhibit
"A-2" with all fixtures, furniture, equipment, supplies and all replacements
thereof necessary to operate a card club (collectively, the "Premises").
(b) Notwithstanding anything contained herein to the contrary, Tenant
hereby acknowledges and agrees that the exterior walls of the building of
which the Premises are a part, as well as the area above the finished ceilings
and the area below the finished floors, including the real property underlying
the Center, have not been demised or leased hereby and the use thereof,
together with the right to install, maintain, use, repair and replace pipes,
ducts, conduits and wires leading through, under or above the Premises are
hereby excepted and reserved unto Landlord, at Landlord's sole cost and
expense.
(c) This Lease is subject to the terms, covenants and conditions herein
set forth and each party covenants, as a material part of the consideration
for this Lease, to keep and perform each and all of said terms, covenants and
conditions by it to be kept and performed.
1.02 Landlord's Obligations.
----------------------
Prior to the Commencement Date, as that term is hereinafter defined,
Landlord shall, to Tenant's reasonable satisfaction, fully improve, equip,
fixture, furnish and provide all necessary supplies for the Premises, at
Landlord's sole cost and expense, to enable Tenant to operate a casino
<PAGE>
card club on the Premises in a first class manner. During the Term (as
hereinafter defined) hereof, Landlord, at its sole cost and expense, shall
replenish the equipment and supplies described on Exhibit "C" attached hereto
on an as needed basis in order for Tenant to operate its business on the
Premises as provided in this Lease "(but Tenant may, at its option and
expense, replace any of such equipment and supplies from other sources)." The
performance of each and every one of Landlord's obligations under this Section
1.02(a) shall, at all times during the Term, comply with any and all
Applicable Laws (as hereinafter defined) and shall be at Landlord's sole cost
and expense.
Article 2.
TERM; POSSESSION; ACCEPTANCE
----------------------------
2.01 Term
----
The term of this Lease shall commence on the date upon which Tenant opens
for business to the general public (the "Commencement Date") and shall
continue until midnight on the Expiration Date which is the date twenty seven
(27) months after the Commencement Date unless sooner terminated pursuant to
any provision hereof (the "Term" or "the term of this Lease"). Landlord and
Tenant acknowledge and agree that the Commencement Date occurred on July 1,
1994, and accordingly, the Expiration Date shall be September 30, 1996.
2.02 Termination Right
-----------------
(a) Tenant and Landlord agree that at any time after the date hereof,
Landlord shall hav e the right, in its sole discretion, to terminate this
Lease upon the giving of at least ten (10) days' prior written notice to
Tenant (or such shorter period as the parties may agree in writing) specifying
the effective date of such termination of this Lease.
(b) Tenant and Landlord agree that Tenant shall have the right, in its sole
discretion, to terminate this Lease,
<PAGE>
without liability to Landlord therefor, upon the giving of at least ten (10)
days' written notice to Landlord (or such shorter period as the parties may
agree in writing) specifying the effective date of such termination of this
Lease.
(c) The termination of this Lease by Landlord or Tenant pursuant to this
Article 2.02 or otherwise shall not operate to relieve Tenant of the
obligation to pay any accrued but unpaid Rent (as that term is hereinafter
defined) as of the effective date of termination. All such Rent shall be due
and payable on the effective date of termination and shall be paid without
deduction or offset.
2.03 Intentionally Deleted
---------------------
2.04 Acceptance of Premises; Premises Remodeling
-------------------------------------------
All improvements constructed and maintained by or under the direction of
Landlord or its Affiliates (as that term is hereinafter defined) shall be
constructed and maintained in accordance with "Applicable Laws," as that term
is defined in Section 5.03 hereof. Tenant agrees to accept the Premises
subject to all Applicable Laws regulating or in any manner applicable to any
use or occupancy thereof by Tenant (as limited by this Lease) and to all
liens, encumbrances, easements, rights of way, covenants, conditions,
restrictions, servitudes, licenses and other matters which have been disclosed
in writing to Tenant prior to the execution of this Lease. For the purposes
of this Lease, the term "Affiliate" means Landlord or any parent corporation,
subsidiary or brother-sister corporation of Landlord or any entity owned or
controlled, whether in whole or in part by Landlord or by any parent,
subsidiary or brother-sister corporation of Landlord, or any individual or
entity which owns or controls, whether in whole or in part, Landlord or any
parent corporation, subsidiary or brother-sister corporation of Landlord,
including, without limitation, Hollywood Park Operating Company.
<PAGE>
Article 3.
RENT
----
3.01 Monthly Rent
------------
(a) Except as otherwise expressly provided in Article 3.03 below,
Tenant shall pay to Landlord the amounts specified herein as Monthly Rent (the
"Monthly Rent"), in arrears on or before the last day of each calendar month
during the Term hereof, without any deduction or offset, prior notice or
demand, as the monthly rent for the Premises. Tenant's obligation to pay
Monthly Rent shall commence on the Commencement Date. If the Term shall
commence on a day other than the first day of a calendar month or shall end on
a day other than the last day of a calendar month, then the Monthly Rent for
the first and/or last partial calendar month of the Term, as the case may be,
shall be prorated on a per diem basis.
3.02 Initial Monthly Rent
--------------------
Commencing upon the Commencement Date and extending through June 30, 1995,
the Monthly Rent shall be Two Million Dollars ($2,000,000.00) per month. For
the period commencing July 1, 1995, the Monthly Rent shall be $1,500,000.
<PAGE>
3.03 Rent Arrearages
---------------
(a) All Rent accrued but unpaid as of the date hereof shall be paid by
Tenant strictly in accordance with the promissory note attached hereto as
Exhibit "D" and incorporated herein by this reference, except that if this
Lease terminates for any reason, all accrued but unpaid Rent shall be due and
payable upon the effective date of termination. Tenant's obligation to pay
the accrued but unpaid Rent as of the date hereof shall be evidenced by a
promissory note (the "Promissory Note") in the form attached hereto as Exhibit
"D". Until such Promissory Note has been paid in full, no amount shall be
paid or accrued (whether in the form of compensation, dividends, loans or
otherwise) directly or indirectly to or on behalf of Ed LeBaron or Don
Klosterman in excess of the amount determined pursuant to Section 3.03(b).
(b) So long as Tenant owes Landlord any Rent which is due but has not been
paid, Tenant shall not pay to Ed LeBaron and Don Klosterman any compensation,
dividend or other amount if the aggregate amount so paid during the Term of
this Lease exceeds the sum of (i) $83,333 multiplied by the number of months
elapsed after June 30, 1994, (ii) all amounts paid for the reimbursement of
expenses reasonably incurred by Messrs. LeBaron or Klosterman on behalf of
Tenant and (iii) all amounts properly paid or advanced to or on behalf of
Messrs. LeBaron and Klosterman pursuant to the Articles of Incorporation or
ByLaws of Tenant or any indemnification agreement between Tenant and Messrs.
LeBaron or Klosterman.
3.04 Legal Tender
------------
Rent and all other sums payable under this Lease must be paid in lawful
money of the United States of America, without demand, offset or deduction.
<PAGE>
3.05 Additional Rent; Rent Defined
-----------------------------
(a) Subject to the limitations of Section 18.03, in addition to the Monthly
Rent, Tenant shall also pay as additional rent ("Additional Rent"), without
deduction or offset, 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 Monthly Rent for
the Premises and Additional Rent.
3.06 Interest on Late Payments
-------------------------
Any Rents 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 the
maximum rate of interest then permitted to be charged 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.
<PAGE>
Article 4.
RECORDS AND ACCOUNTING
----------------------
4.01 Reports
-------
For so long as there remains any accrued but unpaid Rent, Tenant shall
submit to Landlord on or before the fifteenth (15th) day following the end of
each calendar month during the Term during which any accrual exists (including
the 15th day of the calendar month following the end of the Term, if
applicable), a written statement signed by Tenant, and certified by it (or if
Tenant is a corporation or a partnership, by a duly authorized corporate
officer or general partner of Tenant) to be true and correct, showing in
reasonable, accurate detail financial information reasonably requested by
Landlord. The certification of each such statement shall be satisfactory to
Landlord, acting reasonably, in scope and substance and without qualification
except as may be expressly permitted by Landlord, acting reasonably. The
statements referred to herein shall be in such form and style and contain such
details and breakdown as Landlord may reasonably require.
4.02 Landlord's Audit.
----------------
For so long as there remains any accrued but unpaid Rent, during regular
business hours and upon two (2) business days notice, Landlord or Landlord's
representatives may examine the books of account and related records of Tenant
during regular business hours. Landlord may, upon reasonable notice, cause an
audit of such books and records of Tenant to be made by a person or persons of
Landlord's selection. Tenant shall pay for the cost of the audit if the audit
reveals that statements made to Landlord are inaccurate by more than three
percent (3%) in Tenant's favor. Except to the extent required by law,
Landlord agrees to keep information acquired by it pursuant to this Section
4.02 confidential.
<PAGE>
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.
USE AND OPERATION OF PREMISES
-----------------------------
5.01 Specific Use of Premises
------------------------
Tenant shall use and occupy the Premises as a card club and for no other use
or purpose.
<PAGE>
5.02 Conduct of Business
-------------------
(a) Landlord and Tenant acknowledge that Tenant's obligation to operate a
business in conformance with this Article 5 is a material inducement to
Landlord to enter into this Lease, without which Landlord would not have
entered into this Lease. Accordingly, except as expressly provided elsewhere
herein, Tenant agrees to conduct business continuously at the Premises during
the entire Term of this Lease, except when prevented from doing so by reason
of the acts or omissions of Landlord or any Affiliate or any other tenant or
occupant of the Center or the Property, strikes, lockouts, casualty damage,
the order of any governmental agency having jurisdiction over the Premises
and/or the conduct of Tenant's business therein or other reasons (other than
financial inability) beyond Tenant's reasonable control or during such periods
that alterations or repairs are being made to the Premises which make it
impracticable to keep the Premises open. Tenant agrees that, commencing with
the Commencement Date and continuing for the remainder of the Term, Tenant
shall be open for business on a 24-hour a day basis. Tenant shall at all
times actively and diligently operate its business on the Premises in a
commercially reasonable manner.
(b) During the Term hereof, Tenant shall not, directly or indirectly,
operate, own, or have a material interest in any business similar to that
conducted on the Premises by Tenant located within a radius of fifty (50)
miles from the Center.
(c) In the event that Landlord consents to any subleasing, Tenant shall
cause all Subtenants to comply with all of the requirements of subsections (a)
and (b) of this Section 5.02 to the same extent as if each such Subtenant were
the Tenant hereunder.
(d) Tenant acknowledges that Landlord has made certain commitments to the
City of Inglewood regarding the operations to be conducted within the
Premises. Landlord and Tenant shall comply fully with all such commitments
including without
<PAGE>
limitation, those contained in the ordinances of the City of Inglewood
regarding the operation of a card club in the Premises. Landlord and Tenant
acknowledge that compliance with such obligations is a material inducement to
the other party to enter into this Lease without which the other party would
not enter into this Lease.
5.03 Compliance with Restrictions and Laws
-------------------------------------
Upon written notice thereof from Landlord to Tenant, Tenant shall comply
with all of the requirements of all covenants, conditions and restrictions of
record applicable to its use of the Premises and shall faithfully observe all
such covenants, conditions and restrictions. Each of Landlord and Tenant, to
the extent required to fulfill their respective obligations under this Lease,
shall comply with all federal, state and local laws, regulations, rules,
ordinances, zoning variances, conditional use permits and orders now in force
or which may hereafter be in force applicable to the Premises, the Center or
the Property or the respective conduct of Landlord and Tenant's business
therein or thereon ("Applicable Laws"), provided that Tenant is informed in
writing of any zoning variances, conditional use permits or orders. Tenant
shall cause any Subtenants to comply with and observe all such covenants,
conditions, restrictions and Applicable Laws which are applicable to Tenant by
the terms of this Lease.
<PAGE>
5.04 Prohibited Uses
---------------
Tenant shall not use the Premises or any part thereof for any purpose in
violation of any Applicable Law, or in a manner that will tend to create a
nuisance or tend to disturb or interfere with the quiet enjoyment of the
patrons or other tenants of the Center or tend to injure or damage the
reputation of the Center. Neither Landlord nor Tenant shall do anything which
would violate, suspend, void, cancel or serve to increase the premium rate of
or make inoperative any policy or policies of insurance at any time carried on
any property, buildings or other improvements in the Center or any part
thereof provided each party has received written notice thereof. Tenant shall
have the right to establish reasonable rules regarding the conduct of
Landlord's employees, invitees or customers while such individuals are present
in and about the Premises. Notwithstanding the foregoing, however, or
anything to the contrary contained herein, Tenant shall not have any liability
whatsoever for any prohibited use of the Premises described in this Section
5.04 by any employee, invitee or customer of Landlord or any Affiliate of
Landlord.
5.05 Restrictions on Activities
--------------------------
Tenant shall not:
(a) Use any portion of the Premises for storage or warehouse purposes except
as may be reasonably required for the storing of property to be used in the
immediate future in connection with Tenant's business on the Premises;
(b) Use any portion of the Premises as living quarters, sleeping apartments
or lodging rooms;
(c) Burn any papers, trash or garbage of any kind in or about the Premises
or any other part of the Center;
(d) Distribute handbills or other advertising matter in or about the
Premises or any other part of the Center without Landlord's prior written
consent;
<PAGE>
(e) Use any sidewalks, walkways or areaways or any of the "Common Areas" (as
such term is hereinafter defined) of the Center for display of any material;
(f) Other than monument and other exterior signage to be installed by
Landlord for the benefit of Tenant, place any fence, structure, building,
improvement, division rail, sign or other advertising or display device or
obstruction of any type or kind upon the Common Areas or any part thereof;
(g) Park, operate, load or unload any truck or other delivery vehicle within
the Center other than that portion thereof from time to time designated by
Landlord for such purpose, without Landlord's prior written consent; or
(h) Sell or otherwise provide any food or beverage service from the
Premises.
5.06 Rules and Regulations
---------------------
Tenant shall comply and shall use reasonable efforts to cause its
Subtenants, and its and their respective employees, agents, customers and
invitees to comply at all times with the Rules and Regulations attached hereto
as Exhibit "B". Landlord shall have the sole and exclusive right from time to
time to amend such Rules and Regulations and to make other and different
reasonable rules and regulations for the safety, care and cleanliness of and
the preservation of good order in the Premises and the other parts of the
Center, provided any such amendment shall not materially or adversely affect
Tenant's rights or obligations under this Lease. All such amended and
additional rules and regulations shall, after written notice thereof to
Tenant, be binding upon Tenant and shall become conditions of Tenant's tenancy
and covenants on the part of and to be performed by Tenant. In the event of
any conflict between the provisions of this Lease and the provisions of any of
such rules and regulations, the provisions of this Lease shall control.
<PAGE>
Article 6.
MAINTENANCE, REPAIRS and ALTERATIONS
------------------------------------
6.01 Landlord's Maintenance and Repair Obligations
---------------------------------------------
During the Term, Landlord, at its sole cost and expense (except as set forth
in Section 6.02 hereof), shall keep in first-class order, condition and repair
the Premises and the Common Areas (as that term is hereinafter defined) and
the foundations, exterior walls (excluding the interior surface of exterior
walls, and all windows, doors, and plate glass), downspouts, gutters and roof
of the building of which the Premises are a part, except for reasonable wear
and tear. Landlord shall also maintain, repair and replace, upon demand by
Tenant acting reasonably, and at Landlord's sole cost and expense, the
fixtures, furniture, supplies and equipment leased to Tenant pursuant to
Article 1 of this Lease.
<PAGE>
6.02 Tenant's Maintenance and Repair Obligations
-------------------------------------------
Tenant shall use due care with respect to the Premises in order to keep the
Premises in a safe, clean, sanitary, orderly and attractive condition. Unless
otherwise expressly indicated, all maintenance to the Premises shall be made
by Landlord. Tenant shall notify Landlord promptly in the event of the need
to make any repairs to the Premises and Landlord promptly shall make said
repairs. Notwithstanding anything to the contrary contained in this Lease, to
the extent the need for any maintenance or repair is the result of Tenant's
negligence or willful misconduct, the costs incurred by Landlord for said
maintenance or repair to the Premises, together with interest thereon at the
Agreed Rate from the date of payment thereof by Landlord, shall be deemed
Additional Rent hereunder and shall be payable by Tenant to Landlord promptly
upon Tenant's receipt of a written statement therefor. Landlord, at
Landlord's expense, shall arrange for the maintenance of plumbing, electrical,
heating and air conditioning and other mechanical systems for the Premises.
Tenant shall not be liable for the cost of any and all additions to or
alterations or repairs in and about the Premises which may be required by any
and all Applicable Laws now or hereafter in effect or for construction or
design defects or deficiencies or as a result of Landlord's breach of any of
its obligations under this Lease.
6.03 Damage to Premises
------------------
Except as otherwise provided in this Section 6.03, or elsewhere in this
Article VI, if the Premises are damaged and such damage was caused by fire or
other peril covered by Landlord's insurance, Landlord agrees to repair such
damage to the extent set forth in Section 6.05 hereof, and this Lease shall
continue in full force and effect.
If (a) the Premises are damaged as the result of any cause other than perils
covered by Landlord's insurance, or (b) the Premises are damaged as the result
of fire or other peril covered by Landlord's insurance, but the cost to repair
such
<PAGE>
damage, as determined by Landlord in good faith, shall exceed the insurance
proceeds available for such repair (treating any so-called "deductible" as
available insurance), then Landlord may, at Landlord's option, either (i)
repair such damage as soon as reasonably practicable at Landlord's expense (to
the extent set forth in Section 6.05 hereof), in which event this Lease shall
continue in full force and effect, or (ii) terminate this Lease by giving
written notice of termination to Tenant not later than thirty (30) days after
the date of occurrence of such damage. In the event Landlord duly elects to
terminate this Lease, this Lease shall be deemed to have been terminated as of
the date of occurrence of such damage.
If the Premises are damaged to the extent that Tenant is unable to operate a
first class card club therein and such damage cannot be repaired within sixty
(60) days from the date of damage, either party may terminate this Lease by
giving written notice to the other party no later than ten (10) days after the
date of occurrence of such damage. In the event either party duly elects to
terminate this Lease, this Lease shall be deemed to have been terminated as of
the date of occurrence of such damage.
6.04 Damage to Building or Other Premises
------------------------------------
Notwithstanding anything to the contrary contained in this Article VI, in
the event that (a) the building of which the Premises are a part shall be
damaged to the extent of thirty-three and one-third percent (33-1/3%) or more
of the then full replacement cost thereof (as estimated by Landlord in good
faith), whether or not the Premises are damaged, and whether or not such
damage is covered by Landlord's insurance, either Landlord or Tenant may, at
such party's option, terminate this Lease by giving written notice to the
other party of its election to do so not later than thirty (30) days after the
date of occurrence of such damage, in which event this Lease shall be deemed
to have been terminated as of the date of occurrence of such damage.
<PAGE>
6.05 Repair of Damage; Rent Abatement
--------------------------------
(a) If this Lease is terminated pursuant to any of the provisions of
Sections 6.03 or 6.04 hereof, the Monthly Rent, Additional Rents and other
payments provided for herein shall be paid by Tenant through the date of
damage, and advance rents and other payments made by Tenant to Landlord shall
be appropriately prorated through the date of termination.
(b) If this Lease is not terminated pursuant to any of the provisions of
Sections 6.03 or 6.04 hereof, Landlord shall, as soon as reasonably
practicable (and subject to (i) the requirements of Applicable Laws, (ii) the
provisions of any Landlord's mortgage (if any) concerning the application of
insurance proceeds and (iii) delays beyond Landlord's reasonable control,
including delays in the adjustment of insurance claims), restore and repair
the Premises to the same condition, to the extent practicable, they were in
immediately prior to the occurrence of the damage.
(c) If the Premises are damaged or destroyed by any casualty covered by
Landlord's casualty insurance and, by reason of such damage or destruction,
the use of the Premises for the conduct of the business theretofore carried on
in the Premises is materially impaired, and such condition continues for more
than three (3) days, then (i) Tenant's obligation to pay Monthly Rent shall
abate from the date of damage or destruction until the earlier of (A) the date
Tenant (or any Subtenant) reopens for business in the Premises, or (B) four
(4) days after the date that Landlord completes such repairs to the Premises
which Landlord is required to make pursuant to Section 6.05(b) hereof.
<PAGE>
6.06 Alterations; Improvements; Additions
------------------------------------
Tenant shall not make or permit the making of any alterations, improvements,
additions or installations ("Alterations") in, on or about the Premises
without Landlord's prior written consent and unless and until the drawings,
plans and specifications for such Alteration shall have been first submitted
in triplicate to and approved by Landlord and, if required, by any and all
mortgagees of Landlord.
Landlord may, as a condition to its consent pursuant to this Section 6.06,
require Tenant to furnish Landlord, prior to the commencement of any work that
could constitute the basis for a mechanic's lien on the Premises and before
any building materials are delivered to the Premises, with a bond by a
responsible surety company licensed to do business in California, in a form
and with a company satisfactory to Landlord, in an amount equal to one and
one-half times the estimated cost of the work to be done and the materials to
be supplied, such bond to remain in effect until all such costs shall have
been fully paid and the improvements fully insured by Tenant as herein
provided. Such bond, if required, shall secure completion by Tenant, or on
its default by the surety, of all work free from any and all liens of
contractors, subcontractors, materialmen, laborers or others and shall defend
and indemnify Landlord from and against any loss, damage or liability in any
manner arising out of or connected with such work. Landlord may also impose
additional reasonable conditions upon its consent pursuant to this Section
6.06, including, but not limited to, a requirement that any work be supervised
by a qualified engineer or architect approved by Landlord and that appropriate
"builder's risk" insurance be obtained.
Notwithstanding anything contained herein to the contrary, Landlord shall
have the absolute right to withhold its consent to any proposed Alteration
which is contrary to such design criteria for the Center which Landlord may
establish (and amend, from time to time, in Landlord's sole discretion) or
<PAGE>
which would affect the structural soundness or integrity of the building of
which the Premises are a part or which Landlord finds, in its sole discretion,
to be objectionable, distasteful or not in accord with the standards which
Landlord desires to maintain for the Center.
Any Alterations made in, on or about the Premises by or at the direction of
Tenant (or any Subtenant), shall be made and completed with due diligence, in
a good and workmanlike manner, in strict compliance with the requirements of
all Applicable Laws and all conditions of Landlord's consent and otherwise in
accordance with Landlord's design criteria for the Center. Tenant agrees to
carry such insurance as required by Section 7.02 hereof covering each and
every such Alteration.
So long as there exist any restrictions on the square footage of
improvements on the Property, Tenant shall not, under any circumstances, do
anything which would increase the square footage of the Premises.
6.07 Ownership of Improvements, Fixtures, Furnishings and Equipment
--------------------------------------------------------------
All improvements, alterations, additions and installations constructed,
installed, affixed or otherwise made in, on or about the Premises by or at the
direction of either Landlord or Tenant (or any Subtenant) at any time prior to
or during the term of this Lease, including, without limitation, any and all
carpeting, floor coverings, wall coverings, lighting and hardware fixtures,
window treatments and ceilings, trade fixtures whether or not permanently
affixed to the Premises, furniture, business equipment and stock in trade
paid for by Landlord, shall at once become a part of the realty, if applicable
and, in any event belong to Landlord, without any obligation on the part of
Landlord to compensate Tenant or any other person therefor.
<PAGE>
6.08 Mechanic's Liens
----------------
Tenant shall promptly pay 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, the Center and the Property 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 fifteen (15) days after written demand for such removal is made by
Landlord. If Tenant shall fail to discharge any such lien within such 15-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.
Except for Landlord's express obligations relating to the improvement,
maintenance and repair of the Premises, nothing in this Lease shall be deemed
to be, or construed in any way as constituting, the consent or request of
Landlord, express or implied, to or for the performance of any labor or the
furnishing of any materials for any construction, rebuilding, alteration or
repair of or to the Premises or any part thereof by any person or as giving
Tenant any right, power or authority to contract for or permit the rendering
of any services or the furnishing of any materials which might in any way give
rise to the right to assert any lien against Landlord's interest in any
property. 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 lien. 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 7.
INSURANCE, EXONERATION and INDEMNITY
------------------------------------
7.01 Liability Insurance
-------------------
At all times during the term of this Lease, and during any period of
occupancy of, or access to, the Premises by Tenant prior to the commencement
of the Term, Tenant shall, at Tenant's sole cost and expense provide and keep
in force (a) workers' compensation insurance policies as required by law for
all of Tenant's employees and (b) comprehensive general liability insurance
policies, in standard form (on an occurrence basis), protecting Tenant (and
naming Landlord and, if requested by Landlord, any mortgagee of Landlord, as
additional insureds) against liability for injury to or death of any person or
persons, or damage to property arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto and the usage of
the remainder of the Center by Tenant and its Subtenants and their agents,
employees and invitees. Such insurance shall be in the amount of not less
than $10,000,000 combined single limit per occurrence.
<PAGE>
7.02 Fire and Extended Coverage Insurance
------------------------------------
During the Term, Landlord shall procure and maintain in full force and
effect with respect to the Premises, a policy or policies of all risk
insurance (including sprinkler, vandalism and malicious mischief coverage, and
any other endorsements required by the holder of any fee or leasehold
mortgage) in an amount equal to at least 80% (and at Landlord's election up to
100%) of the full insurance replacement value (replacement cost new, including
debris removal, and demolition) thereof. During the Term, Tenant at its sole
cost shall procure and maintain in full force and effect a similar policy of
all risk insurance insuring all alterations and leasehold improvements paid
for by Tenant and all equipment, inventory, trade fixtures and other personal
property in or about the Premises for the full replacement cost thereof. In
addition, Landlord may elect to procure and maintain with respect to the
Premises earthquake/volcanic action and flood and/or surface water insurance,
including rental value insurance against abatement or a loss of rent in the
case of damage or loss covered under such earthquake/ volcanic and flood
and/or surface water insurance, in an amount up to 100% of the full insurance
replacement value (including debris removal and demolition) thereof.
Unless this Lease is terminated, as provided in Sections 6.03 or 6.04
hereof, all proceeds of Tenant's fire and extended coverage insurance shall be
held by the insurance carriers, or, at Tenant's option exercised by written
notice to such insurance carriers and to Landlord, by a trust company selected
by Tenant, and approved by Landlord, and shall be disbursed by such insurance
carriers or trust company in progress payments in reimbursement or payment of
the costs incurred in repairing or restoring the Premises. If this Lease is
terminated pursuant to Section 6.03 or 6.04 hereof, proceeds of insurance
payable with respect to property belonging to Landlord (including property
belonging to Landlord by reason of Section 6.07 hereof) shall be paid directly
to Landlord.
<PAGE>
7.03 Insurance Policies
------------------
All policies of insurance provided herein by Tenant shall be issued by
financially responsible insurance companies with a general policy holder's
ratings of not less than A, and financial ratings of not less than Class XII,
as rated in the most current available "Best's" Insurance Reports, and shall
name Tenant as insured and Landlord, and at the request of Landlord, any
mortgagee of Landlord, as additional insureds or loss payees. Such policies
shall further provide that they may not be cancelled by the insurer for
nonpayment of premiums or otherwise, or be revised in a manner so as to
decrease coverage thereunder, or be terminated or lapse of their own accord or
by their own terms until at least thirty (30) days after service by mail of
notice of the proposed cancellation upon all parties named in such policies as
additional insureds or loss payees, unless such cancellation is due to the
nonpayment of premiums, in which event only ten (10) days' notice shall be
required. All public liability, property damage and other casualty policies
shall contain a provision that one party, although named as an additional
insured or loss payee, shall nevertheless be entitled to recovery under said
policies for any loss occasioned to it by reason of the negligence of the
other party, and that Landlord or Tenant, as the case may be, shall be
entitled to the benefits of such insurance notwithstanding any willful act or
other misconduct by the other party or its agents or employees. Each
liability insurance policy shall include a "cross liability" endorsement,
providing coverage for claims brought by another insured under such policy.
All public liability, property damage and other casualty policies shall be
written as primary policies, not contributing with any coverage which Landlord
may carry. Tenant shall deliver to Landlord copies of the policies for all
the insurance required to be carried hereunder, or certificates evidencing the
existence and the amounts of such insurance, or renewals thereof or binders
thereto, if applicable, (a) at least ten (10) days prior to the date insurance
is required to be carried hereunder, (b) at least ten (10) days prior to the
expiration of any such policies, (c) within fifteen (15) days following any
change in the policy limits or coverage of any such policies. Tenant shall
permit Landlord to inspect the policies of insurance
<PAGE>
required by this Lease at all reasonable times, and, upon the Landlord's
request at any time, Tenant shall provide Landlord with satisfactory evidence
that such policies are in full force.
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 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 VII, (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 VII are satisfied.
<PAGE>
Tenant shall use reasonable efforts to obtain business interruption
insurance if economically feasible.
7.04 Waiver of Subrogation
---------------------
<PAGE>
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 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 7.04) upon the expiration of such
policy period. Nothing in this Section 7.04 shall be deemed to diminish in
any way the rights of Tenant pursuant to Section 2.02(a)
<PAGE>
hereof and any losses incurred by Tenant as contemplated above shall be deemed
Losses under Section 2.02(a).
7.05 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): any
failure by Tenant to perform any material obligation to be performed by Tenant
under the terms of this Lease; or 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 the terms of this Lease; (ii) any act or event occurring in,
upon or about the Property, the Center or the Premises conducted solely by the
Landlord, any Affiliate of Landlord, or any of its or their
<PAGE>
agents, employees, officers, directors or representatives; or (iii) 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, or directors. 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 Consent Required
----------------
Except as hereinafter provided in this Article VIII and Section 18.03,
Tenant shall not voluntarily, involuntarily or by operation of law assign,
transfer, mortgage, pledge, hypothecate or otherwise encumber or transfer
(collectively, a "Transfer") all or any part of Tenant's interest in this
Lease or in the Premises or sublet the whole or any part of the Premises, or
permit any other person, firm or corporation (a "Subtenant") to occupy by
license, concession or otherwise any portion of the Premises (collectively, a
"Subletting"), without first obtaining in each and every instance the prior
written consent of Landlord. Any Transfer or further subletting by a
Subtenant shall be considered a Subletting or Transfer hereunder and shall
require the prior written consent of Landlord. Consent to any type of
Transfer may be withheld in Landlord's sole discretion.
Any purported Transfer or Subletting without Landlord's prior written
consent shall be null and void and have no force or effect whatever and shall
constitute an incurable breach of this Lease.
<PAGE>
8.02 Indirect Transfers
------------------
If, at any time during the Term, Tenant is a partnership, the death,
insolvency, withdrawal, substitution, addition or change in the identity of
any general partner of Tenant (including, without limitation, any transfer of
any stock of any corporation which is a partner of Tenant) following the date
such partnership becomes the Tenant hereunder shall be deemed a Transfer
within the meaning of this Lease. If, at any time during the Term, Tenant is
a corporation, the transfer of the stock of Tenant to any person who is not as
of the date hereof a shareholder of Tenant shall be considered a Transfer for
purposes of this Lease whether such change occurs by reason of transfer,
redemption, issuance of additional stock, operation of law, or any other cause
whatever. Notwithstanding the foregoing, Tenant may not transfer any stock if
the proposed transferee is not compatible with the licensing, permitting,
regulatory and other governmental restrictions applicable to Tenant, Landlord
or Landlord's Affiliates.
8.03 Obligations of Transferees and Subtenants
-----------------------------------------
(a) Each person or entity obtaining ownership of the interest of Tenant
hereunder, or any portion thereof, by reason of a Transfer (a "Transferee"),
shall unqualifiedly agree in writing, for the benefit of Landlord, to perform
all of the obligations of Tenant under this Lease. Such agreement shall be in
form and substance satisfactory to Landlord and shall be delivered to Landlord
no later than the date of such Transfer.
(b) In connection with any Subletting, Tenant shall use only such form of
agreement with a Subtenant concerning such Subletting (a "Sublease") as shall
have been approved, as to form and substance, by Landlord, acting reasonably
and after approval, such Sublease shall not be amended or modified if any
material respect without the prior written consent of Landlord. Each
Subtenant shall, by reason of having entered into such Sublease, be deemed to
have agreed, for the benefit
<PAGE>
of Landlord (i) to the provisions specified in Section 10.05 hereof, and (ii)
to comply with each and every obligation to be performed by Tenant hereunder
(specifically including Section 5.02 hereof and this Article VIII), except
Tenant's obligation to pay Rent to Landlord. Concurrently with any Subletting,
Tenant shall provide Landlord with written notice of the name and address of
any Subtenant for the purpose of giving notices to such Subtenant.
8.04 Continued Liability; No Waiver
------------------------------
Any consent to any Transfer or Subletting which may be given by Landlord
shall not constitute a waiver by Landlord of the provisions of this Article,
or a consent to any other or further Transfer or Subletting, or, in the event
of a Subletting, a release of Tenant from primary liability for the full
performance by it of the provisions of this Lease. Notwithstanding any
Subletting, Tenant shall continue to be liable for the full performance of
each and every obligation under this Lease to be performed by Tenant,
regardless of whether Tenant is in possession of the Premises or has any power
or legal ability to perform such obligations. Notwithstanding any Transfer
(or multiple Transfers) the person named herein as Tenant (and any Transferee)
shall continue to be primarily liable in any and all events for the full
performance of each and every obligation under this Lease to be performed by
Tenant, and the obligations under this Lease of the person named herein as
Tenant and any and all Transferees shall be joint and several.
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
<PAGE>
exercise of eminent domain or while condemnation proceedings are pending (all
of which are herein called "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 as a result of a taking by
condemnation, the volume of Tenant's business is materially reduced, 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 earlier of the date the condemning
authority takes such title or possession (whichever first occurs) or the date
Tenant vacates the Premises. In the event of such termination, the provisions
of Section 2.02(a) shall apply.
Notwithstanding anything to the contrary contained in this Section 9.01, in
the event that (a) more than twenty-five percent (25%) of the floor area of
the building of which the Premises are a part, (b) more than fifteen percent
(15%) of the "Parking Area" (as such term is hereinafter defined), shall be
taken by condemnation, whether or not any portion of the Premises is taken,
then either Landlord or Tenant may, at such party's option, to be exercised by
written notice to the other party not later than ninety (90) days after the
date the condemning authority shall take title or possession, whichever first
occurs, terminate this Lease, in which event this Lease shall terminate as of
the date of such party's notice. In the event of such termination, the
provisions of Section 2.02(a) shall apply.
<PAGE>
9.02 Award
-----
In the event of a taking by condemnation, each of Landlord and Tenant shall
be entitled to the award attributable to their respective interests in this
Lease. Notwithstanding the foregoing provisions of this Section 9.02,
Landlord shall not be entitled to any award (a) for loss of or damage to
Tenant's (or any Subtenant's) trade fixtures and removable personal property
(except that any award for the fixtures, furniture and equipment owned by
Landlord and leased to Tenant pursuant to this Lease shall belong solely to
Landlord), (b) for damages for cessation or interruption of Tenant's (or any
Subtenant's) business, or (c) for the cost of removal or relocation of
Tenant's (or any Subtenant's) property or business.
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 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 and the building of which they are a part 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 and the other
occupants of the remaining portion of such building. Landlord shall indemnify
and hold Tenant harmless from and against any Losses by reason of a
condemnation.
<PAGE>
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 Monthly Rent, Additional
Rent or other payment required to be made by Tenant hereunder (including,
without limitation, payments of Monthly Rent pursuant to the Promissory Note),
as and when due, where such failure shall continue for a period of ten (10)
business days after written notice thereof from Landlord to Tenant.
(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 subsection (a) 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 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 by Tenant.
(d) The failure by Tenant to remain fully licensed as a "Card Club Operator"
in good standing at all times during the Term of this Lease, as a result of
the negligence or willful misconduct of Tenant.
(e) 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 thirty (30) days.
<PAGE>
(f) A general assignment by Tenant for the benefit of creditors.
(g) 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.
(h) 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.
(i) The attachment, execution or judicial seizure of 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.
(j) The admission in writing by Tenant of its inability to pay its
respective debts or perform its obligations as they become due.
(k) 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.
(l) 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.
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.
<PAGE>
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
<PAGE>
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 Monthly
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 Tenant's right to possession, and Landlord may
enforce 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.
Tenant's right to possession of the Premises shall not be deemed to have been
terminated by Landlord unless express written notice to such effect is given
by Landlord to Tenant, and Tenant's right to possession of the Premises shall
in no event be deemed terminated without such notice on account of acts of
maintenance or preservation of or efforts to relet the Premises by Landlord or
by reason of the appointment of a receiver upon the initiative of Landlord.
<PAGE>
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
---------------------------------
Except as expressly limited herein, 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.
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.
<PAGE>
10.06 Limitation on Landlord's Remedies; Personal Obligations of LeBaron
------------------------------------------------------------------
and Klosterman
--------------
(a) In consideration of the benefits accruing to it hereunder but subject to
Section 10.06(b), Landlord acknowledges, covenants and agrees that, in the
event of any actual or alleged failure, breach or default hereunder by Tenant,
the sole and exclusive remedy of Landlord shall be against the assets of
Tenant and not against the assets of any officer, director, employee, agent,
attorney, shareholder or partner of Tenant or of any partnership now or in the
future constituting Tenant and that:
(i) No partner, officer, director, shareholder, agent, attorney or
employee of Tenant (individually and collectively "Insider") shall be sued or
named as a party in any suit or action hereunder. It is understood and agreed
that, in the event of the bankruptcy of Tenant, Landlord will not make or
support any claim which seeks repayment by any Insider of amounts paid by
Tenant and, in the event any third party successfully makes such a claim,
Landlord agrees not to participate in or accept any share of any amount
recovered;
(ii) No judgment will be taken against any partner of Tenant or any
officer, director, shareholder, agent, attorney or employee of Tenant; and
(iii) The covenants and agreements contained in this Section 10.06(a) shall
be enforceable by Tenant and also by any partner of Tenant and any officer,
director, shareholder, agent, attorney or employee of Tenant.
(b) Section 10.06(a) to the contrary notwithstanding, Ed LeBaron and Don
Klosterman shall be personally liable, in an amount equal to their Pro Rata
Interest in Tenant, for any Rent owed but not paid for the period which begins
September 1, 1995 and ends on the first date they no longer own any equity or
voting interests in Tenant. This Section 10.06(b) shall in no way create any
personal liability for Messrs. LeBaron and Klosterman with respect to Rent
owed for
<PAGE>
any period before September 1, 1995 or after the first date they no longer own
any equity or voting interests in Tenant or, during the period after September
1, 1995 during which they own any equity or voting interests in Tenant, in an
amount in excess of their Pro Rata Interest. "Pro Rata Interest" shall mean
the ratio of the number of equity and voting securities of Tenant held by
LeBaron or Klosterman, as the case may be, to the total number of shares of
outstanding equity and voting securities of Tenant. Messrs. LeBaron and
Klosterman shall not be deemed to own or hold any equity or voting interest in
Tenant by virtue of their ownership of up to five percent of the outstanding
equity or voting securities of any publicly traded company.
Article 11.
LANDLORD'S DEFAULT; TENANT'S REMEDIES
-------------------------------------
11.01 Landlord's Default
------------------
The occurrence of any one of the following events shall constitute a default
of this Lease by Landlord:
(a) 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; 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.
(b) The failure by Landlord to observe or perform any of the covenants or
obligations under this Lease to be performed by Landlord where such failure
materially interferes with or adversely affects the operation of Tenant's
business, and where such failure shall continue for five (5) business days
after written notice from Tenant to Landlord.
<PAGE>
11.02 Tenant's Remedies
-----------------
In the event of Landlord's default under Section 11.01 then Tenant, 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, shall have all of the
following rights:
(a) Tenant shall have the right to terminate this Lease by giving written
notice of termination to Landlord;
(b) 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, at Tenant's option, shall be offset against future Rent or 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.
11.03 Limitation on Tenant's Remedies
-------------------------------
In consideration of the benefits accruing to it hereunder, Tenant
acknowledges, covenants and agrees that, in the event of any actual or alleged
failure, breach or default hereunder by Landlord, the sole and exclusive
remedy of Tenant shall be against the assets of Landlord and not against the
assets of any director, officer, shareholder, employee, agent, attorney or
partner of Landlord or of any partnership now or in the future constituting
Landlord and that:
(a) No partner of Landlord or any officer, director, shareholder, agent,
attorney or employee of Landlord shall be sued or named as a party in any suit
or action;
<PAGE>
(b) No judgment will be taken against any partner of Landlord or any
officer, director, shareholder, agent, attorney or employee of Landlord; and
(c) The covenants and agreements contained in this Section 11.03 shall be
enforceable by Landlord and also by any partner of Landlord and any officer,
director, shareholder, agent, attorney or employee of Landlord.
11.04 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, 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.
11.05 Payment of Rents
----------------
Tenant's payment of full or partial payment of Rent following any default of
Landlord under this Lease shall not constitute a waiver of such default.
Article 12.
MORTGAGE OF LANDLORD'S INTEREST
-------------------------------
12.01 Subordination
-------------
The rights of Tenant hereunder shall be subject and subordinate to the lien
or interest of any Landlord's mortgage but only upon execution and delivery to
Tenant of a subordination, non-disturbance and attornment agreement executed
by Landlord's mortgagee in form and substance reasonably acceptable to Tenant.
<PAGE>
12.02 Tenant's Obligations With Respect to Landlord's Mortgage
--------------------------------------------------------
Tenant shall at any time and from time to time, upon not less than twenty
(20) days' prior written request by Landlord, deliver to Landlord either or
both of the following:
(a) Such financial information concerning Tenant and Tenant's operations as
reasonably may be required by any mortgagee or prospective mortgagee under any
Landlord's mortgage; provided, however, that any such financial information
shall be required and used only for bona fide business reasons related to such
mortgage or the obtaining thereof; and
(b) An executed and acknowledged instrument amending this Lease in such
respect as may be reasonably required by any mortgagee or prospective
mortgagee under any Landlord's mortgage; provided, however, that any such
amendment shall not materially alter or impair any of the rights and remedies
of Tenant under this Lease.
12.03 Definition of Landlord's Mortgage and Landlord's Mortgagee
----------------------------------------------------------
As used in this Lease, the term "Landlord's mortgage" refers to each
mortgage or deed of trust which may in the future encumber, the Premises, the
Center or the Property, or any part thereof, and each lease of which Landlord
is the lessee which covers, or may in the future cover, the Premises or any
part thereof. As used in this Lease, 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
lease.
<PAGE>
Article 13.
COMMON AREAS
------------
13.01 Definition of Common Areas
--------------------------
As used herein, the term "Common Areas" shall mean and refer to all areas
from time to time located on or within the exterior boundaries of the Center
(whether above, below or at ground level and whether or not presently in
existence) which are not leased to tenants or offered for lease to tenants or
exclusively used by Landlord or Landlord's Affiliates or invitees of
Landlord's or Landlord's Affiliates' business operations (including the Race
Track, horse racing areas and the non-gaming businesses referred to in Section
18.03 hereof, all of which are excluded from the Common Areas). "Common
Areas" shall include, but are not limited to, walkways, parking areas,
driveways, escalators, elevators, delivery passages, loading areas, storage
areas, corridors, tunnels, bridges, all access and egress roads, courts and
malls, landscaped and planted areas and all buildings and structures on the
Property, whether now existing or hereafter created (excluding only the
interior portions thereof which are leased or offered for lease to tenants or
exclusively used by Landlord or Landlord's Affiliates and invitees of
Landlord's or Landlord's Affiliates' business operations (including the Race
Track, horse racing areas and the non-gaming businesses referred to in Section
18.03 hereof)), and all building systems which directly service the Center
(and no others) (including, but not limited to, electrical, heating and air
conditioning systems) but excluding any and all such building systems which
service, in whole or in part, the Premises. Landlord shall have the right to
make changes at any time and from time to time in the size, shape, location,
number and extent of the "Common Areas" or any of them, provided that such
changes do not materially interfere with the operation of Tenant's business on
the Premises.
<PAGE>
13.02 Maintenance of Common Areas
---------------------------
Subject to Article 6 hereof, Landlord shall maintain the Common Areas in
good order and condition during the Term hereof and in a manner consistent
with the operation of a first class card club.
13.03 Use of Common Areas
-------------------
Except as otherwise provided herein, except to the extent limited by
Landlord in its reasonable discretion, Tenant and its employees and invitees
shall be entitled to use the Common Areas during the Term hereof, in common
with Landlord and other persons authorized by Landlord from time to time,
subject to Landlord's right to close any or all of the Common Areas for
maintenance or to avoid the accrual of prescriptive rights or for any other
proper purpose; provided, however, that the foregoing shall not entitle
Tenant, its employees, agents or invitees to use any portion of the Common
Areas not generally open to the public.
<PAGE>
Article 14.
PARKING
-------
14.01 Parking Area
------------
Landlord shall supply an area or areas consisting of 2,000 parking stalls
(the "Parking Area") for the use by Tenant's customers in common with others,
and upon the conditions specified below, for use by employees of Tenant.
Landlord shall cause such Parking Area to be open for business on all days and
at all times during which the Premises are open for business; provided,
however, that Landlord may cause the Parking Area or portions thereof to be
closed at any time and from time to time when reasonably deemed necessary by
Landlord to avoid the acquisition by anyone of prescriptive rights therein or
to reflect the fact that portions of the center are closed. The Parking Area
or portions thereof may also be closed from time to time for maintenance,
repairs or construction or by reason of matters beyond the reasonable control
of Landlord, including, but not limited to, labor disputes, governmental
orders and acts of God. If Tenant requires more than 2,000 parking stalls for
use by its customers, Landlord shall provide such stalls to Tenant at
Landlord's expense.
14.02 Valet Parking Charges
---------------------
Landlord may impose a charge for valet parking in the Parking Area which
charge shall be determined by Landlord from time to time in the exercise of
its sole judgment and which amounts shall be retained by Landlord. The
charges applicable to parking shall be posted in the Parking Area. Landlord
shall cooperate with Tenant in the event Tenant elects to provide valet
parking to its patrons on a complimentary basis, provided Tenant promptly pays
the charges therefor.
<PAGE>
14.03 Validations
-----------
Landlord may establish a reasonable system for validating parking tickets
and may change or eliminate such system from time to time in its sole
discretion.
14.04 Employee Parking
----------------
(a) Landlord shall make available in a portion of the Parking Area or in
another area in reasonable proximity to the Center designated from time to
time by Landlord, a sufficient number of parking spaces for parking by
Tenant's employees. Tenant shall pay, as Additional Rent, monthly in arrears,
without deduction or offset, such charges for each such parking space as
Landlord shall determine and modify from time to time; provided, however, that
such monthly charges for employee parking shall not exceed the prevailing rate
for monthly parking charged by private owners of parking facilities in the
vicinity of the Center. Tenant shall not impose any charge upon its employees
for parking in the Parking Area. Tenant and its employees shall park their
cars only in those areas, if any, designated for that purpose by Landlord.
(b) Tenant shall cooperate with Landlord in implementing plans to reduce
automobile usage by employees at no cost or expense to Tenant.
<PAGE>
Article 15.
TAXES AND OTHER CHARGES
-----------------------
15.01 Tenant's Taxes
--------------
Tenant agrees that it will pay and discharge, punctually as and when the
same shall become due and payable without penalty, all personal property
taxes, excise taxes and all other governmental taxes, fees, impositions and
charges payable by Tenant of every kind and nature, whether or not now
customary or within the contemplation of the parties hereto, which shall be or
become due and payable under or by virtue of any law, statute, ordinance,
regulation or other requirement of any governmental authority, whether
federal, state, county, municipal or otherwise (all of such taxes, charges,
assessments and other governmental impositions being hereinafter collectively
referred to as "Tenant's Tax" or "Tenant's Taxes") which shall be levied,
assessed or imposed, or shall be or become liens, upon or against any personal
property of Tenant or any interest of Tenant therein or under this Lease.
Notwithstanding the foregoing provisions of this Section 15.01, nothing
contained in this Lease shall require Tenant to pay any franchise, estate,
inheritance, succession, capital levy or transfer tax of Landlord or any net
income or excess profits tax which is in fact personal to Landlord.
Article 16.
UTILITY AND OTHER SERVICES
--------------------------
16.01 Furnishing of Services
----------------------
Landlord shall arrange and pay for water, sewer, gas, electricity, light,
power, telephone and any other utility services necessary and appropriate to
the operations of Tenant's business on the Premises.
<PAGE>
Article 17.
SIGNS; DISPLAYS; ADVERTISING
----------------------------
17.01 Signs
-----
Subject to the requirements of Applicable Laws, Landlord shall affix and
maintain signage subject to the reasonable approval of Tenant.
17.02 Displays
--------
Tenant shall not install or use in or about the Premises any device or
advertising medium which may be heard, seen or experienced outside the
Premises, such as flashing lights, searchlights, loudspeakers, phonographs or
radio broadcasts.
17.03 Advertised Name
---------------
The name of the Center is "Hollywood Park". Landlord may change the name
of the Center at any time upon written notice to Tenant. Landlord, as a
material part of the consideration of this Lease, hereby grants to Tenant the
use of the name "Hollywood Park Casino" during the Term of this Lease. Tenant
shall not, however, acquire any property right in or to any name which
contains said word combinations of "Hollywood Park" as a part thereof. Any
permitted use by Tenant of the words "Hollywood Park" (or such other name for
the Center as Landlord may adopt) during the term of this Lease shall not
permit Tenant to use, and Tenant shall not use, such words either after the
termination of this Lease or at any other location.
<PAGE>
Article 18.
GENERAL PROVISIONS
------------------
18.01 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 Monthly 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
<PAGE>
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.
18.02 Landlord's Right of Entry
-------------------------
Provided that Landlord does not unreasonably interfere with the operation
of Tenant's business on the Premises, Landlord and its agents shall have the
right:
(a) To display the Premises to prospective tenants. If Tenant vacates
the Premises prior to the expiration of the Term, Landlord, at its sole cost
and expense, may from and after Tenant's vacation decorate, remodel, repair,
alter, improve or otherwise prepare the Premises for reoccupancy.
(b) To enter the Premises at any reasonable time for inspections, to
exhibit the Premises to others, such as prospective purchasers and insurance,
building and lender's inspectors, and for any purpose whatsoever reasonably
related to the safety, protection or preservation of the Premises or
Landlord's interest therein, without being deemed guilty of an eviction or
disturbance of Tenant's use and possession, provided that Landlord shall not
unreasonably interfere with Tenant's business operation.
(c) At any reasonable time and from time to time, to do any maintenance
or make any repairs, alterations, additions or improvements, whether
structural or otherwise, in or to the Premises or any other portion of the
building of which the
<PAGE>
Premises are a part or the Center but Landlord shall use best efforts to
minimize interruption to the operation of Tenant's business. Landlord shall
exercise its best efforts when making any repairs to minimize any disruption
of Tenant's business and shall attempt to schedule any repairs at times when
there are a minimum number of patrons on the Premises, provided the need to
make such repairs does not constitute an emergency.
Tenant shall deliver to Landlord all keys necessary to unlock all of the
doors in, on or about the Premises, except Tenant's vaults and safes, and
Landlord shall have the right to use any and all means which Landlord may deem
proper in order to obtain entry in an emergency.
18.03 Landlord's Installations, Access and Food Services
--------------------------------------------------
(a) Landlord, throughout the Term of the Lease, shall operate, at its
sole cost, non-gaming businesses in the building in which the Premises are
located, including, without limitation, dining services. Tenant agrees to
cooperate and assist Landlord with such businesses and acknowledges that
Landlord's right to operate such businesses are material inducements to
Landlord to enter into this Lease, without which Landlord would not have
entered into this Lease. If Tenant desires to offer any such services to its
patrons on a complimentary basis, Landlord and Tenant shall agree on
appropriate procedures to accomplish same. All dining and other non-gaming
services shall be operated by Landlord in a first-class manner.
(b) Landlord, at its sole cost, shall comply with all of the requirements
of all covenants, conditions and restrictions of and applicable to the
operations of the business referred to in subparagraph (a) above. In
conducting such businesses, Landlord shall not create a nuisance or disturb or
interfere with the quiet enjoyment of Tenant.
<PAGE>
18.04 Changes in the Center
---------------------
(a) From time to time and at any time during the Term, Landlord may add
or withdraw property to or from the Center. Any property so added shall
thereafter be subject to the provisions of this Lease and shall thereafter be
included in the terms "Center" and "Property" for all purposes hereof. Any
property so withdrawn by Landlord shall thereafter cease to be subject to the
provisions of this Lease and shall thereafter be specifically excluded from
the terms "Center" and "Property" for all purposes hereof. Landlord shall not
make any changes to the Center or the Property which materially interfere with
the operation of Tenant's business on the Premises.
18.05 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.
<PAGE>
18.06 Surrender of Premises; Holding Over
-----------------------------------
Subject to Landlord's obligations to maintain and repair the Premises,
Tenant agrees on the last day of the Term or on the earlier termination of
this Lease to surrender the Premises, in good order, condition and repair,
reasonable wear and tear excepted. Tenant acknowledges that upon termination
of this Lease (including without limitation pursuant to Section 2.02 hereof)
it is anticipated the Premises will be immediately occupied by another card
club operator with little if any disruption in operation and, as such,
Tenant's agreement to promptly return the Premises in good order is a material
inducement for Landlord's execution of this Lease.
If Tenant fails to surrender the Premises upon the termination of this
Lease, Tenant agrees to and shall indemnify and hold harmless Landlord from
and against any loss or liability, including costs and attorneys' fees,
resulting from such failure to surrender the Premises, including but not
limited to, any claims made by, or loss of rent from, any succeeding tenant
based on or resulting from such failure to surrender. Nothing contained
herein shall be construed as a consent to Tenant's occupancy or possession of
the Premises beyond the expiration or earlier termination of this Lease.
Tenant expressly acknowledges that except as set forth in Section ?, it
has no right express or implied to renew this Lease beyond the Term and that
absent a mutually executed extension agreement or a new Lease, Tenant shall
promptly vacate at the end of the Term and leave the Premises in good order as
provided in this Section 18.06.
<PAGE>
18.07 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, return receipt
requested, 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: Pacific Casino Management, Inc.
2220 Avenue of the Stars
Suite 2502
Los Angeles, California 90067
Attn: Donald Klosterman
With a copy to: Peter V. Leparulo, Esq.
Pillsbury, Madison & Sutro
725 S. Figueroa Street
Suite 1200
Los Angeles, California 90017
If to Landlord: Hollywood Park, Inc.
1050 So. Prairie Ave.
Inglewood, California 90301
Attn: G. Michael Finnigan
With a copy to: Sandra G. Kanengiser, Esq.
Irell & Manella
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
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
<PAGE>
delivered or two (2) business days after the date deposited in the United
States mail in accordance with this Section 18.07.
18.08 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.
18.09 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.
18.10 Short Form Lease
----------------
At the request of Landlord, Tenant agrees to join in the execution and
delivery of a short form memorandum of this Lease to be recorded in the
Official Records of Los Angeles County, California. The terms, covenants and
conditions of this Lease shall control over any such memorandum. In no event
shall Tenant have this Lease recorded without the prior written consent of
Landlord, which consent may be withheld in Landlord's sole and absolute
discretion.
<PAGE>
18.11 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.
18.12 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.
<PAGE>
18.13 Arbitration of Disputes
-----------------------
Any dispute or claim in law or equity arising out of this Lease shall be
decided by neutral binding arbitration in accordance with the rules of the
American Arbitration Association, and not by court action except as provided
by California law for judicial review of arbitration proceedings. Judgment
upon the award rendered by the arbitrator(s) may be entered in any court
having jurisdiction thereof. The parties shall have the right to discovery in
accordance with California Code of Civil Procedure, Section 1283.05. Tenant
expressly acknowledges and agrees that an action for unlawful detainer shall
not be subject to arbitration and in no event shall Landlord be precluded from
or delayed in initiating such an action by virtue of this Section 19.13.
18.14 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.
18.15 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.
18.16 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.
<PAGE>
18.17 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.
18.18 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.
18.19 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.
<PAGE>
18.20 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.
18.21 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.
18.22 Corporate Resolution
--------------------
If Tenant is a corporation, Tenant shall deliver to Landlord, 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.
18.23 Relationship to Original Lease
------------------------------
This Amended and Restated Lease supersedes and replaces the Original
Lease, from and after the date hereof, the original Lease shall be of no
further force or effect.
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as
of the day and year first above written.
LANDLORD: HOLLYWOOD PARK, INC.,
a Delaware corporation
By: /s/ G. Michael Finnigan
<PAGE>
Title:_________________________
TENANT: PACIFIC CASINO MANAGEMENT, INC.,
a California corporation
By: /s/ Edward LaBaron
Title: Chairman - CEO
<PAGE>
Exhibit 10.15
AMENDED AND RESTATED AGREEMENT RESPECTING
PYRAMID CASINO
This AMENDED AND RESTATED AGREEMENT (this "Agreement") is entered into as
of this 14 day of July, 1995, by and between HOLLYWOOD PARK, INC., a Delaware
corporation ("HPI" or "Buyer"), COMPTON ENTERTAINMENT, INC., a California
corporation ("CEI" or "Seller") and ROUBEN KANDILIAN, the sole shareholder of
Seller ("Shareholder"), with reference to the following facts and circumstances:
A. CEI has entered into an Amended and Restated Disposition and
Development Agreement, Agreement of Purchase and Sale, and Lease with Option to
Purchase (the "DDA") with The Community Redevelopment Agency of the City of
Compton (the "Agency") to lease and purchase certain property located in the
area known as the Alameda Auto Plaza in the City of Compton (the "City") as more
particularly described on Exhibits 1 and 2 to the DDA (the "Card Club Site").
B. CEI and each of its officers, directors and shareholders have been
licensed by the City to own and operate a card club to be known as the Pyramid
Casino or such other name as the parties may agree (the "Card Club") to be
located at the Card Club Site.
C. CEI and HPI have entered into an Agreement of Principle dated April
29, 1994, as amended (the "AIP") and an Agreement Respecting Pyramid Casino
dated December 5, 1994, as amended April 14, 1995, with respect to the
development, ownership and operation of the Card Club and now desire to amend
and restate this Agreement as provided herein.
NOW, THEREFORE, in consideration of these premises, the mutual agreements
and representations contained herein and other good and valuable consideration
the receipt and adequacy of which is hereby acknowledged, each party hereto
(consisting of Buyer, on the one hand, and Seller and Shareholder, on the
other), agrees as follows:
I. DEFINITIONS
FOR ALL PURPOSES OF THIS AGREEMENT, THE FOLLOWING ADDITIONAL DEFINITIONS
SHALL APPLY:
<PAGE>
1.1 "CARD CLUB OPENING" shall mean the opening of the Card Club for
business to the general public.
1.2 "CLOSING" and "CLOSING DATE" shall have the meanings ascribed
in Article IV.
1.3 "LEASE" shall mean the Lease to be entered into between HPI and
CEI pursuant to Section 2.3 in the form attached hereto as Exhibit A.
1.4 "LICENSE RIGHTS" shall mean CEI's City license to operate the
Card Club, as amended (the "License Amendment").
1.5 "LICENSE RIGHTS OPTION" shall have the meaning ascribed in
Section 2.2.
1.6 "PARTNERSHIP AGREEMENT" shall mean the Partnership Agreement or
the Limited Liability Company Operating Agreement, as the case may be, to be
entered into between HPI and CEI pursuant to Section 5.4.1 in the form attached
hereto as Exhibit B-1 and B-2, respectively. "PARTNERSHIP" shall mean the
general partnership or the limited liability company, as the case may be, of HPI
and CEI formed and/or governed by the Partnership Agreement.
1.7 "PLANS" shall mean the plans and specifications to construct
the Card Club heretofore submitted to the City for its approval by CEI.
1.8 "PURCHASED ASSETS" shall mean the Real Property Rights, the
Plans and all other assets, real or personal, tangible or intangible, pertaining
to the Card Club other than the License Rights.
1.9 "REAL PROPERTY RIGHTS" shall mean CEI's rights in and to the
Card Club Site, including its rights under the DDA.
II. PURCHASE, OPTION AND LEASE
2.1 PURCHASE AND SALE OF PURCHASED ASSETS. For the consideration
-------------------------------------
and subject to the terms and conditions contained herein, Seller shall sell,
convey, assign and deliver to Buyer at the Closing, and Buyer shall purchase and
accept the conveyance, assignment and delivery of, the Purchased Assets, on the
terms and conditions set forth herein.
2.2 LICENSE RIGHTS OPTION.
---------------------
2
<PAGE>
2.2.1 GRANT OF LICENSE RIGHTS OPTION. For the consideration
------------------------------
and subject to the terms and conditions contained herein, Seller shall grant to
Buyer at the Closing an option to purchase the License Rights (the "License
Rights Option") and Buyer shall purchase the License Rights Option on the terms
and conditions set forth herein.
2.2.2 TERM AND EXERCISABILITY. The License Rights Option
-----------------------
shall be exercisable by HPI or, at HPI's election, by the Partnership at any
time during the period commencing with the Closing Date and ending on the later
of (i) the fifth anniversary thereof or (ii) the Expiration Date of the Lease;
provided that the License Rights Option shall be exercisable only if at the time
- -------------
of exercise HPI is then qualified to be licensed by the State of California and
the City as an operator of a card club.
2.2.3 EXERCISE PRICE OF LICENSE RIGHTS OPTION. The exercise
---------------------------------------
price of the License Rights Option shall be Two Million Dollars ($2,000,000), of
which One Million Five Hundred Thousand Dollars ($1,500,000) is payable at the
time the License Rights Option is exercised, and the remaining Five Hundred
Thousand Dollars ($500,000) shall be applied from the purchase price of the
License Rights Option pursuant to Section 3.1.3. The exercise price shall be
paid upon the Card Club Opening, if HPI is then licensed as an operator of the
Card Club. If HPI is not licensed as an operator of the Card Club at the time
of the Card Club Opening, it shall pay CEI an extension fee of One Million Four
Hundred Ninety Nine Thousand Dollars ($1,499,000) upon the Card Club Opening and
the exercise price thereupon shall be reduced to Five Hundred and One Thousand
Dollars ($501,000), payable by application of the purchase price of the License
Rights Option as aforesaid and One Thousand Dollars ($1,000) upon exercise
thereof.
2.3 LEASE. At the Closing, CEI and HPI shall enter into the Lease.
-----
III. PURCHASE PRICE
3.1 PURCHASE PRICE OF PURCHASED ASSETS AND LICENSE RIGHTS OPTION.
------------------------------------------------------------
The purchase price ("Purchase Price") for the Purchased Assets and License
Rights Option shall be as follows:
3.1.1 REAL PROPERTY RIGHTS. Two Million Dollars
--------------------
($2,000,000).
3.1.2 PLANS. One Million Dollars ($1,000,000).
-----
3
<PAGE>
3.1.3 LICENSE RIGHTS OPTION. Five Hundred Thousand Dollars
---------------------
($500,000), which amount will be applied to the exercise price of the License
Rights Option at the time of exercise.
3.2 PAYMENT TERMS. The Purchase Price shall be paid as follows:
-------------
3.2.1 AT CLOSING. At the Closing, HPI shall pay CEI the
----------
following:
(a) $2,000,000 for the Real Property Rights; and
(b) $500,000 for the License Rights Option.
3.2.2 CARD CLUB OPENING. The remainder of the Purchase Price
-----------------
and the exercise price of the License Rights Option shall be paid on the date of
Card Club Opening as follows:
(a) $1,000,000 for the Plans; and
(b) $1,500,000 for the balance of the exercise price of
the License Rights Option, or $1,499,000 as a license extension fee, as
applicable pursuant to Section 2.2.3.
provided, however, that any advances made by HPI pursuant to Section 3.4 shall
- -----------------
be deducted from the payment made pursuant to this Section 3.2.2.
3.3 CEI REPRESENTATION. CEI represents and warrants that the
------------------
actual out-of-pocket expenses incurred by CEI in connection with the Card Club
equal or exceed the aggregate amount to be paid by HPI at the Closing pursuant
to Section 3.2.1 and has provided HPI an itemization of such expenses. HPI
shall have the right, at any reasonable time, to audit such expenses and to
obtain from CEI such additional information or documentation with respect
thereto as HPI shall reasonably request in order to confirm the proper
relationship of such expenses to the Card Club.
3.4 ADVANCES BY HPI. HPI has agreed to pay the following costs and
---------------
expenses of CEI on or prior to the Closing, which amounts will be treated as
advances to CEI of the amounts otherwise due and payable on Card Club Opening
pursuant to Section 3.2.2, and shall be deducted from the payment thereof:
4
<PAGE>
3.4.1 Attorneys' fees of Twenty-Six Thousand Dollars
($26,000) to Murray Kane, Esq.;
3.4.2 Consulting fees of Seven Thousand Dollars ($7,000) to
Kathy Head;
3.4.3 Attorneys' fees to Mitchell, Silberberg & Knupp of
Sixty-One Thousand Five Hundred Ninety-Two Dollars ($61,592); and
3.4.4 Twenty Thousand Dollars ($20,000) to CEI for
reimbursement of miscellaneous expenses.
IV. CLOSING
The closing of the transactions contemplated by Article II of this
Agreement (the "Closing") shall be held concurrently with the closing of the
transactions contemplated by the DDA, as specified in Section 1(c) thereof (but
no later than October 31, 1995 (the "Closing Date"), at _______________________
____________________________________________________________ California, subject
to postponement or acceleration as agreed upon in writing by Buyer and Seller.
V. OTHER AGREEMENTS
5.1 EQUITY CONTRIBUTION.
-------------------
5.1.1 It is expected that the aggregate cost of constructing,
developing and furnishing the Card Club (including the purchase price of the
Purchased Assets and the purchase and exercise price of the License Rights
Option) and related start-up matters will be approximately Twenty Million
Dollars ($20,000,000) (the "Equity Contribution"). Subject to the provisions of
Section 5.1.2, HPI agrees to make the entire Equity Contribution in installments
as needed. It is understood and agreed that all taxes, insurance or other
operating expenses incurred by HPI from the Closing Date to the commencement of
the Lease shall be part of and credited to HPI's Equity Contribution.
Notwithstanding the foregoing, CEI understands and agrees that certain other
investors previously approved by CEI may participate with HPI in making the
Equity Contribution. To the extent such other investors make an Equity
Contribution, they shall share pro-rata with HPI in all distributions to HPI
which relate to the Equity Contribution and shall have a pro-rata ownership
interest in HPI's interest in the Card Club Site and any improvements thereon.
Concurrently with such investment by any such other investor, HPI shall obtain
the agreement of such investor to be bound by all of the provisions of this
Agreement, specifically including the provisions of Section 10.2 with respect to
the
5
<PAGE>
transferability of such investors' interests hereunder. In such event, except
where the context otherwise requires, references to HPI in this Agreement and in
the Exhibits hereto shall include HPI and such other investors.
5.1.2 At CEI's option, any fees, costs or other expenses
which are due and payable prior to Card Club Opening, including any Periodic
License Fees (as hereinafter defined), may be paid by CEI and, to the extent
such amounts, when added to the amounts expended by CEI and accounted for
pursuant to Section 3.3 or otherwise approved in advance by HPI, exceed Five
Million Dollars ($5,000,000), shall be deemed an Equity Contribution made by
CEI. To the extent CEI has made such an Equity Contribution, it will share pro
rata with HPI in all distributions referable to the Equity Contribution and
shall have a pro-rata ownership interest in the Card Club Site and any
improvements thereon. If CEI does not elect to pay any such fees, costs or
other expenses itself, HPI shall pay such fees, costs or other expenses as part
of its Equity Contribution. For purposes of this Section 5.1.2, "Periodic
License Fees" shall mean the $12,500 quarterly license fee described in Section
2.B.1 of the City License and the "additional" Gross Revenue License Fees
required by Section 2.B.2(c)(ii) of the City License (i.e., the $5,000 per month
----
interest payment on the $125,000 accrual).
5.2 CONSTRUCTION OF CARD CLUB. Following the Closing and the
-------------------------
transfer of the Purchased Assets and the License Rights Option to HPI as
contemplated herein, HPI shall construct and furnish the Card Club pursuant to
the Lease in accordance with the Plans.
5.3 CARD CLUB OPENING; BUY-OUT PROVISIONS.
-------------------------------------
5.3.1 The parties shall use their best efforts to obtain all
necessary consents and approvals from the City, the California Attorney General
and any other applicable authority for the Card Club Opening as soon as
practicable following the construction and furnishing of the Card Club.
5.3.2 In the event the Card Club cannot be opened by CEI by
October 31, 1996, HPI shall have the right to own and operate the Card Club
itself if it can then be licensed, or to lease the Card Club to another Card
Club operator licensed by the City. If HPI cannot then be licensed or cannot
transfer the license to another operator which can operate the Card Club within
one hundred eighty (180) days after such date, then subject to Section 5.3.3
below, CEI shall have the right to acquire all of HPI's right, title and
interest to the Card Club Site and all improvements thereon, the Plans and the
License Rights Option for an amount equal to
6
<PAGE>
HPI's Equity Contribution, with no profit or interest payable to HPI. In such
event, CEI shall assume all remaining obligations of "Redeveloper" under the DDA
and shall cause Agency to fully release HPI from all obligations thereunder. If
HPI operates the Card Club itself or leases the Card Club to a third party
operator pursuant to this Section 5.3.2, then at such time as CEI or Shareholder
is licensed to operate the Card Club, CEI and HPI shall form the Partnership if
HPI is then licensed, or in the event HPI is not then licensed, CEI shall have
the right to operate the Card Club pursuant to the terms of the Lease upon the
expiration of the existing operating agreement with the third party operator.
Any lease of the Card Club to a third party operator by HPI hereunder shall be
terminable upon HPI's becoming licensed to operate the Card Club.
5.3.3 In the event the Card Club cannot be opened by CEI
because of the denial or revocation of CEI's state or City license, or in the
event of a material breach of this Agreement by CEI which is incapable of cure
(including a material breach of CEI's representations and warranties set forth
in Article VI) then HPI shall pay CEI any remaining balance of the Purchase
Price of the Purchased Assets, including but not limited to, the payment for the
Real Property Rights, the Plans and both the purchase price and exercise price
of the License Rights Option, whereupon all of CEI's rights and obligations
hereunder to the Card Club shall terminate and be of no further force or effect.
Thereafter, HPI shall have the right to own and operate the Card Club itself (if
then eligible pursuant to applicable state and City law) or to lease the Card
Club to another operator licensed by the City and to assign all necessary rights
and obligations to such other operator in substitution and in lieu of CEI.
5.4 LLC AGREEMENT; LEASE TERMINATION.
--------------------------------
5.4.1 CEI and HPI each agree at such time as HPI is licensed
as an operator of the Card Club under applicable California law and City
ordinances, the Lease shall terminate as provided therein and CEI and HPI shall
enter into the Partnership Agreement in substantially the form attached hereto
as Exhibit B-1 for the ownership and operation of the Card Club (or, if at such
time a limited liability company may legally operate a card club, a Limited
Liability Company Operating Agreement in substantially the form attached hereto
as Exhibit B-2). CEI and the Shareholder shall fully cooperate with HPI in its
efforts to be so licensed.
5.4.2 In the event that HPI is not licensed prior to the
expiration of the Lease term, then, at CEI's election:
7
<PAGE>
(i) the parties shall negotiate: (A) a new lease for
the continued operation of the Card Club on the same terms as the Lease (except
that the monthly rent shall equal the greater of the "Monthly Rent", as defined
in the Lease, or the "Fair Market Rental Value"); and (B) an extension of the
License Rights Option; or
(ii) CEI may acquire from HPI its rights to the Card
Club Site together with the improvements thereon for a purchase price equal to
the "Fair Market Sale Value" thereof. In such event, CEI will assume all
obligations of "Redeveloper" under the DDA and shall cause HPI to be fully
released by the Agency from all obligations under the DDA, and the License
Rights Option shall terminate in accordance with its terms. If other investors
have participated in HPI's Equity Contribution in the Card Club Site pursuant to
Section 5.1.1, and CEI elects to acquire HPI's rights under this clause (ii),
CEI also shall be entitled to acquire all rights of such other investors to the
Card Club Site and any improvements thereon together with HPI's rights.
5.4.3 For purposes of Section 5.4.2, the "Fair Market Rental
Value" and the "Fair Market Sale Value", as the case may be, shall be determined
as follows:
In determining the Fair Market Rental Value or the Fair
Market Sale Value, as the case may be, the parties shall negotiate in good faith
in order to reach agreement; and in the event the parties are unable to reach
agreement during the period that is not more than four (4) months and not less
than three (3) months prior to the expiration date of the Lease, ("Negotiation
Period"), the determination of Fair Market Rental Value or the Fair Market Sale
Value, as the case may be, shall be made by appraisal as provided in Section
5.4.4.
5.4.4 APPRAISAL PROCEDURE. The parties shall use their best
-------------------
efforts to complete the appraisal process within sixty (60) days after the
expiration of the Negotiation Period and shall instruct their appraisers to do
likewise.
(i) Each party shall, within ten (10) days following
the expiration of the Negotiation Period, appoint a licensed, disinterested
M.A.I. Appraiser having substantial experience with comparable buildings in the
County of Los Angeles (a "Qualified Appraiser") and give written notice of such
appointment to the other. If either party fails to notify the other of the
appointment of its Qualified Appraiser within the time period specified above,
then the Qualified Appraiser appointed shall be the sole appraiser to
8
<PAGE>
determine Fair Market Rental Value or the Fair Market Sale Value, as the case
may be;
(ii) In the event two (2) Qualified Appraisers are
chosen as herein provided, the Qualified Appraisers so chosen shall meet within
ten (10) business days after they are appointed as aforesaid, and, if within ten
(10) business days after such first meeting, the two (2) Qualified Appraisers
fail to come to a mutual determination as to the appropriate Fair Market Rental
Value or the Fair Market Sale Value, as the case may be, they themselves shall
appoint a third Qualified Appraiser, who shall be a competent and disinterested
person with qualifications similar to those required of the first two (2)
Qualified Appraisers as herein provided. In the event the first two (2)
Qualified Appraisers fail to agree upon and select a third Qualified Appraiser
within ten (10) days after the expiration of said ten (10) day period, the third
Qualified Appraiser shall be selected by the Presiding Judge of the Superior
Court for the County of Los Angeles and the parties shall not raise any
questions or objections as to such Judge's full power, jurisdiction, and
authority to select said Qualified Appraiser;
(iii) Within ten (10) days after appointment of the
third Qualified Appraiser, each of the three (3) Qualified Appraisers selected
shall state in writing his or her respective opinion as to the appropriate Fair
Market Rental Value or Fair Market Sale Value, as the case may be, supported by
the reasons therefor with counterpart copies to each party;
(iv) The Qualified Appraisers shall arrange for a
simultaneous exchange of such determinations promptly. The opinion which is the
furthest from the middle value shall be excluded and the Fair Market Rental
Value or Fair Market Sale Value, as the case may be, for purposes hereof shall
be the average of the remaining two (2) opinions and shall constitute the
decision of the Qualified Appraisers and be final and binding on the parties.
The Qualified Appraisers shall give written notice to the parties stating their
determination, and shall furnish to each party a signed copy of such
determination. The Qualified Appraisers shall have no power to modify the
provisions of the Lease.
(v) In the event of a failure, refusal or inability of
any Qualified Appraiser to act, a successor shall be appointed by the party who
originally appointed the Qualified Appraiser, but in the case of the third
Qualified Appraiser, the third Qualified Appraiser's successor shall be
appointed in the same manner as provided for appointment of the third Qualified
Appraiser. Each party shall pay the fees and expenses of the party's own
Qualified Appraiser and shall share equally the fees and expenses of the
9
<PAGE>
third Qualified Appraiser and all other expenses of the appraisal.
5.4.5 With the exception of an "Event of Default" made in bad
faith or the revocation of CEI's state or City license as a result of such bad
faith, no "Event of Default" under the Lease or termination of the Lease shall
act as a bar against CEI entering into the Partnership at such time as HPI can
be licensed. In the event of the termination of the Lease or the revocation of
CEI's state or City license as a result of CEI's bad faith, all of CEI's rights
and obligations hereunder to the Card Club shall terminate and be of no further
force or effect provided that HPI has paid CEI the full Purchase Price of the
Purchased Assets hereunder. In the event either party's license is revoked
after the Partnership has been formed, the rights and obligations of the parties
shall be determined in accordance with Section 2.2 of the Partnership Agreement.
5.4.6 In the event the Lease terminates for any reason other
than as provided in Section 5.4.5 above, CEI shall have the right, but not the
obligation, for a period of ninety (90) days following such termination, to
purchase a one-third (1/3) interest in HPI's interest in the Card Club, for a
purchase price equal to one-third (1/3) of HPI's total cost thereof.
Concurrently with CEI's purchase of such interest, CEI and HPI shall enter into
a partnership or limited liability company in form and terms mutually agreed
upon to own the Card Club Site and all improvements thereon and such partnership
or limited liability company shall assume all obligations of HPI as landlord
under HPI's lease with any third party operator. At such time as HPI is
licensed to operate the Card Club and the lease with the third party operator
terminates, HPI and CEI shall enter into the Partnership Agreement, with
appropriate changes to the Partnership Agreement relating to capital accounts
and distributions so that CEI shall be entitled to receive the same rate of
return on its purchased interest hereunder as HPI is entitled to receive on its
Initial Capital Account as provided in Section 5.2(a) of the Partnership
Agreement. Each of the parties hereto agree that if CEI elects to purchase such
interest hereunder, it will execute such further documents and take such further
action as may be necessary or appropriate to implement the foregoing.
5.5 EMPLOYMENT AGREEMENTS. CEI agrees that any employment
---------------------
agreements which are entered into with any individuals (including Shareholder)
for Card Club employment during the term of the Lease shall, by their terms,
terminate no later than the termination date of the Lease so that upon formation
of the Partnership, the Partnership may enter into whatever employment
arrangements it believes are desirable at
10
<PAGE>
such time. HPI acknowledges and agrees that it is intended that Shareholder will
be employed by the Partnership on mutually acceptable terms and that certain
other employees of CEI also may be employed by the Partnership.
5.6 OPTION FOR OTHER CARD CLUBS. CEI hereby grants HPI the right
---------------------------
and option (but not the obligation) during the term of the Lease and the
Partnership Agreement to participate with CEI and Shareholder in the ownership
of any card club in the State of California (including the City of South El
Monte and the City of Norwalk) in which CEI or Shareholder secure an opportunity
to own a majority interest (directly or through affiliated entities). Should
HPI elect to participate in any such opportunity, such participation shall be on
the following basis: (a) CEI will secure the site and license to operate the
card club in exchange for a one-third interest in the venture and reimbursement
of its costs and expenses plus an amount equal to two-thirds (2/3) of such costs
and expenses; and (b) HPI will provide up to one-half of the financing required
for land acquisition and construction of the card club in exchange for a two-
thirds (2/3) interest in CEI's interest in the venture. Should HPI elect to
participate in any such opportunity, the parties shall enter into either a lease
arrangement or a new partnership or limited liability company (depending on
whether or not HPI is then qualified to be licensed as a card club operator and
whether or not a limited liability company can then legally operate a card club)
substantially identical in form and substance to the Lease or Partnership
Agreement contemplated by this Agreement, as the case may be, whereupon HPI or
such partnership or limited liability company, as the case may be, shall avail
itself of such opportunity and, subject to the availability of the remaining
necessary financing, acquire ownership of such card club in its name.
Notwithstanding the foregoing, HPI shall not be under any obligation to offer
CEI or Shareholder the opportunity to participate in the ownership or operation
of any other card club in which HPI obtains an ownership interest.
5.7 GROSS REVENUE LICENSE FEE.
-------------------------
5.7.1 PAYMENT. CEI has previously paid the City an initial
-------
gross revenue license fee in the amount of One Million Five Hundred Thousand
Dollars ($1,500,000) as acknowledged by the City in Section 2.B.2(a) of the City
License and included in CEI's itemization of expenses pursuant to Section 3.3
hereof (the "Initial License Fee") and is obligated to pay an additional gross
license fee of Two Hundred Fifty Thousand Dollars ($250,000) upon Card Club
Opening (the "Additional License Fee"). CEI hereby agrees to pay the Additional
License Fee pursuant to the City License
11
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when due whether or not the City License has been assigned to HPI or the
Partnership.
5.7.2 REFUND. Pursuant to Section 2.B.2(e) of the City
------
License, if in any license year the gross revenue license fee paid by the holder
of the City License exceeds Three Million Dollars ($3,000,000), the City shall
refund the Initial License Fee and the Additional License Fee to CEI (but not to
any assignee). CEI and HPI agree that upon such refund:
(a) CEI shall retain the Additional License Fee and HPI
shall have no claim or rights thereto; and
(b) With respect to the Initial License Fee:
(i) If such refund is made to CEI at any time after
HPI has received all distributions contemplated by Section 5.2(a) of the
Partnership Agreement, such amount shall be remitted to the Partnership as part
of its operating income and no adjustments on account thereof shall be made to
the capital accounts of either of the Partners; and
(ii) If such refund is made to CEI at any time
prior to such time as HPI has received all distributions contemplated by Section
5.2(a) of the Partnership Agreement, CEI shall promptly remit the same to HPI,
and CEI shall have no further claims or rights thereto. In such event, the
amount of HPI's Equity Contribution (or HPI's Initial Capital Account after
formation of the Partnership) shall be adjusted accordingly.
VI. REPRESENTATIONS AND WARRANTIES OF
SELLER AND SHAREHOLDER
As an inducement for Buyer entering into this Agreement, each of Seller and
Shareholder, jointly and severally, represents and warrants as follows:
6.1 ORGANIZATION. Seller is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of California. Seller
has all necessary corporate power and authority to enter into, be bound by the
terms and conditions of, and perform its obligations under, this Agreement, and
to transfer the Purchased Assets and to grant the License Rights Option to Buyer
pursuant hereto.
6.2 SECURITIES OF CEI. All of the outstanding shares of capital
-----------------
stock of CEI (the "Shares") (i) are duly
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authorized, validly issued, fully paid and non-assessable, (ii) were issued in
compliance with all applicable state, federal and foreign securities laws, and
(iii) are owned beneficially and of record by Shareholder, free and clear of all
liens, charges, security interests, encumbrances or adverse claims of any nature
whatsoever. There are no outstanding securities convertible into, or any
options, warrants, rights, calls or other commitments of any nature relating to,
the shares of the capital stock or other securities of CEI.
6.3 AUTHORIZATION; NO CONFLICT. All requisite corporate action on
--------------------------
the part of Seller has been taken to authorize and approve the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Seller and Shareholder and constitutes a legal, valid and binding
obligation of Seller and Shareholder, and each instrument contemplated by this
Agreement, when executed and delivered by Seller and/or Shareholder, as the case
may be, in accordance with the provisions hereof, will be a legal, valid and
binding obligation of Seller and/or Shareholder, in each case enforceable
against Seller and/or Shareholder in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors' rights generally and by legal and equitable limitations on the
availability of equitable remedies). Neither the execution, delivery or
performance of this Agreement nor the consummation of the transactions
contemplated hereby will (i) conflict with or result in the breach of any
provision of the Articles of Incorporation or Bylaws of Seller, (ii) constitute
a default (or an event which, with notice or lapse of time or both, would
constitute a default) under the terms, conditions or provisions of any note,
bond, mortgage, indenture, license, lease, agreement or other material
instrument or obligation to which Seller or Shareholder is a party or by which
Seller or Shareholder is bound, (iii) result in the creation of any lien,
charge, security interest or other encumbrance upon the Purchased Assets or the
License Rights pursuant to the terms of any such note, bond, mortgage,
indenture, license, agreement or other material instrument or obligation, (iv)
violate any judgment, order, injunction, decree, or award of any court,
administrative agency or governmental body against, or binding upon, Seller or
Shareholder, or (v) constitute a violation by Seller or Shareholder of any law
or regulation of any jurisdiction applicable to Seller or Shareholder.
6.4 GOVERNMENTAL APPROVALS. Schedule 6.4 sets forth all approvals,
----------------------
authorizations, consents or orders or actions of any governmental authority
required to be obtained
13
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by Seller and/or Shareholder in connection with their execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby or
performance of the obligations undertaken herein. Except as set forth on
Schedule 6.4, 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 Seller or Shareholder for the execution and delivery
by Seller and Shareholder of this Agreement or the consummation of the
transactions contemplated hereby or for the operation of the Card Club.
6.5 OWNERSHIP OF PURCHASED ASSETS AND LICENSE RIGHTS. Seller has
------------------------------------------------
good title to the Purchased Assets and the License Rights free and clear of any
claim, lien, charge, security interest or encumbrance whatsoever and neither
Seller nor Shareholder has any legal obligation, absolute or contingent, to any
other person or entity to sell or transfer any interest in any portion of the
Purchased Assets or the License Rights. Upon Seller's transfer and sale of the
Purchased Assets to Buyer pursuant to this Agreement, Buyer will have good title
to all of the Purchased Assets, free and clear of any claim, lien, charge,
security interest or encumbrance whatsoever. Upon grant of the License Rights
Option by Seller to Buyer and the exercise thereof by Buyer (or the Partnership)
as provided herein (subject to any required State and City approvals), Buyer or
the Partnership, as the case may be, will have good and marketable title to all
of the License Rights, free and clear of any claim, lien, charge, security
interest or encumbrance whatsoever.
6.6 CARD CLUB LICENSE. Each of Shareholder, Seller and each of
-----------------
Seller's officers and directors is duly and validly licensed by the City to
operate and own the Card Club.
6.7 COMPLIANCE WITH LAWS. To the best of each of Seller's and
--------------------
Shareholder's knowledge, without independent investigation, this Agreement, the
Lease, the Partnership Agreement and all other instruments and agreements
contemplated hereby comply in all material respects with all applicable
requirements of applicable City ordinances.
6.8 FULL DISCLOSURE. No representation or warranty by Seller or
---------------
Shareholder in this Agreement or in any certificate or other document or
instrument furnished or to be furnished by Seller or Shareholder to Buyer or its
representatives pursuant hereto, contains or will contain any untrue statement
of a material fact or omits or will omit to state a material fact necessary to
make the statements made therein not misleading.
VII. REPRESENTATIONS AND WARRANTIES OF BUYER
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<PAGE>
As an inducement for Seller and Shareholder to enter into this Agreement,
Buyer represents and warrants as follows:
7.1 ORGANIZATION. Buyer is a corporation duly organized, validly
------------
existing and in good standing under the laws of the State of Delaware. Buyer
has all necessary corporate power and authority to enter into, be bound by the
terms and conditions of, and perform its obligations under, this Agreement.
7.2 AUTHORIZATION; NO CONFLICT. All requisite corporate action on
--------------------------
the part of Buyer has been duly taken to authorize and approve the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Buyer and constitutes a legal, valid and binding obligation of
Buyer, and each instrument contemplated by this Agreement, when executed and
delivered by Buyer in accordance with the provisions hereof, will be a legal,
valid and binding obligation of Buyer, in each case enforceable against Buyer in
accordance with its terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, moratorium, reorganization or similar laws
from time to time in effect which affect creditors' rights generally and by
legal and equitable limitations on the availability of equitable remedies).
Neither the execution, delivery and performance of this Agreement nor the
consummation of the transactions contemplated hereby will (i) conflict with or
result in the breach of any provision of the Certificate of Incorporation or
Bylaws of Buyer, (ii) constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under the terms, conditions
or provisions of any note, bond, mortgage, indenture, license, lease, agreement
or other material instrument or obligation to which Buyer is a party or by which
Buyer is bound, (iii) violate any judgment, order, injunction, decree or award
of any court, administrative agency or governmental body against, or binding
upon, Buyer, or (iv) constitute a violation by Buyer of any law or regulation of
any jurisdiction applicable to Buyer.
7.3 GOVERNMENTAL APPROVALS. Except to the extent that Buyer's
----------------------
participation is required for the approvals listed on Schedule 6.4, 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 this Agreement or the
consummation of the transactions contemplated hereby or for the operation of the
Card Club.
15
<PAGE>
7.4 COMPLIANCE WITH LAWS. To the best of Buyer's knowledge,
--------------------
without independent investigation, this Agreement, the Lease, the Partnership
Agreement and all other instruments and agreements contemplated hereby comply in
all material respects with all applicable requirements of applicable City
ordinances.
7.5 FULL DISCLOSURE. No representation or warranty by Buyer in
---------------
this Agreement or in any certificate or other document or instrument furnished
or to be furnished by Buyer to Seller or its representatives pursuant hereto,
contains or will contain any untrue statement of a material fact or omits or
will omit to state a material fact necessary to make the statements made therein
not misleading.
VIII. CONDITIONS TO OBLIGATIONS OF BUYER
The obligations of Buyer hereunder are subject, at its election, to the
satisfaction, at or prior to the Closing Date, of the following conditions:
8.1 CARD CLUB SITE. All conditions to the closing of the
--------------
transactions contemplated by the DDA as set forth in Section 2(b) thereof shall
have been satisfied or waived by HPI. All exceptions to title and other
contingencies to be approved by Redeveloper thereunder shall be acceptable to
and approved by HPI.
8.2 CONSENTS. There shall have been obtained all requisite
--------
consents of governmental or other regulatory agencies, foreign or domestic, and
of any other third parties, required to be received by or on the part of Buyer,
Seller or Shareholder in connection with the consummation of the transactions
contemplated hereby, including but not limited to any and all consents or
approvals of the City.
8.3 REPRESENTATIONS AND WARRANTIES. Seller's and Shareholder's
------------------------------
representations and warranties contained herein shall be true and correct in all
material respects, on and as of the Closing Date as though made on and as of the
Closing Date.
8.4 COMPLIANCE. Seller and Shareholder shall have performed and
----------
complied with all agreements, covenants and conditions required by this
Agreement to be performed or complied with by them prior to the Closing Date.
8.5 SUITS, PROCEEDINGS, INVESTIGATIONS. No suit, action or other
----------------------------------
proceeding shall be pending or, to the knowledge of Seller or Buyer, threatened,
before any court or governmental agency wherein an unfavorable judgment, decree
or
16
<PAGE>
order would prevent the carrying out of this Agreement or any of the
transactions or events contemplated hereby, or declare unlawful the transactions
or events contemplated by this Agreement or cause such transactions to be
rescinded, or would otherwise have a material adverse effect on the Purchased
Assets, the License Rights and/or the business of the Card Club.
8.6 OTHER DOCUMENTS. Seller and Shareholder shall have delivered
---------------
all such certified resolutions, certificates, documents and instruments with
respect to Seller as Buyer's counsel may reasonably request prior to the Closing
Date to carry out the intent and purpose of this Agreement and the form of all
such documents shall be satisfactory in all reasonable respects to Buyer and its
counsel.
8.7 INSTRUMENTS OF CONVEYANCE. Seller shall have executed and
-------------------------
delivered, or caused to be executed and delivered, to Buyer any necessary
instruments of conveyance for the transfer of the Purchased Assets and the grant
of the License Rights Option, and executed copies of all consents, if any, of
third parties which may be required for any assignment, transfer or recording
contemplated hereby, which instruments and consents shall be in form and
substance reasonably satisfactory to Buyer and its counsel.
IX. CONDITIONS TO OBLIGATIONS OF SELLER AND SHAREHOLDER
The obligations of Seller and Shareholder hereunder are subject, at its or
his election, to the satisfaction, at or prior to the Closing Date, of the
following conditions:
9.1 CARD CLUB SITE. All conditions to the closing of the
--------------
transactions contemplated by the DDA as set forth in Section 2(b) thereof shall
have been satisfied or waived by CEI. All exceptions to title and other
contingencies to be approved by Redeveloper thereunder shall be acceptable to
and approved by CEI.
9.2 GOVERNMENTAL CONSENTS. There shall have been obtained all
---------------------
requisite consents of governmental or other regulatory agencies, foreign or
domestic, and of any other third parties required to be received by or on the
part of Buyer, Seller or Shareholder in connection with the consummation of the
transactions contemplated hereby, including but not limited to any and all
consents or approvals of the City.
9.3 REPRESENTATIONS AND WARRANTIES. Buyer's representations and
------------------------------
warranties contained herein shall be true
17
<PAGE>
and correct in all material respects on and as of the Closing Date as though
made on and as of the Closing Date.
9.4 COMPLIANCE. Buyer shall have performed and complied with all
----------
agreements and conditions required by this Agreement to be performed or complied
with by it prior to the Closing Date.
9.5 SUITS, PROCEEDINGS, INVESTIGATIONS. No suit, action or other
----------------------------------
proceeding shall be pending or, to the knowledge of Seller or Buyer, threatened,
before any court or governmental agency wherein an unfavorable judgment, decree
or order would prevent the carrying out of this Agreement or any of the
transactions or events contemplated hereby, or declare unlawful the transactions
or events contemplated by this Agreement or cause such transactions to be
rescinded or would otherwise have a material adverse effect on the Purchased
Assets, the License Rights, and/or the business of the Card Club.
9.6 OTHER DOCUMENTS. Buyer shall have delivered all such certified
---------------
resolutions, certificates, documents and instruments with respect to Buyer as
Seller's counsel may reasonably request prior to the Closing Date to carry out
the intent and purpose of this Agreement and the form of all such documents
shall be satisfactory in all reasonable respects to Seller and its counsel.
X. RESTRICTIONS ON ISSUANCE AND TRANSFER
10.1 CEI STOCK.
---------
10.1.1 RESTRICTION ON ADDITIONAL ISSUANCES. Each of CEI and
-----------------------------------
Shareholder covenants and agrees that during the period from the date hereof
through the term of the Lease and the Partnership Agreement, except as permitted
by Section 8.02 of the Lease, CEI will not issue any additional shares of its
capital stock or other securities or grant any options, warrants, rights, calls
or other commitments of any nature relating to shares of capital stock or other
securities of CEI without the prior written consent of HPI.
10.1.2 RESTRICTION ON TRANSFER BY SHAREHOLDER. Shareholder
--------------------------------------
agrees that during the period from the date hereof through the term of the Lease
and the Partnership Agreement, except as permitted by Section 8.02 of the Lease,
he will not sell, transfer, convey or otherwise hypothecate any of the Shares
owned by him without the prior written consent of HPI.
18
<PAGE>
10.1.3 LEGEND OF CERTIFICATES. Concurrently with execution of
----------------------
this Agreement, CEI shall cause the certificates representing the Shares held by
the Shareholder to bear a legend substantially as follows:
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO CERTAIN TRANSFER RESTRICTIONS PROVISIONS CONTAINED IN AN
AGREEMENT BETWEEN THE HOLDER AND THE ISSUER HEREOF AND HOLLYWOOD PARK,
INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF
THE ISSUER. ANY TRANSFER OF SHARES IN VIOLATION OF SUCH PROVISIONS
SHALL BE NULL AND VOID AB INITIO."
---------
10.1.4 ADDITIONAL RESTRICTIONS; RIGHT OF FIRST REFUSAL.
-----------------------------------------------
Notwithstanding the foregoing, no issuance or transfer of Shares may be made
unless and until the issuee or transferee has obtained all required licenses and
approvals from the City and any other necessary or applicable licensing
authorities and has executed an agreement (i) to be bound by all provisions of
this Agreement, including a restriction on the further transfer of such shares
and (ii) granting a right of first refusal to HPI with respect to future
transfers of such Shares by such issuee or transferee in substantially the form
heretofore agreed upon by Shareholder and HPI. Any purported issuance or
transfer of Shares not permitted by this Agreement shall be void ab initio and
---------
of no effect.
10.2 HPI AND HPI INVESTORS. HPI agrees, on behalf of itself and
---------------------
each of the investors, if any, participating in HPI's Equity Contribution
pursuant to Section 5.1.1 (the "HPI Investors") that, during the period from the
date hereof through the terms of the Lease and the Partnership Agreement
(subject to the provisions of the Lease, the Partnership Agreement and
applicable law):
(a) FIRST OPPORTUNITY OFFER. Subject to the provisions of
-----------------------
Paragraphs (c) and (d) below, prior to any transfer by HPI or any of the HPI
Investors of its interest hereunder, it will first offer CEI the right to
purchase such interest (the "Transferable Interest") on the same terms and
conditions as HPI or such HPI Investor (the "Transferor") intends to sell such
interest, or on the same terms and conditions as the offer from a prospective
purchaser, as the case may be, (herein, the "First Opportunity Offer"). The
First Opportunity Offer, once made, shall constitute an irrevocable binding
offer by the Transferor to sell the Transferable Interest to CEI. CEI shall have
thirty (30) days after receipt of the First Opportunity Offer within which to
19
<PAGE>
accept same in writing. If CEI timely accepts the First Opportunity Offer, the
Transferor shall sell the Transferable Interest to CEI in accordance with the
terms and conditions of the First Opportunity Offer; provided, however, that
such sale shall be consummated within ninety (90) days of acceptance of the
First Opportunity Offer.
(b) SALES UNDER PURCHASE PRICE FLOOR. If CEI fails to timely
--------------------------------
accept the Transferor's First Opportunity Offer, CEI shall be deemed to have
rejected same, and the Transferor shall be free to sell the Transferable
Interest to any third party on any terms (subject to applicable restrictions in
any agreement amongst HPI and the HPI Investors); provided, however, that if the
sale price to such third party is more than ten percent (10%) lower than that
stated in the First Opportunity Offer (the "Purchase Price Floor"), then prior
to entering into a binding agreement with such third party for an amount below
the Purchase Price Floor, the transferor shall afford CEI five (5) business days
notice to agree, in writing, to purchase the Transferable Interest on the terms
offered by the third party, without any qualifications.
(c) LIMITATIONS ON TRANSFER BY HPI GROUP. Notwithstanding the
------------------------------------
foregoing, in no event shall the aggregate interests transferred by HPI and the
HPI Investors (collectively, the "HPI Group") to a third party pursuant to this
Section 10.2 exceed 49% of the total interests held by the HPI Group without the
prior written consent of CEI.
(d) PERMITTED TRANSFERS. Notwithstanding the foregoing, CEI
-------------------
acknowledges and agrees that (i) the restrictions on transfer by HPI contained
in this Section 10.2 shall not apply to the investment by the HPI Investors in
HPI's Equity Contribution prior to Card Club Opening and the resultant transfer
of a portion of HPI's interest hereunder to the HPI Investors pursuant to
Section 5.1.1 and (ii) each of the HPI Investors shall have the right, at any
time (subject to the provisions of the Lease, the Partnership Agreement and
applicable law) to transfer all or any portion of its interest hereunder to HPI
or, so long as HPI remains the Managing Partner or Member of the HPI Group, to
any other of the HPI Investors on any terms (subject to applicable restrictions
in any agreement amongst HPI and the HPI Investors) without any obligation to
offer such interest to CEI or to obtain its consent thereto.
XI. OTHER COVENANTS
11.1 ACTIONS WITH RESPECT TO CLOSING. Each party agrees to use his
-------------------------------
or its best efforts to bring about the
20
<PAGE>
satisfaction of the conditions precedent to the Closing, including satisfaction
of all conditions to the closing of the transactions contemplated by the DDA and
obtaining all necessary City and other consents and approvals, and to cause the
covenants and agreements contained in this Agreement to be satisfied and
performed hereunder by each of them.
11.2 EXPENSES. Seller and Shareholder, on the one hand, and Buyer,
--------
on the other hand, shall each bear their own direct and indirect expenses
incurred in connection with the negotiation and preparation of this Agreement
and the consummation and performance of the transactions contemplated hereby;
provided however, that HPI shall bear all reasonable expenses related to the
Card Club after the date of this Agreement, as approved in advance by HPI, other
than the costs incurred by Seller and Shareholder pursuant to Section 11.3 and
Seller's overhead expenses.
11.3 ATTORNEY GENERAL CONSENT. Seller and Shareholder each agrees
------------------------
to use his or its best efforts to obtain all necessary licenses and other
consents and approvals from the California Attorney General and other gaming
authorities for the ownership and operation of the Card Club prior to the Card
Club Opening.
11.4 COOPERATION. Each party hereto agrees, both before and after
-----------
the Closing, to execute any and all further documents and writings and perform
such other reasonable actions which may be or become necessary or expedient to
effectuate and carry out the transactions contemplated hereby.
11.5 ANNOUNCEMENTS. Except as required by applicable provisions of
-------------
the federal securities laws, each party agrees not to make, nor cause to be
made, any news releases or other public announcements pertaining to the
transactions contemplated hereby without first consulting the other party and
attempting to formulate a mutually satisfactory arrangement for such disclosure.
XII. TERMINATION
12.1 TERMINATION. Anything herein or elsewhere to the contrary
-----------
notwithstanding, this Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing Date:
12.1.1 By mutual consent of Seller, Shareholder and Buyer;
21
<PAGE>
12.1.2 By Buyer, if any of the conditions set forth in Section
8 shall have become incapable of fulfillment and shall not have been waived by
Buyer;
12.1.3 By Seller or Shareholder, if any of the conditions set
forth in Section 9 shall have become incapable of fulfillment and shall not have
been waived by Seller and Shareholder;
12.1.4 By Buyer, on the one hand, or Seller or Shareholder, on
the other, if the Closing has not occurred on or before October 31, 1995, and if
the failure to consummate such transactions on or before such date did not
result from the failure by the party seeking such termination to fulfill any
condition set forth in Section 8 or 9, as the case may be, which is a condition
precedent to the obligation of the other party to this Agreement to consummate
the transactions contemplated hereby;
12.1.5 By Buyer, on the one hand, or Seller or Shareholder, on
the other hand, upon a material breach of this Agreement provided that the party
seeking such termination shall not be in material breach of this Agreement and
if such breach shall continue for a period of fifteen (15) days after written
notice thereof; provided, however, that if the nature of such breach is such
that more than fifteen (15) days are reasonably required for its cure, then such
cure is commenced within said 15-day period and is thereafter diligently
prosecuted to completion, this Agreement may not be terminated hereunder by
reason of such breach.
12.2 MANNER AND EFFECT OF TERMINATION.
--------------------------------
12.2.1 Termination shall be effected by the giving of notice
to that effect by one party to the other.
12.2.2 If this Agreement is terminated pursuant to this
Article XII and the transactions contemplated hereby are not consummated, this
Agreement shall become null and void and of no further force and effect and
neither party shall be obligated to the other hereunder. Nothing contained in
this Section 12.2 shall relieve any party of liability for any breach of this
Agreement which occurred prior to the date of termination of this Agreement.
12.3 RIGHTS TO PROCEED. Notwithstanding anything contained in this
-----------------
Agreement to the contrary, if any of the conditions specified in Section 8 have
not been satisfied, HPI shall have the right to proceed with the transactions
contemplated by this Agreement without waiving any of its rights hereunder; and
if any of the conditions specified in Section 9 have not been satisfied, CEI
shall have the right to
22
<PAGE>
proceed with the transactions contemplated by this Agreement without waiving any
of its rights hereunder.
XIII. EQUITABLE REMEDIES; ARBITRATION
13.1 EQUITABLE REMEDIES. Seller, Shareholder and Buyer acknowledge
------------------
that the remedy at law for any breach, or threatened breach, of their respective
covenants to consummate the transactions contemplated hereby will be inadequate
and, accordingly, each of Seller, Shareholder and Buyer covenants and agrees
that, with respect to any such breach or threatened breach, the non-breaching
party 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 equitable and injunctive relief as may be
available.
13.2 ARBITRATION.
-----------
13.2.1 Any claim (regardless of the legal theory involved)
arising out of or relating to this Agreement, including, without limitation, its
validity, interpretation, enforceability or breach, which is not settled by
agreement between the parties (the "Dispute"), shall be submitted to a two-step
dispute resolution process involving, first, mediation before a retired jurist
from the panel of Judicial Arbitration & Mediation Services, Inc. or any
successor entity ("JAMS") followed, if necessary, by final and binding
arbitration before the same or, upon request of any party, another mutually
agreed upon jurist from said panel. The mediation process is to be considered
settlement negotiation for the purpose of all State and Federal rules protecting
disclosures made during such conferences from later being discovered or used in
evidence. The entire procedure is confidential, and no stenographic or other
record shall be made except to memorialize a settlement record. All conduct,
statements, promises, offers, views and opinions, oral or written, made in the
course of the mediation by any party or their agent, employee, or attorney, are
confidential and, where appropriate, are to be considered to be work product and
privileged. Such conduct, statements, promises, offers, views and opinions shall
not be discoverable or admissible for any purpose, including, impeachment, in
any litigation or other proceeding involving the parties; provided, however,
that evidence otherwise discoverable or admissible is not excluded from
discovery or admission in evidence simply as a result of it being used in
connection with the settlement process. These alternative dispute resolution
proceedings shall be administered by and conducted in conformity with the then
obtaining Rules of Practice and Procedure for the Arbitration of Commercial
Disputes of JAMS, except as such Rules of Practice and Procedure are expressly
modified by the
23
<PAGE>
provisions of this Paragraph. A Dispute shall be deemed to include any issue or
question regarding whether any matter submitted by a party to arbitration is
arbitrable within the scope of this Section 13.2. Each of the parties hereto
acknowledges and agrees that the use of these alternative dispute resolution
proceedings necessarily results in the waiver of the party's right to a jury
trial and of its right to appeal under standard appellate procedures; however,
nothing herein shall bar a party from seeking provisional relief from a court in
aid of these proceedings.
13.2.2 Either HPI or CEI may initiate arbitration of a Dispute
by providing written notice to the other party of a demand for arbitration. The
party initiating the arbitration shall file a copy of the demand therefor with
the Los Angeles regional office of JAMS, not later than one business day
following the day on which written notice of the demand is provided to the
responding party. The Dispute shall be submitted to a single arbitrator (the
"Arbitrator") chosen by the parties from the JAMS panel of arbitrators, so long
as the person chosen meets the qualifications set forth below. If the parties do
not, for any reason, mutually select the Arbitrator from the JAMS panel within
five business days after the filing of the demand for arbitration, either party
may submit a written request to JAMS for a list of five persons qualified to
serve as the Arbitrator. A person shall be deemed qualified to serve as the
Arbitrator if such person is (a) impartial; (b) a lawyer or retired judge; and
(c) willing and able to conduct the arbitration in accordance with the
provisions of this Section 13.2. A copy of this Section 13.2 shall be included
with the request submitted to JAMS. Within three business days after the last
party actually receives the list from JAMS, the parties (or their authorized
representatives) shall meet and take turns striking names from the list, with
the party striking first chosen by a coin toss, until one name remains. The
person whose name remains on the list shall serve as the Arbitrator. If the
parties do not, for any reason, meet to strike names from the list within the
foregoing period, the Arbitrator shall be selected by JAMS within three business
days after the expiration of the foregoing period, and the selection of the
Arbitrator by JAMS shall be final and binding and shall not be subject to
challenge for any reason whatsoever. Within five business days after the
selection of the Arbitrator, the arbitration shall be conducted in Los Angeles,
California. The award, which shall be made in writing and shall set forth in
general the reasons therefor, shall be a final and binding determination of the
Dispute and judgment thereon may be entered by any court of competent
jurisdiction. Each party shall bear such party's own attorney's fees and
expenses in connection with the arbitration and shall bear one-half of the
24
<PAGE>
Arbitrator's fees and expenses and the cost of a transcript of the arbitration
proceedings.
13.2.3 In any arbitration proceeding hereunder, the parties
hereto hereby EXPRESSLY, KNOWINGLY AND VOLUNTARILY FULLY AND FINALLY WAIVE AND
RELINQUISH any and all provisions of, and rights and benefits that may arise
under, Section 1281.9 of the Code of Civil Procedure of the State of California
(the "Statute") and hereby DISCHARGE AND EXONERATE any person(s) proposed for
nomination as neutral arbitrator(s) from any duty to comply with any of the
provisions of the statute in any such arbitration proceeding hereunder.
In connection with such waiver, relinquishment,
exoneration and discharge, the parties acknowledge that they have read and are
familiar with the provisions of the Statute and have had adequate opportunity to
consult with legal counsel with respect thereto and with respect to any other
pertinent provisions of law. All parties, with the advice of their respective
legal counsel, agree that the Statute is unnecessary and burdensome as to them
and that it is in their best interests to enter into this Agreement, so that the
arbitration process provided for by this Agreement shall proceed as if the
Statute did not exist.
However, this waiver, relinquishment, exoneration and
discharge is not intended to apply to any judicial appointment of arbitrators,
nor is it intended to discharge or exonerate any potential arbitrator from any
other duty imposed by law or equity, including without limitation, the
disclosure of any information relating to the bias or interest or potential bias
or interest of the potential arbitrator.
XIV. MISCELLANEOUS
14.1 ENTIRE AGREEMENT. This Agreement, including the Lease, the
----------------
Partnership Agreement and other agreements specifically referred to herein,
constitutes the entire agreement between the parties and supersedes all prior
agreements, representations, warranties, statements and understandings, whether
oral or written, with respect to the subject matter hereof.
14.2 NOTICES. All notices, demands, elections, or requests provided
-------
for or permitted to be given pursuant to this Agreement must be in writing. All
notices, demands, elections, and requests shall be deemed to have been duly
given on the date delivered personally or on the date of receipt if sent by
overnight delivery services, facsimile transmission, or registered or certified
U.S. Mail with return
25
<PAGE>
receipt requested, to the following addresses, or such other addresses as may be
subsequently designated in writing and delivered to the other parties hereto:
To HPI:
Hollywood Park, Inc.
1050 S. Prairie Avenue
Inglewood, CA 90301
Attention: G. Michael Finnigan
President, Gaming and
Entertainment Division
Fax: (310) 673-2582
with a copy to:
Sandra G. Kanengiser, Esq.
Irell & Manella
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Fax: (310) 203-7199
To CEI and Shareholder:
Compton Entertainment, Inc.
P. O. Box 90038
City of Industry, CA 91715-0038
Attention: Rouben Kandilian
President
Fax: (818) 333-7754
with a copy to:
Jerry Neuman, Esq.
Mitchell, Silberberg & Knupp
11377 West Olympic Blvd.
Los Angeles, CA 90064
Fax: (310) 312-3100
14.3 GOVERNING LAW; ATTORNEYS' FEES. This Agreement and the rights
------------------------------
and obligations of the parties hereunder, shall be interpreted, construed, and
enforced in accordance with the laws of the State of California without regard
to principles of law (such as "conflicts of laws") that might make the law of
some other jurisdiction applicable. In the event any legal action or
arbitration is instituted to construe or enforce this Agreement or the rights or
obligations of any party, the prevailing party shall be entitled to reasonable
attorneys' fees, costs and expenses incurred in such legal action. Attorneys'
fees incurred in enforcing any judgment in respect of this Agreement are
recoverable as a separate item. The preceding sentence is
26
<PAGE>
intended to be severable from the other provisions of this Agreement and to
survive any judgment and, to the maximum extent permitted by law, shall not be
deemed merged into any such judgment.
14.4 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties and their respective successors and
assigns. Except as expressly provided in Article X hereof, neither this
Agreement nor any of the rights hereunder shall be assignable by HPI, CEI or
Shareholder without the prior written consent of the other party. No such
assignment shall relieve the parties hereto of his or its obligations hereunder.
14.5 AMENDMENTS, SUPPLEMENTS. This Agreement may be amended or
-----------------------
supplemented at any time by the mutual written consent of the parties.
14.6 WAIVERS. Either party may, by written notice to the other, (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 document 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 the
exercise of rights or other indulgence.
14.7 EXHIBITS AND SCHEDULES. All exhibits annexed hereto, and all
----------------------
schedules referred to herein, are hereby incorporated in and made a part of this
Agreement as if set forth in full herein.
14.8 CAPTIONS. All section titles or captions contained in this
--------
Agreement or in any schedule or exhibit annexed hereto or referred to herein are
for convenience only, shall not be deemed a part of this Agreement and shall not
affect the meaning or interpretation of this Agreement. All references herein
to sections shall be deemed references to such parts of this Agreement, unless
the context shall otherwise require.
27
<PAGE>
14.9 SEVERABILITY. If any provision of this Agreement or the
------------
application thereof to any person or circumstances shall be held to be invalid
or unenforceable to any extent, the remainder of this Agreement and the
application of such provision to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law.
14.10 NO THIRD PARTY BENEFICIARIES. Nothing contained in this
----------------------------
Agreement is intended to and nothing contained herein shall be interpreted to
confer on any party not a party hereto or a successor or assign thereof the
rights of a third party beneficiary.
14.11 EXECUTION REPRESENTATIVE. Each person executing this Agreement
------------------------
on behalf of a party warrants and represents that he has full right, power, and
authority to enter into this Agreement on behalf of such party and to bind such
party to the terms and provisions thereof.
14.12 COUNTERPARTS. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
14.13 CONFLICT WITH AIP. In the event of any conflict between this
-----------------
Agreement and the AIP, this Agreement shall control.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first written above.
COMPTON ENTERTAINMENT, INC.
("CEI" or "Seller")
By: /s/ Rouben Kandilian
-----------------------
Rouben Kandilian,
President
/s/ Rouben Kandilian
-----------------------
ROUBEN KANDILIAN
("Shareholder")
HOLLYWOOD PARK, INC.,
("HPI" or "Buyer")
28
<PAGE>
By: /s/ G. Michael Finnigan
----------------------------
G. Michael Finnigan
President, Gaming and
Entertainment Division
29
<PAGE>
SCHEDULE 6.4
CONSENTS AND APPROVALS TO BE OBTAINED BY
----------------------------------------
SELLER AND SHAREHOLDER
----------------------
1. City approval of transfer of License Rights.
2. Approval of the City and the Community Redevelopment Agency of the City of
the transfer of the Real Property Rights.
3. Approval of the Attorney General of the State of California of the
Agreement respecting Pyramid Casino, the Lease and the Partnership
Agreement, and the rights and obligations of the parties thereunder and
under all ancillary agreements and documents.
4. Approval and licensing of CEI and Shareholder by California Attorney
General.
5. Building permits, entitlements, etc. necessary for construction of the Card
Club pursuant to the DDA and the Plans.
30
<PAGE>
Exhibit 10.16
AMENDED AND RESTATED
--------------------
DISPOSITION AND DEVELOPMENT AGREEMENT, AGREEMENT OF
---------------------------------------------------
PURCHASE AND SALE, AND LEASE WITH OPTION TO PURCHASE
----------------------------------------------------
between
THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF COMPTON,
a public body, corporate and politic,
and
COMPTON ENTERTAINMENT, INC.,
a California corporation
Walnut Industrial Park Redevelopment Project
AMENDED AND RESTATED
--------------------
DISPOSITION AND DEVELOPMENT AGREEMENT, AGREEMENT OF
---------------------------------------------------
PURCHASE AND SALE, AND LEASE WITH OPTION TO PURCHASE
----------------------------------------------------
THIS AMENDED AND RESTATED DISPOSITION AND DEVELOPMENT AGREEMENT (this
"DDA" or "Lease") is made as of this 4th day of April, 1995, by and between the
COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF COMPTON, a public body corporate
and politic ("Agency") and COMPTON ENTERTAINMENT, INC., a California corporation
("Redeveloper").
RECITALS
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<PAGE>
A. The purpose of this DDA is to effectuate the Agency's Redevelopment Plan,
as amended (the "Redevelopment Plan") for the Walnut Industrial Park Project
Area (the "Project Area") in the City of Compton (the "City") by facilitating
the development, rehabilitation and operation of all or some portion of an
existing hotel structure (the "Hotel") and entertainment center (the
"Entertainment Center") containing one or more restaurants and a card club (the
"Card Club"), and parking (and which may contain a nightclub/sports lounge, gift
shop, meeting facilities/theater, corporate business lounge, and assorted
concession venues), on a parcel of real property of approximately 24.45 acres
(the "Property") located within the Project Area. The Property is legally
described in Exhibit 1 attached hereto, and is depicted on the Site Plan
attached hereto as Exhibit 2.
B. Agency is the owner of the Property.
C. Redeveloper desires to purchase a portion of the Property and to lease
the remainder of the Property for the purpose of developing and operating the
Hotel and Entertainment Center thereon.
D. Agency desires to lease the Property to Redeveloper in accordance with
the terms and conditions set forth hereinbelow.
E. The Property contains four elements:
1. A portion of the Property (the "Convention Center Parcel") currently
improved with a convention center and parking structure, including the
underlying land, all of which is subject to easements for access to, support of
and parking for the Hotel Parcel.
2. A portion of the Property (the "Hotel Parcel") consisting of a
parcel of air space which includes a nine (9) story hotel containing 290 guest
rooms and ancillary areas such as lobbies, restaurant, kitchen, bars, commercial
areas and the like.
3. A portion of the Property (the "Parking Parcels") will be improved
with parking to support the Hotel and the Entertainment Center.
4. A portion of the Property consists of additional land (the
"Expansion Parcels") upon which Redeveloper shall have the right to expand by
construction of an additional casino or card club.
The Hotel Parcel, the Parking Parcels and the Expansion Parcels are
referred to herein collectively as the "Leasehold Parcels" or the "balance of
the Property."
F. This DDA consists of an agreement of purchase and sale of a portion of
the Property, a lease of the balance of the Property to Redeveloper and, if
Redeveloper complies with the terms thereof, an option to purchase the balance
of the Property.
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<PAGE>
G. The parties hereto are parties to that certain Disposition and
Development Agreement dated as of December 10, 1992, concerning real property
adjacent to the Property (the "Prior DDA"). By this DDA, the parties shall
amend and restate such Disposition and Development Agreement on the terms
provided herein.
H. Redeveloper has obtained a license (the "License") from the City of
Compton ("City") to operate within the City of Compton a Card Club pursuant to
Section 9-10 of the Compton Municipal Code, on the terms and conditions set
forth in the City's Resolution No. 17,087. Such license has been extended and
amended by City Resolution Nos. 17,617 and 17,831. More or less concurrently
herewith, Redeveloper is applying for an amendment to the license to cover the
entire Property so as to permit expansion of the Card Club.
I. Redeveloper proposes to: (i) construct improvements to complete and
rehabilitate the Hotel so that it can be operated, in whole or in part, as a
full service hotel lodging facility, (ii) construct improvements to the Property
so that the Entertainment Center, including the Card Club, can be operated
therefrom, (iii) construct additional parking needed to support the Hotel and
Entertainment Center, and (iv) subject to Section 29 hereof, within fifteen (15)
years after the date hereof, construct, open and operate an expansion of the
Card Club facility on the Expansion Parcels and/or other portions of the
Property. Construction of such improvements and operation of the Hotel and
Entertainment Center from the Property, and construction of the expansion
facility on the Expansion Parcels are referred to herein as the "Project."
J. The Project will assist in the elimination of blight in the Project Area,
will provide additional jobs, and will substantially improve the economic and
physical conditions in the Project Area in accordance with the purposes and
goals of the Redevelopment Plan.
NOW THEREFORE, the parties agree as follows:
1. Purchase and Sale of the Convention Center Parcel.
-------------------------------------------------
(a) Redeveloper hereby agrees to purchase from Agency, and Agency
agrees to sell to Redeveloper, the Convention Center Parcel, including the
underlying land and parking structure, subject to easements of support and for
parking for the benefit of the Hotel Parcel, on the terms and conditions set
forth hereinbelow.
(b) The purchase price shall be $2,000,000 cash, payable in full
at closing.
(c) Closing shall occur at such time as the contingencies set forth
in Section 2(b) hereof have been satisfied, but in no case later than July 31,
1995; provided, however, if the closing has not occurred by July 31, 1995 due to
the fact that the bonds described in Section 5 have not theretofore been
defeased, then
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<PAGE>
the closing date may be extended for up to 90 additional days, and if the
closing has not occurred by October 31, 1995, then either party hereto may
terminate this DDA if the terminating party has not defaulted hereunder.
Notwithstanding the foregoing, if the sole reason that the closing has not
occurred is due to the fact that the lis pendens recorded on April 10, 1995, as
Instrument No. 95-496676, Official Records, Los Angeles County (the "Lis
Pendens") has not been expunged, then the closing date may be extended until
such time as the Lis Pendens has been expunged as an exception to title;
provided, however, if the Lis Pendens is not expunged as a title exception by
April 30, 1996, then either party may thereafter terminate this Agreement.
(d) In addition to other matters of title, as provided in Section 3
hereof, title shall be subject to the following matters:
(i) Existing easements of access, support and for parking
referred to hereinabove.
(ii) The Grant Deed pursuant to which Redeveloper or its
successor in interest takes title shall contain a deed covenant in favor of
Agency and City obligating the grantee, its successors and assigns to
continuously and uninterruptedly operate the Hotel, Card Club and Entertainment
Center (except for necessary interruptions which shall not exceed six
consecutive months). If any such use becomes unfeasible or is rendered illegal
(other than as the result of voluntary action on the part of Redeveloper or a
successor in interest), the parties shall negotiate in good faith to substitute
appropriate uses for the Property. Said covenant shall become ineffective from
and after the date that is fifty years after the Rent Commencement Date (as
defined below).
(iii) A deed of trust (the "deed of trust"), in favor of
Agency securing Redeveloper's performance under the Lease hereinafter provided
for, shall be recorded at closing; provided, however, that the foreclosure of
such deed of trust shall not extinguish the Agency's obligation to deliver the
sum set forth in Section 1(e) hereof upon the conditions set forth in Section
1(e).
(e) Anything in Section 1(d)(iii) hereinabove or in the Lease to the
contrary notwithstanding, if, for any reason other than the exercise by
Redeveloper of the option to purchase the Leasehold Parcels, as provided herein,
the Lease is terminated, including a voluntary termination under Section 4(c)
hereof or a termination for breach on the part of Redeveloper or any successor
to Redeveloper, Agency shall be obligated to pay to Redeveloper or to its
successor in interest, the original $2,000,000.00 purchase price of the
Convention Center Parcel, and Redeveloper shall be obligated to reconvey the
Convention Center Parcel to Agency. The failure of Redeveloper to reconvey the
Convention Center Parcel to Agency shall be deemed an event of default under the
deed of trust referred to in Section 1(d)(iii) hereof. Such repurchase price
shall be paid over such
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<PAGE>
period of time as shall be determined by binding negotiations of the parties
during the 90 day period following the termination of the Lease. Upon the
exercise of by Redeveloper of the option topurchase the Property which is
subject to the Lease and the payment of the purchase price thereof, the
provisions of this Section 1(e) shall be ineffective, and the deed of trust
referred to in Section 1(d)(iii) shall be reconveyed. The effect of the
covenants referred to in Section 1(d)(ii) and this Section 1(e) shall survive
the transfer of title to the optioned property to Redeveloper or its permitted
successor in interest.
(f) The purchase price shall be paid in all cash through the close
of escrow. Agency will pay the cost of a CLTA policy of title insurance, any
documentary transfer tax, and one half of the escrow fees. Redeveloper will pay
the cost of recording, the additional premium and any expenses (including survey
costs) in the event Redeveloper desires to obtain an extended coverage policy of
title insurance, and the other half of the escrow fees. In connection therewith,
the parties shall execute normal and necessary escrow instructions and all
documents reasonably called for thereunder, so long as such instructions and
documents are not inconsistent herewith.
2. Lease of the Hotel and Other Parcels.
------------------------------------
(a) Agency hereby leases the Leasehold Parcels to Redeveloper, and
Redeveloper leases the Leasehold Parcels from Agency (the "Lease"), for the term
set forth in Section 8 hereof, subject to and on the terms and conditions set
forth in this Lease.
(b) Notwithstanding the foregoing, this Lease, including the parties'
obligations hereunder, is subject to the satisfaction or waiver of each of the
following conditions on or before the Effective Date (as hereinafter defined):
(i) Agency's receipt of an opinion from bond counsel to be
selected and approved by Agency that this transaction will not adversely affect
the tax exempt status of any bonds or other obligations issued to finance the
acquisition and/or construction of the Property or any part thereof (including
any improvements thereon) to be leased or conveyed to Redeveloper. This
condition is inserted for the sole benefit of Agency and may be waived or
deferred by an instrument in writing signed by Agency. The parties shall use
their best efforts to resolve any bond issues raised by such opinion letter;
(ii) Redeveloper's execution and delivery of the deed of trust and
other security instruments and a recordable Memorandum of Lease, in
substantially the form approved by Agency and Redeveloper's title insurance
company;
(iii) The City of Compton's adoption of an amendment to the
License providing that Hollywood Park, Inc., may be a licensee upon a change in
state law allowing Hollywood Park, Inc., (or a joint
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<PAGE>
venture of Hollywood Park, Inc., and the Redeveloper) to hold such license, and
subject to Hollywood Park, Inc. (or such joint venture) qualifying as a licensee
pursuant to Subsections 9-10.1 through 9-10.10, and 9-10.13, of the Compton
Municipal Code, and any other applicable provisions of the Compton Municipal
Code;
(iv) Agency's delivery to Redeveloper of Redeveloper's Policies of
Title Insurance described in Section 6 hereof. This condition is inserted for
the sole benefit ofRedeveloper and may be waived, in whole or in part, or
deferred by Redeveloper by an instrument in writing signed by Redeveloper.
If the foregoing conditions are not satisfied or waived by the time permitted
for closing under Section 1(c) hereof, then this Lease may be terminated by
either party on ten (10) days prior written notice to the other party, and this
Lease shall thereafter be of no further force or effect.
3. Title and Survey.
----------------
(a) Within ten (10) business days following execution hereof, Agency
shall deliver to Redeveloper a Preliminary Title Report issued by Old Republic
Title Company. Redeveloper's fee interest in the Convention Center Parcel shall
be insured by a standard form, CLTA Owners Policy of title insurance, and
Redeveloper's leasehold interest in the balance of the Property shall be insured
as of the Effective Date by a CLTA Policy of Leasehold Title Insurance (the
"Leasehold Policy") to be purchased and paid for by Agency. The Policy shall
insure Redeveloper's leasehold interest in the Leasehold Parcels free and clear
of all liens, encumbrances, restrictions, and rights-of-way of record, subject
only to the following permitted conditions of title ("Permitted Title
Exceptions"):
(i) Agency's fee interest in the Leasehold Parcels;
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<PAGE>
(ii) The applicable zoning, building and development regulations
of any city, county, state or federal jurisdiction affecting the Property; and
(iii) Those exceptions approved by Redeveloper by May 31, 1995. If
Redeveloper unconditionally disapproves any exceptions, this DDA shall thereupon
terminate and shall be of no further force or effect, unless the sole
disapproved exception is the Lis Pendens, in which case this DDA shall terminate
if the Lis Pendens is not expunged by April 30, 1996. If Redeveloper
conditionally disapproves any exceptions, then Agency shall have ten (10)
business days after receipt from Redeveloper of a written specification of the
title exceptions to which Redeveloper is taking objection within which to either
agree to remove the exceptions to which objection was taken or to notify
Redeveloper that it is unwilling or unable to do so. In the event that Agency
gives notice that it is unwilling or unable to remove any exception to which
objection was taken, then Redeveloper shall have ten (10) business days within
which to give notice that either (A) it will accept title subject to the
exceptions as to which the Agency is unwilling or unable to remove, or (B) to
terminate this DDA forthwith, in which instance each of the parties shall be
relieved of all further liability hereunder, provided that no such termination
shall affect the License for the Card Club or any liability of Redeveloper to
City in connection therewith. The failure of Agency to give notice as provided
hereinabove within the ten (10) day period shall be deemed to be a notice that
it is unwilling or unable to cure the title exceptions to which Redeveloper took
exception, and the failure of Redeveloper to give notice within the subsequent
ten (10) day period that it will either accept title subject to such matters or
to terminate this DDA shall be deemed an election on the part of Redeveloper to
terminate this DDA. If Agency gives notice that it intends to remove a title
defect, it shall use its best efforts to complete such action within thirty (30)
daysthereafter, but, in any case, Agency shall proceed diligently to cause such
title exceptions to be removed.
(iv) With respect to the Convention Center Parcel, those
matters set forth in Section 1(d) hereof.
(v) Should a title exception which Agency is unwilling or unable
to cure and which Redeveloper is unwilling to accept apply only to one or more
the Expansion Parcels, then Redeveloper may elect to defer or sever the affected
parcel by giving written notice thereof to Agency. In the event that the
affected parcel is severed therefrom, there shall be an equitable reduction in
the rental and the option price pursuant to Section 30 hereof. In the event that
the parcel is merely deferred, no such adjustments shall be made until such time
as Redeveloper elects to sever the particular parcel or parcels and gives notice
thereof as provided herein.
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<PAGE>
(b) Redeveloper has elected to obtain an ALTA Extended Coverage Title
Insurance Policy for the Convention Center Parcel and the Leasehold Parcels.
Redeveloper shall cause a licensed surveyor or civil engineer to conduct a
survey of the Property, to prepare from the survey a legal description
satisfactory to the title company insuring Redeveloper's title, and to prepare a
plot plan showing the location of any streets, easements, and rights of way over
or in favor of the Property, by June 7, 1995. Redeveloper shall approve or
disapprove any survey by June 15, 1995. Any survey and any premiums for
endorsements or extended coverage shall be paid by Redeveloper.
4. Term.
----
(a) Effective Date of Agreement. This Lease shall become effective
---------------------------
(the "Effective Date") on the close of escrow on the purchase and sale of the
Convention Center Parcel. If escrow has not closed by July 31, 1995, then
(subject to the extensions of time for the reasons set forth in Subsection )
either party may terminate this Agreement. Redeveloper shall have the right, on
five (5) days prior notice in writing, to enter into the entire Property
(including both the Convention Center Parcel and the Leasehold Parcels) at any
time prior to the Effective Date for the purposes of undertaking preconstruction
inspection, testing and planning studies, and Redeveloper's obligation to
indemnify Agency, pursuant to Section 17 hereof, shall commence on the date
which is five (5) days after such notice is given (but the insurance obligations
set forth in Section 17 shall not commence until the Effective Date).
Redeveloper shall not commence any work of improvement or other construction
prior to the Effective Date.
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<PAGE>
(b) Term of Lease. The term of this Lease (the "Term") shall commence
-------------
on the Effective Date, and shall end on the date that is fifty (50) years after
the Rent Commencement Date; unless sooner terminated as provided for herein.
The Rent Commencement Date shall be the earlier of (i) the date that the Card
Club or Hotel open for business or (ii) the date that is two (2) years after the
Effective Date. Notwithstanding the foregoing, if the rehabilitation of the
Hotel and Entertainment Center has not been completed by the date set forth in
the Schedule of Performance, then the Agency shall have the right to terminate
this Lease upon giving Redeveloper thirty (30) days written notice, and all
rights of Redeveloper hereunder or in the Property (including the Initial
Improvements (as defined below)) shall thereupon cease and shall be of no
further force or effect,provided however, that within such thirty (30) day
notice period, Redeveloper shall have the right to exercise its option to
purchase the Property, as provided in Section 30 hereof. If the Card Club has
not opened for business within 5 years after the Effective Date, or if the
Redeveloper has not purchased the Property by the date that is 5 years after the
Effective Date, then the Agency shall have the right to bring forth a substitute
developer or operator for the Card Club, and in such event the Redeveloper shall
negotiate in good faith with such party for either an operating agreement or a
buy-out, on reasonable and fair terms, of the Redeveloper's interest in this
DDA. For the purposes hereof, a "Lease Year" shall be the period commencing on
the Rent Commencement Date or any anniversary thereof and ending on the day
prior to the next anniversary of the Rent Commencement Date.
(c) Redeveloper's Right to Terminate the Lease. Redeveloper shall
------------------------------------------
have the right, at any time either (i) prior to issuance of any building permits
for the Property, or (ii) after issuance of the Certificate of Completion as
described in Section 22 hereof, to terminate this DDA; provided, however, in the
event of such termination, Redeveloper shall remain liable for any accrued
obligations hereunder arising prior to the date of termination, and any rights
of Agency which are intended to survive the termination of this Lease shall
continue in full force and effect. Redeveloper shall provide 90 days prior
written notice to Agency of any election to terminate this DDA. Redeveloper
shall not have the right to terminate this DDA during the period (i) from and
after issuance of any building permit for the Property and (ii) prior to the
issuance of the Certificate of Completion. In the event of such termination,
Redeveloper shall be released of any further obligation to pay rent (other than
rent accrued prior to the date of termination).
-9-
<PAGE>
(d) Personalty. Upon termination of the Lease for any reason other
----------
than the exercise by Redeveloper or its permitted successor in interest of the
option to purchase the Property as provided herein, Redeveloper shall deliver
possession of the Property (including both the Convention Center Parcel (subject
to Section 1(e)) and the Leasehold Parcels) to Agency in a good and workable
state of repair (ordinary wear and tear excepted), together with full
inventories of furniture, fixtures and equipment of the type for which
Redeveloper was entitled to Rent Reduction/Credit under Section 6 hereof,
including all additions to or replacements of such items installed after the
initial rehabilitation of the Property.
5. Rent. Redeveloper shall pay to Agency, without demand, prior
----
notice, deduction, or set-off (except as provided in Section 10 hereof) base
rent ("Base Rent"), in the following sums:
Lease Years 1 through 5 - $ 600,000 per year
Lease Years 6 through 10 - $ 850,000 per year
Lease Years 11 through 15 - $1,100,000 per year
Lease Years 16 through 20 - $1,350,000 per year
Lease Years 21 through 25 - $1,600,000 per year
Lease Years 26 through 30 - $1,850,000 per year
Lease Years 31 through 35 - $2,100,000 per year
Lease Years 36 through 40 - $2,350,000 per year
Lease Years 41 through 45 - $2,600,000 per year
Lease Years 46 through
the end of the Lease - $2,850,000 per year
Base Rent shall be payable in advance on the first day of each Lease Year, in
legal currency of the United States, commencing on the Rent Commencement Date.
6. Rent Reduction/Credit. Redeveloper shall receive a credit
---------------------
against any Base Rent obligation of Redeveloper set forth in Section 10 in an
amount equal to the actual verified costs of the Initial Improvements
constructed or installed by Redeveloper for the Hotel and the Convention Center,
including the actual verified costs of furnishing and equipping the Hotel and
Entertainment Center pursuant to Section 18 hereof and Exhibit 4 hereto, such
costs of construction, furnishings and equipage including but not limited to
inventories of china, glassware and linens, ("Initial Improvement Costs") to be
consistent with budgets prepared by Redeveloper and submitted to and approved by
Agency, provided however that the cost of remedying defects, certified as latent
defects by the City Engineer, which existed at the Effective Date and which
Redeveloper would have included in the budgets had their existence been known at
the Effective Date, shall be eligible for reimbursement even if not included in
the approved budgets. For purposes hereof, the "Initial Improvements" are the
improvements to the Hotel and Convention Center approved by Agency and provided
pursuant to the Scope of Development, and the furniture, fixtures and equipment
having a useful life of one year or more reasonably required to open the Hotel
and Card Club for
-10-
<PAGE>
business, where first approved by Agency and described in the Scope of
Development, constructed or acquired prior to the earlier of (i) the issuance of
the Certificate of Occupancy, or (ii) issuance of the Certificate of Completion,
or (iii) the opening of the Hotel or Card Club for business. Except as
specifically provided herein, no capital investment after the Initial
Improvement Costs shall be eligible for such credit. Expendables, and other
personalty having a useful life of one year or less, shall not be deemed to be
part of the furniture, fixtures and equipment the cost of which is eligible for
such credit, unless otherwise approved by Agency's Board of Directors.
Redeveloper's allowable credit shall be on a dollar for dollar basis and shall
be applied to the first Base Rent due hereunder. Any unused credit in any Lease
Year shall be carried forward to the next ensuing Lease Year. Redeveloper shall
not receive the credit against Base Rent unless and until (i) Redeveloper is
entitled to receive a Certificate of Completion, and (ii) the Hotel and
Entertainment Center (including the Card Club) are complete and free of
mechanics' and materialmen's liens which concern an amount, in the aggregate, of
$100,000.00 (or any such liens are released through counterbonding pursuant to
California Civil Code Section 3143). No credit shall be available for costs
incurred after the Hotel or Card Club receives a Certificate of Occupancy or
opens for business unless the Agency's Board of Directors agrees to provide such
additional credit.
-11-
<PAGE>
7. Additional Consideration. Compton Entertainment, Inc. ("CEI"),
------------------------
shall, as additional consideration, deliver to with Agency the sum of
$1,000,000. Such additional consideration shall be delivered by CEI to Agency
in ten installments as follows: The sum of $100,000 shall be paid on the first
day of the third Lease Year, and the sum of $100,000 shall be paid by CEI to
Agency on the first day of each subsequent Lease Year through the 12th Lease
Year, for an aggregate maximum of $1,000,000.00. The payments of additional
consideration provided for herein shall not be subject to the Rent
Reduction/Credit provided for in Section 6 hereof, and shall remain the
obligation of CEI and shall not become the obligation of any assignee of this
DDA.
8. Taxes.
-----
(a) Covenant to Pay Taxes. As additional rent, Redeveloper shall pay
---------------------
directly to the appropriate taxing authorities all Taxes (as defined in Section
8(b)). All Taxes shall be paid at least 10 days before delinquency and before
any fine, interest or penalty shall become due or be imposed by operation of law
for their non-payment. Redeveloper shall furnish to Agency at least 10 days
prior to the date when any Taxes would become delinquent receipts or other
appropriate evidence establishing such payment. Notwithstanding the foregoing,
so long as Redeveloper is fully operating the Card Club and the Hotel,
Redeveloper shall not be obligated to pay or shall be entitled to receive a
refund or rebate of that portion of any possessory interest taxes, or real
property taxes relating to the Property, to the extent payable or allocable to
Agency or City during the first ten (10) Lease Years of the Term. Provided,
however, that if Redeveloper or Redeveloper's successor in interest has not
obtained a State of California Gaming License for the Card Club within one year
after the Effective Date, Redeveloper shall be obligated to pay the full
possessory interest tax or real property tax (or any prorated portion thereof),
and shall not be entitled to any rebate or refund thereof, until the date upon
which the California Gaming License is obtained.
-12-
<PAGE>
(b) Definition of Taxes. The term "Taxes" shall include all real
-------------------
property taxes (including increases in real property taxes caused by
reappraisals that are the result of changes in the ownership of Agency's
interest), possessory interest taxes, personal property taxes, charges and
assessments, (including but not limited to street improvement liens) which are
levied, assessed upon or imposed by any governmental authority or political
subdivision thereof during or with respect to any portion of the Term hereof
with respect to the Property or any improvements, fixtures, equipment or other
property of Redeveloper or Agency, real or personal, located on the Property or
used in connection with the operation of the Project, and any tax which shall be
levied or assessed in addition to or in lieu of such real or personal property
taxes, and any license fees, taxes measured by or imposed upon rents, or other
taxes or charges upon Agency's leasing of the Property or the receipt of rent
hereunder. All assessments, taxes, fees, levies and charges imposed by
governmental agencies for services such as fire protection, street, sidewalk and
road maintenance, refuse removal and other public services generally provided
without charge to owners or occupants prior to the adoption of Proposition 13 by
the voters of the State of California in the June 1978 election, also shall be
deemed included within the definition of "Taxes" for the purposes of this Lease.
Provided, however, that the definition of "Taxes" shall not include (i) any
taxes imposed by City (other than gaming tax) unless such taxes are of general
application over the City as a whole, or (ii) any special assessments or special
taxes hereafter adopted by City against the Property unless Redeveloper shall
have been granted the right of a property owner to protest the inclusion of the
Property in the Special District in question.
(c) Proration of Redeveloper's Tax Liability. Redeveloper's liability
----------------------------------------
to pay Taxes shall be prorated on the basis of a 365-day year to account for any
fractional portion of a fiscal tax year included in the Term at its commencement
or expiration.
9. Use and Compliance with Laws.
----------------------------
(a) Redeveloper or an operator under contract to Redeveloper shall use
and operate the Property solely for the following purposes:
(i) the construction and operation of the Hotel in whole or in
part.
(ii) the construction and operation of the Card Club containing
the maximum number of gaming tables permitted, subject to health and safety
codes and marketing consideration, in order to maximize revenues.
(iii) operation of one or more restaurants (the "Restaurants").
-13-
<PAGE>
(b) Redeveloper shall have the obligation to provide ancillary
facilities which may include but need not be limited to a night club, a sports
bar and other entertainment facilities. The parties recognize that public demand
for such matters may vary from time to time as public tastes and technology
change, and Redeveloper agrees to consult with Agency with respect to the
installation, commencement and termination of operation, substitution and other
modification or replacement of such ancillary facilities.
Redeveloper covenants to and for the benefit of Agency that, subject to Section
32 hereof, Redeveloper shall continuously and uninterruptedly, throughout the
Term of this Lease, operate the Hotel, in whole or in part, the Card Club and
one or more Restaurants on the Property, following completion of the Initial
Improvements constituting the Project, subject to temporary closures for repairs
or remodeling which are reasonable in frequency and duration. Redeveloper shall
diligently pursue obtaining the requisite permission from the State of
California for operation of the Card Club.
(c) At all times from and after opening for business, Redeveloper
shall at all times during the Term hereof obtain, keep and maintain all licenses
and permits required by state and local governmental authorities necessary to
operate the Hotel and the Entertainment Center from the Property. Redeveloper
hereby agrees to comply with all obligations under the Card Club License issued
by the City of Compton, and Redeveloper's breach thereof or the termination
thereof shall be a breach of this Lease.
(d) Redeveloper shall at all times provide such security for operation
of the Hotel and Entertainment Center as shall reasonably be required to provide
all necessary protection for the customers, employees, guests, contractors and
other invitees of the Entertainment Center. Redeveloper shall fully comply with
the security requirements of the City of Compton Card Club Ordinance and with
the Security Plan submitted to and approved by the City in connection with the
issuance of the Card Club License. Neither Agency nor Agency's Executive
Director shall have any duty or obligation to review, evaluate, or direct the
security of the Hotel and Entertainment Center operation, it being the intent
hereof that Redeveloper shall be solely responsible for providing all necessary
security. Redeveloper shall indemnify, hold harmless and defend Agency and City
against any and all loss, cost or obligation with respect to any claim that any
injury to person or property arising out of or in connection with the operation
of the Property was the result of or was aggravated by any lack of security or
defect in the security plan or the implementation thereof,except for matters
caused by the sole active negligence or to the extent of the wilful misconduct
of Agency or City.
-14-
<PAGE>
(e) Redeveloper shall, at Redeveloper's expense, comply promptly with
all applicable statutes, ordinances, rules, regulations, orders, covenants,
conditions, and restrictions of record, and requirements of any governmental
authority or the local Insurance Services Office in effect during the Term
hereof, regulating the Property, the improvements thereon, or Redeveloper's use
of the Property. Redeveloper shall keep and maintain in full force and effect,
and in good standing, all permits and licenses required from state and local
governmental authorities for operation of the Hotel and Entertainment Center
(including the Card Club), and termination of any permit or license shall be a
material breach hereof. If the Insurance Services Office or any other similar
body or any bureau, department or official of the state, county or city
government or any other governmental authority having jurisdiction requires that
any changes, modifications, replacements, alterations, or additional equipment
necessary to life safety be made or supplied in or to any portion of the
Property by reason of Redeveloper's use thereof, Redeveloper shall, at
Redeveloper's cost and expense, make and supply such changes, modifications,
replacements, alterations or additional equipment. Redeveloper shall not use
nor permit the use of the Property in any manner that will tend to create waste
or a nuisance.
(f) At present, the Property conforms to the Redevelopment Plan. This
Lease is conditioned upon, and Redeveloper shall at all times operate the
Property, in conformity with the Redevelopment Plan.
(g) Notwithstanding anything provided herein to the contrary, the
parcels identified as Parcels 2, 3 and 4 of Parcel Map 10784, recorded in Book
112, Pages 96 and 97, of Parcel Maps, Official Records, Los Angeles County,
California, Parcels 1 and 2 of Parcel Map 8669, recorded in Book 87, Page 9, of
Parcel Maps, Official Records, Los Angeles County, California, and Parcels 2, 7,
and 11 of Parcel Map 7899, recorded in Book 79, Page 47-49, of Parcel Maps,
Official Records, shall be used by Redeveloper only for surface parking (unless
redesignated at the request of Redeveloper and approved by the Agency), and
Parcels 8 and 9 of Parcel Map No. 7899 shall be used by Redeveloper only for
purposes of expansion of the Card Club and/or for a Casino pursuant to an
approved plan of expansion, provided that such plan makes provision for, and
Redeveloper in fact provides, not less than 14 gross acres of surface parking on
the Property for the benefit of the Hotel and Entertainment Center and for no
other purpose whatsoever. The Agency shall not unreasonably withhold consent to
redesignation of the parcels for development of the expansion of the Card Club,
and no fee shall be charged for such redesignation except as may be necessary to
cover any of the Agency's reasonable expenses (including attorneys fees) in
effectuating such redesignation.
10. Physical Condition of the Property.
----------------------------------
-15-
<PAGE>
(a) "As-Is" Condition. Except as provided herein below to its
-----------------
contrary, Agency disclaims any and all covenants or warranties respecting the
condition of the soil or subsoil or any other physical or environmental
condition of the Property. Redeveloper is purchasing and leasing the entire
Property in their "as-is" condition. Prior to the date set forth in the
Schedule ofPerformance attached hereto as Exhibit 3 (the "Schedule of
Performance"), Redeveloper may, at Redeveloper's expense, conduct examinations,
soils tests or an environmental site assessment on the Property (in connection
with which Redeveloper shall indemnify and hold Agency and the Property free and
harmless from any and all costs, expenses, liabilities and charges resulting
from Redeveloper's entry onto the Property). If the examination or soils tests
reveal that the Property is not suitable (or cannot be made suitable at
reasonable cost) for construction of the Initial Improvements thereon,
Redeveloper may elect to cancel this DDA upon written notice to Agency given
within ten (10) days after Redeveloper's receipt of the completed soils reports
or environmental site assessments, but in any event such notice shall be
delivered to Agency no later than June 15, 1995. Agency hereby assigns to
Redeveloper any and all causes of action which it may have against prior
developers, builders, contractors, subcontractors or suppliers of labor and/or
materials to the Hotel Parcel and the Convention Center Parcel for design and
construction defects, negligent construction or other causes of action of a
similar nature resulting in damage to the Hotel Parcel and/or the Convention
Center Parcel, it being understood that (i) all costs of any litigation
(including attorneys' fees) shall be borne solely by Redeveloper and (ii) the
proceeds from any recovery with respect to such litigation, after payment of the
costs thereof (including attorneys' fees), shall be credited against the cost of
the Initial Improvement Costs, thus reducing the Rent Reduction/Credit referred
to in Section 6 hereof.
(b) Environmental Conditions of Property Prior to Commencement of
-------------------------------------------------------------
Lease. Agency shall be solely responsible for the costs of clean up or
- -----
remediation of any deposit or discharge of Hazardous Materials on or from the
Property which occurred prior to the Effective Date, and Agency shall indemnify,
hold harmless and defend Redeveloper against any and all loss, cost or
obligation with respect thereto (including attorneys fees and costs), provided,
however, that Agency shall not be liable to Redeveloper for any consequential
damages suffered by Redeveloper by reason of the existence of any Hazardous
Waste on the Property which existed prior to the Effective Date and which could
have reasonably been discovered by a competent environmental assessment of the
Property.
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<PAGE>
(c) Environmental Condition of the Property During Lease Term.
---------------------------------------------------------
Redeveloper shall indemnify, protect, defend and hold harmless Agency from and
against any and all claims, liabilities, suits, losses, costs, expenses and
damages, including but not limited to attorneys' fees and costs, arising out of
any claim for loss or damage to any property, including the Property (including
both the Convention Center Parcel and the Leasehold Parcels), injuries to or
death of persons, or for the cost of cleaning up the Property, and removing
hazardous or toxic substances, materials and waste therefrom, by reason of
contamination or adverse effects on the environment, or by reason of any
statutes, ordinances, orders, rules or regulations of any governmental entity or
agency requiring the clean-up of the Property caused by or resulting from any
hazardous material, substance or waste introduced to the Property during the
Term of this Lease. The foregoing indemnity shall survive the expiration or
termination of this Lease, and the close of escrow in the event of Redeveloper's
exercise of the option to purchase the Leasehold Parcels set forth below.
However, Redeveloper shall not be liable on account of this indemnity if, prior
to the date set forth in the Schedule of Performance, Redeveloper elects to
terminate this Lease on account of Redeveloper's disapproval of the condition of
the Property as provided in Section 10(a) hereof. Moreover, upon the expiration
of this Lease, if Redeveloper has not purchased theLeasehold Parcels, then
Redeveloper shall not thereafter be liable on account of this indemnity as a
result of hazardous or toxic substances, materials, or waste that were located
on the Leasehold Parcels prior to the Effective Date, except to the extent such
hazardous or toxic substances, materials, or waste were deposited on the
Property prior to the Effective Date by Redeveloper or Redeveloper's agents,
officers, employees, contractors, sublessees, or assignees.
(d) Other Conditions of Property. Redeveloper, on behalf itself and
----------------------------
its successors, affiliates, partners, and assigns, hereby fully and entirely
release and discharge the City (as a third party beneficiary hereof) and Agency
(including the City's and Agency's servants, employees, agents, representatives,
successors, descendants, heirs, executors, administrators, assigns, and
attorneys), and of each of them alone, of and from any and all claims, causes of
action, or demands, liabilities, damages, and losses, of whatever nature,
anticipated or unanticipated, known or unknown, or in connection with, or in any
way related to, the Property, or for the physical condition of the Property or
any portion thereof, other than as provided hereinabove with respect to
Hazardous Wastes. This release constitutes an explicit waiver by Redeveloper of
each and all of the provisions of California Civil Code Section 1542, which
states as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
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<PAGE>
Redeveloper's Initials: _____________________________________________
Redeveloper hereby declares and represents that Redeveloper is
effecting and executing this release of the City and Agency after having read
all of this release and with full understanding of its meaning and effect and
after having received full legal advice as to Redeveloper's rights from an
attorney.
11. Construction by Redeveloper.
---------------------------
(a) Approval of Financing. Within ninety (90) days after the
---------------------
Effective Date, Redeveloper shall deliver to Agency, for Agency's approval,
evidence of Redeveloper's construction and take-out financing for the Initial
Improvement Costs for the Initial Improvements to be constructed or installed by
Redeveloper on the Property pursuant to this Section 11 including any plan of
self financing, which approval shall not be unreasonably withheld or delayed.
In order to enable Agency to evaluate Redeveloper's financing, Redeveloper shall
provide to Agency evidence of such financing including at a minimum
Redeveloper's proforma and line-item budget, a copy of a binding commitment
obtained by Redeveloper for a leasehold mortgage loan or loans financing, if
applicable, (together with any equity capital contribution of Redeveloper) the
hard and soft costs of constructing the Project, financial statements of
Redeveloper and the lender, and other evidence satisfactory to Agency of sources
of loans or capital, sufficient to demonstrate that Redeveloper has or will have
adequate funds to cover all development and construction costs of the entire
Project. The terms and conditions of such commitments, and the identity of the
construction lender itself, shall be subject to Agency's approval, which
approval shall not unreasonably be withheld, provided,however, that should the
lender be a bank, savings and loan association, insurance company or other
institutional lender, no approval of the identity of the lender or other source
of funds shall be required.
(b) Scope of Development. The Initial Improvements shall consist
--------------------
of the matters described in the Scope of Development attached hereto as Exhibit
5. The Initial Improvements shall include high quality landscaping as approved
by Agency pursuant to the terms hereof (including, but not limited to, the
Conditions of Construction set forth in Exhibit 4).
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<PAGE>
(c) Construction Schedule. Redeveloper shall diligently comply
---------------------
with all performance dates, including dates for submitting and obtaining
approvals for plans and specifications, as set forth in the Schedule of
Performance attached hereto as Exhibit 3 and incorporated herein by this
reference (the "Schedule of Performance"). Redeveloper shall diligently seek
approval of all plans and specifications, and permits, required to construct the
improvements described in the Scope of Development.
(d) Anti-discrimination During Construction. Redeveloper, for
---------------------------------------
itself and its successors and assigns, agrees that it shall not discriminate
against any employee or applicant for employment because of age, sex, marital
status, race, handicap, color, religion, creed, ancestry, or national origin in
the construction of the improvements constituting the Property.
(e) Commencement of Construction.
----------------------------
(i) Redeveloper shall commence construction and installation
of the Initial Improvements, notwithstanding any other Section of this Lease
to the contrary (including but not limited to Section 32), within the time
period set forth in the Schedule of Performance.
(ii) When necessary for Redeveloper to commence construction
of the Initial Improvements, Redeveloper may use, sell, demolish, remove, or
otherwise dispose of any improvements existing on the Property at the
commencement of the Term of this Lease. Agency shall receive no compensation
for such improvements other than the performance of Redeveloper's covenants
expressed in this Lease, provided, however, that the proceeds from such
disposition shall be credited against the Initial Improvement Costs, for
purposes of computing the Rent Reduction/Credit under Section 6 hereof.
(iii) After commencement of construction, Redeveloper shall
diligently prosecute such construction to completion. Such construction shall
comply with the Conditions of Construction set forth in Exhibit 4 attached
hereto and incorporated herein by this reference. All work shall be performed
in a good and workmanlike manner, shall substantially comply with the plans
and specifications submitted to and approved by Agency and shall comply with
all applicable governmental licenses, permits, laws, ordinances and
regulations.
(iv) No materials, equipment, fixtures, carpets, appliances,
or any other part of the Initial Improvements shall be purchased or installed
under conditional salesagreements, leases, or under other arrangements wherein
the right is reserved or accrues to anyone to remove or to repossess any such
items. Agency may, in the exercise of its good faith
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<PAGE>
business judgment, permit certain specialized equipment to be leased for the
Project but only with its prior written approval and, then, only upon
Redeveloper's execution and delivery of an assignment of the lease to Agency,
together with the original lease and the equipment lessor's written approval
of such assignment, in form satisfactory to Agency.
(f) Completion Of Construction. Construction of the Initial
--------------------------
Improvements shall be completed and the Hotel and Entertainment Center
(including the Card Club) ready for occupancy and open for business by the
date set forth in the Schedule of Performance; provided that the time for
completion shall be extended for as long as Redeveloper shall be prevented
from completing the construction by delays beyond Redeveloper's reasonable
control, including but not limited to flood, earthquake, fire, acts of God,
war, epidemic and civil commotion; provided, further, however, Redeveloper's
failure to complete construction and equipage of the Card Club and Hotel and
to open the Hotel for business within one year after Effective Date (subject
to the term of any reasonable delay caused by force majeure) shall, at
Agency's election, trigger Agency's right to terminate the Lease as provided
herein; however, if this Lease is so terminated, then Redeveloper shall be
released from liability for rent under this Lease accruing thereafter.
(g) Minor Field Changes. The parties acknowledge that it is
-------------------
common practice in the construction industry to make minor changes during the
course of construction without substantially altering the plans and
specifications previously approved by Agency. On completion of the work,
Redeveloper shall give Agency notice of all changes in plans and
specifications made during the course of the work and shall, at the same time,
supply Agency with "as built" drawings accurately reflecting all such changes.
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<PAGE>
(h) Easements, Zoning and Other Restrictions.
----------------------------------------
(i) Easements and Dedications. In order to provide for the
-------------------------
more orderly development of the Property, it may be necessary that street,
water, sewer, drainage, gas, power line and other easements and dedications,
and similar rights be granted or dedicated over or within portions of the
Property. Agency shall, upon request of Redeveloper, join with Redeveloper in
executing and delivering such documents as may reasonably be necessary for the
purpose of granting such easements and dedications.
(ii) Zoning. If necessary or appropriate to the Project,
------
Agency agrees, from time to time upon request of Redeveloper, to execute such
documents, petitions, applications and authorizations as may reasonably be
appropriate or required for the purposes of obtaining conditional use permits,
zoning and rezoning, tentative and final map approval, precise plan approval,
and similar government approvals with respect to the Property or any part
thereof. This paragraph shall apply to Agency solely in its capacity as owner
of the Property and shall not in any way restrict or bind Agency acting in its
governmental capacity.
(iii) Street Vacation. If requested by Redeveloper and if
---------------
consistent with the approved plan of development, Agency will apply for
vacation of internal streets within the Property, provided that such vacation
does not result in the creation of land locked parcels.
(iv) Expenses. In each of the foregoing instances, Agency
--------
shall be without expense therefor. Redeveloper shall pay all costs and
expenses thereof (including reimbursement of normal application and processing
fees and other normal and necessary out-of-pocket costs) incurred by Agency.
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(i) Ownership of Improvements. The Initial Improvements on the
-------------------------
Property constructed or installed by Redeveloper shall be owned by Redeveloper
until the expiration or sooner termination of the Term of this Lease;
provided, however, if Redeveloper exercises the option described in Section 30
hereof and purchases the Property, then Redeveloper shall retain ownership of
the Initial Improvements (in addition to all other Improvements, furniture,
fixtures, and equipment) on the Property notwithstanding the termination of
this Lease. Redeveloper shall not, however, remove any improvements from the
Property (without Agency's prior written consent), nor waste, destroy or
modify any improvements on the Property, except as permitted by this Lease.
Anything in this Section 11(i) to the contrary notwithstanding, Redeveloper
shall have the right to demolish or remove existing improvements on the
Property if necessary or appropriate to permit development of the Property in
accordance with the approved plans. The parties covenant and agree for
themselves and all persons claiming under them that the improvements are real
property. Upon expiration or sooner termination of the Term of this Lease
(other than by reason of Redeveloper's exercise of its option to purchase
under Section 30 hereof), all improvements on the Property, and all furniture,
fixtures and equipment used by Redeveloper in operating the Property
(including operation of the Hotel and Entertainment Center) shall, without
additional compensation to Redeveloper, thereupon become Agency's property
free and clear of all claims and encumbrances to or against them by
Redeveloper or any third person, unless within ninety (90) days after such
expiration or termination Agency requires that all or certain improvements or
property be removed by Redeveloper at Redeveloper's expense or Redeveloper
exercises the option described in Section 30 hereof and purchases the
Leasehold Parcels.
12. Certificate of Completion.
-------------------------
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<PAGE>
(a) After completion of construction, development, and installation
by Redeveloper of the Initial Improvements, Agency shall, promptly following
written request by Redeveloper therefor, furnish Redeveloper with a
Certificate of Completion, for such completed Initial Improvements. After
issuance of a Certificate of Completion for such completed Initial
Improvements, any party then owning or thereafter purchasing, leasing or
otherwise acquiring any interest in the Project shall not (because of such
ownership, purchase, lease or acquisition) incur any obligation or liability
under this DDA as to such portion of the Project, except that such party shall
be bound by any covenants, conditions or restrictions contained in this Lease,
or other instruments executed in accordance with theprovisions of this Lease.
Neither Agency nor any other person, after recordation of a Certificate of
Completion, shall have any rights, remedies or controls that it would
otherwise have or be entitled to exercise as a result a breach of
Redeveloper's construction obligations under this Lease, except that said
Certificate of Completion shall have no effect on any other separate
instrument signed by Redeveloper in favor of the City or Agency, nor shall it
have any effect on Redeveloper's obligations under the environmental
warranties and other indemnities provided herein, nor shall it waive any
obligations of Redeveloper included hereunder to survive issuance of a
Certificate of Completion.
(b) If Agency refuses or fails to furnish a Certificate of
Completion after written request from Redeveloper, Agency shall, within thirty
(30) days after the written request, provide Redeveloper with a written
statement of the reasons Agency refused or failed to furnish such Certificate
of Completion. The statement shall also contain Agency's opinion of the
action Redeveloper must take to obtain such Certificate of Completion. If the
reason for such refusal is confined to the immediate availability of specific
items or material for landscaping, and the estimated cost of completion does
not exceed $250,000.00 and the particular item or matter is not essential to
the operation of the Property, then Agency will issue its Certificate of
Completion upon the posting by Redeveloper with Agency of a bond or other
collateral satisfactory to Agency in an amount equal to 125% of the reasonable
cost of completing the work not yet completed, but the posting of such bond
shall not excuse Redeveloper from obligation to complete the work, and
Redeveloper shall not be entitled to any Rental Credit for such work until it
has, in fact, been completed.
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(c) Such Certificate of Completion shall not constitute evidence of
compliance with or satisfaction of any obligation of Redeveloper to any holder
of a mortgage, trust other than with respect to Redeveloper's right to claim
the Rent Reduction/Credit for work actually completed. Such Certificate of
Completion shall not be construed as a notice of completion as described in
California Civil Code Section 3093.
13. Utilities and Services. Redeveloper shall make all
----------------------
arrangements for and pay for all utilities and services furnished to or used
by it or its licensees or subtenants, including, without limitation, gas,
electricity, water, telephone service, communications, cable television, and
trash collection, and for all connection charges.
14. Maintenance.
-----------
(a) Throughout the Term, Redeveloper shall, at Redeveloper's sole
cost and expense, maintain the Property in safe and first class condition and
repair (ordinary wear and tear excepted) and in accordance with (i) all
applicable laws, rules, ordinances, orders and regulations of federal, state,
county, municipal, and other governmental agencies and bodies having or
claiming jurisdiction and all their respective departments, bureaus, and
officials; (ii) the insurance underwriting board or Insurance Services Office
having jurisdiction over the Property; and (iii) all insurance companies
insuring all or any part of the Property. Agency shall not have any
responsibility to maintain the Property whatsoever.
(b) Except as provided in Section 25 hereof, Redeveloper shall
promptly and diligently repair, restore, and replace as required to maintain
or comply as above, or to remedy all damage to or destruction of all or any
part of the Property. The completed work of maintenance, compliance, repair,
restoration, or replacement shall be equal in value, quality and use to the
condition of the Property before the event giving rise to the work. Agency's
election to perform any obligation of Redeveloper under this section on
Redeveloper's failure or refusal to do so shall not constitute a waiver of any
right or remedy for Redeveloper's default, and Redeveloper shall promptly
reimburse, defend and indemnify Agency against all liability, loss, cost and
expense arising from such election.
(c) Redeveloper waives the provisions of California Civil Code
sections 1941 and 1942 with respect to Agency's obligations for tenantability
of the Leasehold Parcels and Redeveloper's right to make repairs and deduct
the expenses of such repairs from rent.
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15. Alterations. Redeveloper shall not make any alterations or
-----------
additions to the Leasehold Parcels (other than interior, non-structural, non-
systemic alterations costing not more than $250,000 in any one instance)
without the prior written consent of Agency's executive director, which shall
not be unreasonably withheld. In constructing alterations or additions that
exceed the cost of $250,000, or which affect the exterior or structural
portions or the systems of the Leasehold Parcels, Redeveloper shall comply
with (a) the Conditions of Construction set forth in Exhibit 4 and (b) the
provisions of Section 11 hereof. If Redeveloper makes any alterations to the
Leasehold Parcels as provided in this Section, the alterations or additions
shall not be commenced until 20 days after Agency's executive director has
received written notice from Redeveloper stating the date the construction of
the alterations or additions is to commence so that Agency's executive
director, on behalf of Agency, can post and record an appropriate notice of
nonresponsibility. The provisions of this Section 15 shall not apply to the
construction or installation of the Initial Improvements.
16. Destruction.
-----------
(a) Partial Destruction; Restoration by Redeveloper. If less than
-----------------------------------------------
fifty percent (50%) of the floor area of the improvements on the Property are
rendered unusable by a casualty during the Term of this Lease and the proceeds
of the casualty insurance are sufficient to do so or, if Redeveloper has
failed to maintain the full amount of casualty insurance required by Section
17(c) hereof, whether or not the proceeds of the insurance are sufficient,
then Redeveloper shall restore the Improvements on the Property to
substantially the same condition as they were in immediately before such
damage or destruction, in accordance with the original plans and
specifications (except for changes as may be required by changed building and
safety codes). Such damage or destruction shall not terminate this Lease. In
reconstructing the improvements, Redeveloper shall comply with (i) the
Conditions of Construction set forth in Exhibit 4 and (ii) the provisions of
Section 11. In the event that, notwithstanding the fact that Redeveloper has
maintained the full amount of casualty insurance required, the insurance
proceeds are not adequate to fund the restoration of the Property, then
Redeveloper may terminate the Lease in the manner providedhereinbelow with
respect to a destruction of more than 50% of the Property, as provided in
Section 16(b) hereinbelow.
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(b) Major Damage or Destruction; Redeveloper's Right to Terminate.
-------------------------------------------------------------
If more than fifty percent (50%) of the floor area of the improvements on the
Property are rendered unusable by a casualty during the Term of this Lease,
then Redeveloper shall have the option of either repairing and reconstructing
the Property or of terminating this Lease. If Redeveloper elects to repair
and reconstruct, Redeveloper shall promptly do so and shall comply with (i)
the Conditions of Construction set forth in Exhibit 4 and (ii) the provisions
of Section 11. During the period of reconstruction, Redeveloper may continue
to conduct business from the Property from temporary facilities such as a tent
or temporary structures (subject to compliance with local building and safety
codes or other applicable municipal codes).
To exercise its right of termination, Redeveloper must comply with
all of the following conditions:
(i) Give Agency notice of termination within 30 days after
the damage or destruction, specifying the date of termination which shall be
not less than 60 days nor more than 120 days after the date such notice of
termination is given;
(ii) Prior to the termination date, cure any defaults on
Redeveloper's part under this Lease;
(iii) Continue to make all payments when due (including
without limitation the prorated portion of any annual Base Rent becoming due
after Redeveloper has given the notice of termination but prior to the date of
termination), if any, as required by the provisions of this Lease until the
date of termination, if Redeveloper continues to use the Property after the
casualty but prior to the date of termination;
(iv) Prior to the termination date, pay in full any
outstanding indebtedness incurred by Redeveloper and secured by an encumbrance
or encumbrances on the Property or any part thereof or an interest therein, or
alternatively, deliver to Agency the written consent of the holders of all
such encumbrances to the early termination of this Lease and extinguishment of
their liens;
(v) Prior to the termination date, cause to be discharged all
liens and encumbrances encumbering the Property or Redeveloper's interest in
the Leasehold Parcels resulting from any act or omission of Redeveloper;
(vi) On or before the termination date, deliver possession of
the Property to Agency, quitclaim all right, title and interest in the
Property to Agency and cease to do business on the Property, and vacate the
Property;
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(vii) Prior to the termination date, effectively relinquish,
assign, and deliver to Agency Agency's share of insurance proceeds resulting
from the casualty as provided in subparagraph (d) below.
In the event of any such termination, any Base Rent paid in advance for such
Lease Year, if any, shall be pro-rated through the date the Lease is
terminated. If Redeveloper does not either (i) terminate the Lease as
provided herein, or (ii) restore the Property in a timely fashion, then the
Redeveloper shall be in breach hereof.
(c) No Abatement or Reduction of Rent. In case of any damage or
---------------------------------
destruction where this Lease is not terminated, there shall be no abatement or
reduction of rent except to the extent such rent is paid through a rental
continuation policy or rider.
(d) Insurance Proceeds.
------------------
(i) If Redeveloper is obligated or elects to restore the
Property pursuant to this Section, the proceeds of any insurance maintained
under this Lease or pursuant to the deed of trust (other than rental
continuation insurance) shall be made available to Redeveloper for payment of
costs and expenses of repair. If the insurance proceeds are insufficient to
cover the cost of repair, then Redeveloper shall deposit the amount of the
deficiency with Agency or shall otherwise provide assurances to Agency's
reasonable satisfaction that such funds are and will be available, and such
funds shall be disbursed by Redeveloper first, and the balance of the
construction costs shall be disbursed from the insurance proceeds by Agency.
(ii) In the event that the Lease is terminated by reason of the
destruction of all or some part of the improvements on the Property, then the
casualty insurance proceeds shall be divided between Agency and Redeveloper as
follows:
(A) Redeveloper shall receive the portion of the casualty
insurance proceeds which bears the same relationship to the total casualty
insurance proceeds as the value of the Initial Improvements not amortized
through the Rent Reduction/Credit bears to the value of all of the
improvements on the Property, both measured prior to the casualty loss.
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(B) Any proceeds of fire and extended coverage insurance
attributable to improvements on the Expansion Parcel, or any improvements that
were purchased by Redeveloper, and that were constructed by Redeveloper at
Redeveloper's cost and expense shall be retained by Redeveloper, except and to
the extent of the credit, if any, given to Redeveloper by Agency on account of
such improvements.
(C) Agency shall receive the balance of the casualty
insurance proceeds.
Anything herein to the contrary notwithstanding, Agency alone shall be
entitled to any rent continuation insurance proceeds. In the event that
Redeveloper exercises its option to purchase under Section 30 hereof and, in
fact, consummates such purchase, Redeveloper shall be entitled to all of the
casualty insurance proceeds.
(e) Lease to Govern Redeveloper's Rights. Redeveloper waives the
------------------------------------
provisions of Civil Code (S)1932(2) and Civil Code (S)1933(4), or any
successor statutes, with respect to any destruction of the Leasehold Parcels,
and agrees that Redeveloper's rights in case of destruction shall be governed
solely by the provisions of this Lease. The provisions of this Lease shall
also govern the Redeveloper's obligations with respect to insurance and
restoration of casualty losses under the deed of trust.
17. Insurance and Indemnity.
-----------------------
(a) Liability Insurance.
-------------------
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<PAGE>
(i) Redeveloper shall procure at its sole cost and expense,
and keep in effect from the date of this Lease and at all times until the end
of the Term, Commercial General Public Liability Insurance applying to the use
and occupancy of the Property, or any part thereof, and the business operated
by Redeveloper, its sublessees, licensees, employees, agents, or any other
occupant, on the Property. Such insurance shall include Broad Form Contractual
liability insurance coverage insuring all of Redeveloper's indemnity
obligations under this Lease. Such coverage shall have a minimum combined
single limit of liability or the equivalent thereof of at least Five Million
Dollars ($5,000,000). Redeveloper's public liability insurance shall include
dram shop liability insurance or liquor liability insurance. All of
Redeveloper's public liability insurance policies shall be written to apply to
all bodily injury, property damage, personal injury and other covered loss,
however occasioned, occurring during the policy term, shall be endorsed to
provide that such coverage shall be primary and that any insurance maintained
by Agency shall be excess insurance only. Such coverage shall also contain
endorsements: (i) deleting any employee exclusion on personal injury coverage;
(ii) deleting any liquor liability exclusion; and (iii) providing for coverage
of employer's automobile non-ownership liability. All such insurance shall
provide for severability of interests or a cross-liability endorsement; shall
provide that an act or omission of one of the named insureds shall not reduce
or avoid coverage to the other named insureds; and shall afford coverage for
all claims based on acts, omissions, injury and damage, which claims occurred
or arose (or the onset of which occurred or arose) in whole or in part during
the policy period. The policy shall be endorsed to waive the insurer's rights
of subrogation against Agency.
(b) Workers' Compensation Insurance. Redeveloper shall also
-------------------------------
maintain Workers' Compensation insurance in accordance with California law,
and an employer's liability insurance endorsement with customary limits. The
policy shall be endorsed with a waiver of subrogation clause for Agency and
the City and their members, council members, officers, employees, and agents.
(c) Property Insurance.
------------------
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<PAGE>
(i) Redeveloper shall at Redeveloper's expense obtain and
keep in force during the Term of this Lease a policy of Broad Form (fire and
extended coverage) insurance covering loss or damage to the Property
(including the Improvements), and all furniture, fixtures, equipment, and
other personal property of Redeveloper, in the amount of the Full Replacement
Cost Value thereof, as the same may exist from time to time, against all
perils included within the classification of fire, extended coverage,
builder's risk, vandalism, malicious mischief, and special extended perils
("Special Form," as that term is known in the insurance industry). Agency and
Redeveloper shall be named as the loss payees on such policy, and any such
coverage for the Convention Center Parcel shall include a Lender's Loss
Payable endorsement in favor of Agency, but Agency's rights shall be subject
to the provisions of this Lease. If such insurance coverage has a deductible
clause, the deductible amount shall not exceed $100,000 per occurrence, and
Redeveloper shall be liable for such deductible amount. Redeveloper shall, in
addition, obtain and keep in force during the Term of this Lease a policy of
rental interruption insurance covering a period of one year, with loss payable
to Agency, which insurance shall also cover all Base Rent, Taxes and insurance
premiums for said period.
(ii) The "Full Replacement Cost Value" of the property to
be insured under this Section shall be determined by Redeveloper subject to
Redeveloper's exercise of its reasonable discretion. Not more frequently than
once every three (3) years, either party shall have the right to notify the
other party that it elects to have the Full Replacement Cost Value
redetermined by an independent party. The determination and redeterminations
shall be made promptly and in accordance with the rules and practices of the
Insurance Services Office, or a like board recognized and generally accepted
in the industry, and each party shall be promptly notified of the results by
the party making the determination. The insurance policy shall be adjusted
according to the redetermination.
(d) Insurance Policies.
------------------
(i) Not more frequently than once every three (3) years,
if in the reasonable opinion of Agency the amount or type of any insurance at
that time is not adequate, Redeveloper shall either acquire or increase the
insurance coverage as reasonably required by Agency.
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(ii) All insurance required under this Lease shall be
issued by companies having a Best's rating of B++vi or better and otherwise
reasonably satisfactory to Agency. Redeveloper shall deliver to Agency copies
of policies of such insurance or certificates evidencing the existence and
amounts of such insurance with loss payable clauses as required by this
Section 28. No such policy shall be cancelable or subject to reduction of
coverage or other modification except after thirty (30) days' prior written
notice to Agency. Redeveloper shall, at least thirty (30) days prior to the
expiration of such policies, furnish Agency with renewals or "binders"
thereof. Redeveloper shall not do or permit to be done anything which shall
invalidate the insurance policies referred to in this Section 28. All policies
of insurance shall name Agency and the City and their members, council
members, officers, employees and agents, and any additional parties designated
by Agency, as additional insureds (except to the extent Agency is the loss
payee or a Lenders Loss Payable endorsee).
(iii) Redeveloper shall not use the Property in any
manner, even if the use is for the purposes permitted herein, that will result
in the cancellation of any insurance required under this Lease. Redeveloper
further agrees not to keep on the Property or permit to be kept, used, or sold
thereon, anything prohibited by any fire or other insurance policy covering
the Property.
(iv) If Redeveloper shall fail to obtain any insurance
required under this Lease, Agency may, at its election, obtain such insurance
and Redeveloper shall, as additional rent, reimburse Agency for the cost
thereof plus a handling charge equal to Agency's costs in obtaining such
insurance including but not limited to staff salaries and overhead, within
five (5) days following demand therefor. If Redeveloper fails or refuses to
maintain insurance as required hereunder, or fails to provide the proof of
insurance, or fails to reimburse Agency for all costs of insurance including
the handling charges, Agency shall have the right to declare this Lease in
default without further notice to Redeveloper, and Agency shall be entitled to
exercise all legal remedies for breach of this Lease.
(v) All insurance required to be provided hereunder is in
addition to, and not in lieu of, the indemnity provisions of Sections 17(f)
and 17(g) hereof. The procuring of such required policies of insurance shall
not be construed to limit Redeveloper's liability hereunder, nor to fulfill
the indemnification provisions and requirements of this Lease.
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(vi) Redeveloper shall maintain the insurance described
herein from and after the earlier of (A) the close of escrow for the
Convention Center Parcel or (B) the date Redeveloper accepts possession of any
Parcel, through and until the expiration or sooner termination hereof.
(e) Waiver of Subrogation. Redeveloper and Agency each hereby
---------------------
release and relieve each other and the City, and waive their entire right of
recovery against the other and the City for loss or damage arising out of or
incident to the perils insured against under Section 17(c), which perils occur
in, on or about the Property, whether due to the negligence of Agency, the
City or Redeveloper or their agents, employees, contractors and/or invitees.
Redeveloper shall, upon obtaining the policies of insurance required
hereunder, give notice to the insurance carrier or carriers that the foregoing
mutual waiver of subrogation is contained in this Lease and obtain the
insurance carrier's consent thereto.
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(f) Indemnity. Redeveloper shall indemnify, defend, protect, and
---------
hold harmless Agency and the City (and Agency's and the City's members,
employees, agents and contractors) from and against any and all claims,
losses, proceedings, damages, causes of action, liability, costs and expenses
(including reasonable attorneys' fees), arising from or inconnection with, or
caused by (i) any act, omission or negligence of Redeveloper or any sublessee
of Redeveloper, or their respective contractors, licensees, invitees, agents,
servants or employees, wheresoever on or adjacent to the Property the same may
occur; (ii) any use of the Property, or any accident, injury, death or damage
to any person or property occurring in, on or about the Property, or any part
thereof, or from the conduct of Redeveloper's business or from any activity,
work or thing done, permitted or suffered by Redeveloper or its sublessees,
contractors, employees, or invitees, in or about the Property (other than to
the extent arising as a result of Agency's or the City's sole active
negligence or to the extent of any wilful misconduct of the Agency or the
City, but excluding any matter with respect to which Agency or City has or
enjoys the benefit of sovereign immunity); and (iii) any breach or default in
the performance of any obligations on Redeveloper's part to be performed under
the terms of this Lease, or arising from any negligence of Redeveloper, or any
such claim or any action or proceeding brought thereon; and in case any action
or proceeding be brought against Agency or the City (or Agency's or the City's
agents, members, employees, agents and contractors) by reason of any such
claim, Redeveloper upon notice from Agency shall defend the same at
Redeveloper's expense by counsel satisfactory to Agency. Redeveloper, as a
material part of the consideration to Agency, hereby assumes all risk of
damage to property or injury to persons in, upon or about the Property arising
from any cause other than Agency's gross negligence or intentional acts, and
Redeveloper hereby waives all claims in respect thereof against Agency. These
provisions are in addition to, and not in lieu of, the insurance required
under this Section 17.
Agency shall indemnify, defend, protect, and hold harmless
Redeveloper from and against any and all claims, losses, proceedings, damages,
causes of action, liability, costs and expenses (including attorneys' fees),
arising from or in connection with, or caused by (i) any matter arising prior
to the Effective Date (except when arising as a result of any inspection,
investigation, entry or other activity of Redeveloper on the Property), or
(ii) any litigation arising as the result of or in connection with a purported
prior sale of the Property.
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(g) Exemption of Agency from Liability. Except as provided to the
----------------------------------
contrary in Section 10(b) hereof, Redeveloper hereby assumes all risks and
liabilities of a landowner in the possession, use or operation of the
Property. Redeveloper hereby agrees that, Agency shall not be liable for
injury to Redeveloper's business or any loss of income therefrom or for damage
to the goods, wares, merchandise or other property of Redeveloper,
Redeveloper's employees, invitees, customers, contractors, workers, or any
other person in or about the Property, including any liability arising from
the physical condition of the Property or the presence of any hazardous or
toxic materials or substances on the Property, nor shall Agency be liable for
injury to the person of Redeveloper, Redeveloper's employees, agents or
contractors, whether such damage or injury is caused by or results from
hazardous or toxic materials or substances, fire, steam, electricity, gas,
water, or rain, or from the breakage, leakage, obstruction or other defects of
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether the said damage or injury results
from conditions arising upon the Property or from other sources or places and
regardless of whether the cause of such damage or injury or the means of
repairing the same is inaccessible to Redeveloper.
18. Condemnation.
------------
(a) Definitions.
-----------
(i) "Condemnation" means (A) the exercise of any
governmental power, whether by legal proceedings or otherwise, by a Condemnor
and (B) a voluntary sale or transfer by Agency to any Condemnor, either under
threat of condemnation or while legal proceedings for condemnation are
pending.
(ii) "Date of Taking" means the date the Condemnor has the
right to possession of the property being condemned.
(iii) "Award" means all compensation, sums, or anything of
value awarded, paid, or received on a total or partial condemnation.
(iv) "Condemnor" means any public or quasi-public
authority, or private corporation or individual, having the power of
condemnation or eminent domain.
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(b) Rights and Obligations Governed by Lease. If during the Term
----------------------------------------
there is any taking of all or any part of the Property (including the
Convention Center Parcel) or any interest in this Lease by Condemnation, the
rights and obligations of the parties shall be determined pursuant to this
Section. Each party waives the provisions of California Code of Civil
Procedure Section 1265.130 allowing either party to petition the Superior
Court to terminate this Lease in the event of a partial taking of the
Property.
(c) Total Taking. If the Property is totally taken by Condemnation,
------------
this Lease shall terminate on the Date of Taking. In the event of any such
termination, any Base Rent paid in advance shall be pro-rated through the date
the Lease is terminated.
(d) Partial Taking. If any portion less than all of the Property is
--------------
taken by Condemnation, this Lease shall remain in effect, except that
Redeveloper can elect to terminate this Lease if the portion of the Property
not so taken cannot be so repaired or reconstructed, taking into consideration
the amount of the award available for repair, so as to be suitable for
Redeveloper's continued use of the Property for the same use as the Property
is being used immediately prior to the taking and the remaining premises would
not be economically feasibly usable by Redeveloper. If Redeveloper elects to
terminate this Lease, Redeveloper must exercise its right to terminate by
giving notice to Agency within 90 days after the nature and the extent of the
taking have been finally determined. If Redeveloper elects to terminate this
Lease, Redeveloper also shall notify Agency of the date of termination, which
date shall not be later than 180 days after Redeveloper has notified Agency of
its election to terminate; except that this Lease shall terminate on the Date
of Taking if the Date of Taking falls on a date before the date of termination
as designated by Redeveloper. If Redeveloper does not terminate this Lease
within the ninety-day period, this Lease shall continue in full force and
effect.
(e) Restoration of Property. If there is a partial taking of the
-----------------------
Property and this Lease remains in full force and effect and pursuant to
Section 18(d), Redeveloper shall accomplish all necessary restoration.
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(f) Temporary Taking. On any taking of the temporary use of all or
----------------
any part or parts of the Property for a period, or of any estate less than a
fee, ending on or before the expiration date of the Term, the Term shall not
be reduced, extended, or affected in any way, and Redeveloper shall be
entitled to any Award for the use or estate taken. If a result of the taking
is to necessitate expenditures for changes, repairs, alterations,
modifications, or reconstruction of the improvements, Redeveloper shall
accomplish all necessary changes, repairs, alterations, modifications, or
reconstruction of the improvements at Redeveloper's sole cost and expense in
accordance with Section 11 hereof. If any such taking is for a period
extending beyond the expiration date of the Term, the taking shall be treated
under the foregoing provisions for total and partial takings, depending upon
whether the temporary taking is of all or only a part of the Property.
(g) Effect on Rent. If any portion of the Property is taken by
--------------
Condemnation and this Lease remains in full force and effect, there shall be
no effect on or reduction of the Base Rent or other rent payable hereunder
unless such Condemnation materially affects Redeveloper's ability to conduct
business from the Property, in which case Base Rent shall be adjusted in a
reasonable proportion reflecting the impact on Redeveloper's business by such
Condemnation.
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(h) Application of Award. Any award for any entire taking shall be
--------------------
apportioned between Agency and Redeveloper as their interests may appear. In
the event of a partial taking, any part of the award attributable to
improvements shall be divided between the parties in the manner provided in
Section 16(d)(ii) hereof, and, in consideration of the abatement of rent, any
part of the award attributable to land shall be paid to Agency; provided,
however, that nothing contained herein shall be deemed to give Agency any
interest in or require Redeveloper to assign to Agency any award made to
Redeveloper for the unamortized value of any improvements or furniture,
fixtures, or equipment or other personal property on the Property constructed
or provided by Redeveloper at Redeveloper's sole cost and expense in
accordance with this Lease (amortized on a straight line basis over the period
in which the cost of such improvements or furniture, fixtures or equipment or
personal property are credited to Base Rent), taking of personal property and
fixtures belonging to Redeveloper and removable by Redeveloper at the
expiration of the Term hereof (except to the extent Redeveloper has received a
rent credit therefor), as provided hereunder, or for the interruption of, or
damage to, Redeveloper's business or for relocation expenses recoverable
against the condemning authority, or in the event of a partial taking, the
cost of restoring the Property to a usable condition. Anything herein to the
contrary notwithstanding, in the event of a termination of the Lease by reason
of any such taking, Agency shall be relieved of any obligation to repay to
Redeveloper the initial purchase price of the Convention Center Parcel, it
being understood and agreed by the parties that Redeveloper's rights shall be
limited to the allocation of the award or settlement in lieu thereof.
(i) Waiver of Right to Take By Eminent Domain. Agency hereby waives
-----------------------------------------
its right to acquire the Property or any material part thereof by exercise of
the power of eminent domain, for the five year period from and after the
Effective Date, and any time after the opening of the Card Club for business.
19. Assignment, Subletting and Encumbering.
--------------------------------------
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(a) Prohibition Against Voluntary Assignment, Subletting, and
---------------------------------------------------------
Encumbering. Except as provided in this Section to the contrary, Redeveloper
-----------
shall not, without Agency's prior written consent, voluntarily assign or
encumber Redeveloper's interest in this Lease or in the Leasehold Parcels, or
sublease substantially all or any part of the Leasehold Parcels, or allow any
other person or entity (except Redeveloper's authorized representatives) to
occupy or use all or any part of the Property. For the purposes hereof, an
"encumbrance" shall mean mortgage, deed of trust, land sale contract, lease or
other financing device. Any attempted assignment, encumbrance, or sublease
shall be voidable by Agency and, at Agency's election, shall constitute a
default hereunder. No consent to any assignment, encumbrance, or sublease
shall constitute a further waiver of the provisions of this Section. Any sale
or transfer of the Convention Center Parcel other than as permitted hereunder
shall void the Agency's obligation to repurchase the Convention Center Parcel
upon termination of the Lease but not its right to do so at its option.
(b) Special Exceptions. Anything in Section 19(a) to the contrary
------------------
notwithstanding, Agency hereby acknowledges that:
(i) Redeveloper intends, immediately upon the commencement of the
Term of the Lease, to convey the Convention Center Parcel and assign this
Lease to Hollywood Park, Inc., and Hollywood Park, Inc., intends to let the
operation of the Card Club to Compton Entertainment Inc., or a third party.
Subject to Hollywood Park, Inc., assuming all obligations under this Lease,
Agency hereby consents to said conveyance and assignment of this Lease and
agrees that the original Redeveloper shall thereupon be relieved of all
obligations hereunder other than those obligations which accrued prior to the
date of the assignment, and other than those obligations specifically not
assumed by Hollywood Park, Inc.
(ii) At such time as Hollywood Park, Inc. qualifies to hold a gaming
license, it intends to convey the Convention Center Parcel and assign this
Lease to a joint venture composed of itself and CEI, and CEI intends to assign
its rights under the lease of the Card Club and the City of Compton Gaming
License to said joint venture. Provided that Hollywood Park, Inc., then holds
a majority in interest in equity ownership and managerial control of the joint
venture, Agency hereby consents to said conveyance and assignments.
(iii) Nothing herein shall be deemed to waive Agency's rights under
Section 19(a) with respect to any other or additional assignments or
sublettings, whether of a similar or dissimilar nature.
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(iv) The Agency shall not unreasonably withhold its consent to a
sublease of the Hotel. No consent by the Agency to any sublease or assignment
shall operate to release the Redeveloper or any assignee from any of
obligations hereunder undertaken by Redeveloper or assumed by such assignee,
except as provided in Section to the contrary.
(c) Right to Sublease Restaurant, Bar, Night Club, and Parking Area.
---------------------------------------------------------------
Notwithstanding the provisions of Section 19(a) hereof, Redeveloper shall have
the right, without Agency's consent, to lease or sublease discrete portions of
the Property, such as a restaurant, bar, nightclub, and parking areas, to an
operator, provided that Redeveloper shall provide to Agency thirty (30) days
prior written notice of the name of the sublessee and the name of the operator
of the restaurant, bar or nightclub.
Redeveloper shall not sublease or otherwise assign this DDA or the right to
operate the Card Club area to any person or entity that has not qualified
under Municipal Code 9-10 with respect to obtaining a license to operate a
card club.
(d) Corporate Reorganization. Any dissolution, merger,
------------------------
consolidation, or other reorganization of Redeveloper, or the sale or other
transfer of a controlling percentage of the capital stock of Redeveloper,
shall be deemed a voluntary assignment hereof. The phase "controlling
percentage" means the ownership of, or the right to vote, stock possessing 50%
or more of the total combined voting power of all classes of Redeveloper's
capital stock issued, outstanding, and entitled to vote for the election of
directors. As to any issuance or transfer of shares whatsoever, Redeveloper
shall promptly notify the Agency of (i) the number of shares issued or
transferred, (ii) the name of the recipient or transferee of such shares, and
(iii) the number of all shares of Redeveloper then issued and outstanding, and
the percentage of all shares so transferred or changed. In the event a
corporation whose stock is publicly traded shall become a successor in
interest to Redeveloper, then this preceding sentence shall apply only to a
transfer of 5% more of the voting securities of such corporation. If
Redeveloper changes to a partnership, the foregoing provisions shall similarly
apply to partnership interests so transferred or created.
(e) Encumbrance or Assignment as Security.
-------------------------------------
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<PAGE>
(i) Notwithstanding any other provision contained in this Lease,
Redeveloper shall have the right to encumber or assign Redeveloper's interest
in the Convention Center Parcel and in this Lease to any bank, savings and
loan, insurance company, or other institutional lender for the purpose of
financing the construction of the Initial Improvements or for purposes of
expansion on the Property and for the purpose of providing a take-out loan (in
a principal amount not to exceed the actual total cost of constructing such
Initial Improvements or of constructing the expansion facilities), provided
only that upon execution of such encumbrance (or any amendment, supplement or
modification thereto) a true copy of such instrument and the obligation
secured thereby be promptly delivered to Agency together with a written notice
of the name and mailing address of the lender, the date and place of recording
or filing of record thereof and recorder'sinstrument number, book and page
reference or other recorder's index reference. Until such true copies and
notice are delivered to Agency any such instrument shall have no force or
effect whatsoever on the enforcement by Agency of any provisions of this Lease
or any rights or remedies hereunder. During the existence of a permitted
encumbrance and following delivery thereof there shall be no cancellation,
surrender, acceptance of surrender or modification of this Lease except (i) by
a written instrument executed by Agency, Redeveloper and the lender, (ii) by
reason of Redeveloper's exercise of the option provided for in Section 30
hereof, or (iii) default under the Lease that is not timely cured by
Redeveloper or the lender. Lessor's interest in this Lease shall at all times
remain senior and superior to the lien of any deed of trust or mortgage
securing any such loan, and any such deed of trust or mortgage shall be
subject to Agency's right to reacquire the Convention Center Parcel upon
termination of the Lease, as hereinbefore provided.
(ii) All financing described in the preceding paragraph shall
provide that Agency shall have the right but not the obligation to assume
Redeveloper's financing for any improvement of the Property. Redeveloper
shall cause the lender to execute all documentation necessary to facilitate
this right. Agency's exercise of this right shall not constitute a waiver of
any other right Agency may have against Redeveloper.
20. Default.
-------
(a) Redeveloper's Default. The occurrence of any of the following
---------------------
shall constitute a default by Redeveloper:
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(i) Failure to pay rent or any other payment required to be made by
Redeveloper hereunder as and when due and the continuation of such failure to
pay rent for ten (10) days after delivery by Agency to Redeveloper of written
of such failure (in which event a Notice to Pay Rent or Quit provided in
accordance with Code of Civil Procedure Section 1161 (or any successor
statute) shall constitute the notice required for this purpose).
(ii) Failure to pay any Taxes which Redeveloper is obligated to pay,
other than possessory interest taxes to be paid by Agency pursuant to Section
8(a) hereof, on a timely basis, or the failure to provide any insurance
required hereunder, and the continuation of such failure for ten (10) days
after delivery by Agency of written of such failure to Redeveloper (in which
event a notice provided in accordance with Code of Civil Procedure Section
1161 (or any successor statute) shall constitute the notice required for this
purpose).
(iii) Abandonment or surrender of the Property or the leasehold
estate by Redeveloper.
(iv) Cessation in a material fashion of either the Hotel or Card
Club business for thirty (30) consecutive days. As used herein, cessation of
operation of the Hotel shall mean the failure to operate the main floor and at
least one floor of guest rooms, including service to said rooms. Said thirty
(30) day period shall be subject to Section 32 hereof and shall not include
any reasonably necessary periods of closure for repair or remodeling.
(v) Failure to comply timely with the obligations set forth in the
Schedule of Performance attached hereto as Exhibit 3, and the continuation of
such failure or the failure to commence performance and diligently pursue the
same to completion for thirty (30) days after receipt of written notice
thereof from Agency.
(vi) Failure to perform any other covenant or provision of this
Lease, if the failure to perform is not cured within thirty (30) days after
written notice. If the failure to perform cannot reasonably be cured within
thirty (30) days, Redeveloper shall not be in default of this Lease if
Redeveloper commences to cure the failure to perform within the thirty (30)
day period and thereafter diligently and in good faith prosecutes the cure to
completion.
(vii) The subjection of any right or interest to attachment,
execution, or other levy, or to seizure under legal process, if not released
within ninety (90) days after such levy.
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<PAGE>
(viii) An assignment by Redeveloper for the benefit of creditors or
the filing of a voluntary or involuntary petition by or against Redeveloper
under any law for the purpose of adjudicating Redeveloper a bankrupt; or for
extending time for payment, adjustment, or satisfaction of Redeveloper's
liabilities; or for reorganization, dissolution, or arrangement on account of
or to prevent bankruptcy or insolvency; unless the assignment or proceeding,
and all consequent orders, adjudications, custodies, and supervisions are
dismissed, vacated, or otherwise permanently stayed or terminated within
ninety (90) days after the assignment, filing, or other initial event.
(ix) The appointment of a receiver, unless such receivership is
terminated within ninety (90) days after the appointment of the receiver, to
take possession of Redeveloper's interest in the Property or of Redeveloper's
interest in the leasehold estate or of Redeveloper's operations on the
Property for any reason, including but not limited to, assignment for benefit
of creditors or voluntary or involuntary bankruptcy proceedings, but not
including receivership (A) pursuant to a permitted first leasehold
encumbrance, or (B) instituted by Agency, the event of default being not the
appointment of a receiver at Agency's instance but the event justifying the
receivership, or (C) commenced pursuant to any license dispute.
(x) Failure to pay when due any license fee for the Card Club
License as required by Section 9-10 of the Compton Municipal Code, or any
additional sums set forth in the City's Resolution No. 17,087, as amended, and
the continuation of such failure to pay such fee or sums for ten (10) days
after delivery by the City of Compton or Agency to Redeveloper of written
notice of such failure.
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<PAGE>
(xi) Termination, annulment, cancellation, revocation, repeal, or
rescission of any of Redeveloper's licenses or permits to operate a Card Club
from the Project, or any other failure of Redeveloper to keep in full force
and effect any license or permit required to operate the Card Club from the
Project, and the expiration of all appeals thereof or the expiration of the
time period for applying for an appeal or other procedure to reinstate the
license or permit pursuant to the terms of any applicable ordinances,
statutes, or regulations and the entry of a fraud judgment, supporting such
termination, punishment, cancellation, revocation, etc., of such licenses if
judicially reviewed; provided, however, notwithstanding the foregoing, if the
reason for the termination, annulment, cancellation, revocation, repeal, or
rescission is Redeveloper's failure to pay any fees to the City of Compton or
the State of California as and when due, then Redeveloper shall be in default
hereunder if such fees are not paid within sixty (60) days after their due
date. Anything herein to the contrary notwithstanding, in this event that the
then Redeveloper is not also the operator of the Card Club, the Redeveloper
shall have ninety (90) days within which to substitute an approved operator
for the Card Club, provided that the Agency shall extend such period for a
reasonable time upon a creditable showing that the reason for delay is a
matter not within the control of Redeveloper or its successor in interest.
(b) Security for Performance of Redeveloper's Duties. As additional
------------------------------------------------
collateral security for Redeveloper's performance of its obligations under
this Lease, Redeveloper shall execute and deliver to Agency:
(i) As provided in Section 1(d)(iii) hereof, a first deed of trust
and fixture filing encumbering the Convention Center Parcel, all improvements
thereon, and all rights attendant thereto.
(ii) A security agreement and a Financing Statement (UCC 1) covering
all furniture, fixtures and equipment and other personal property installed on
or used in connection with the Convention Center Parcel and any and all
replacements therefor or additions thereto.
(iii) A security agreement and a Financing Statement (UCC 1)
covering all furniture, fixtures and equipment and other personal property
installed on or used in connection with the Leasehold Parcels and any and all
replacements therefor or additions thereto.
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<PAGE>
Redeveloper, or its successors in interest, shall, at the request of
Agency, execute any additional financing statements or continuation statements
required to perfect and maintain the lien of such security agreements on the
personalty so encumbered, including any replacements therefor or additions
thereto, whether or not the filing period for any such continuation statement
may have expired.
(c) Remedies.
--------
(i) Cumulative Nature of Remedies. If any default by Redeveloper
-----------------------------
shall continue uncured, following notice of default as required by this Lease,
for the period, if any, applicable to the default under the applicable
provision of this Lease, Agency shall have the remedies described in this
subsection (c) in addition to all other rights and remedies provided by the
security instruments referred to in subsection (b) above or otherwise provided
by law or equity, to which Agency may resort cumulatively or in the
alternative.
(ii) Termination for Breach. Agency may at Agency's election
----------------------
terminate this Lease for breach by giving Redeveloper written notice of
termination. In the event Agency terminates this Lease, Agency may recover
possession of the Property (which Redeveloper shall surrender and vacate upon
demand) and remove all persons and property therefrom, and Agency shall be
entitled to recover as damages all of the following:
(A) The worth at the time of the award of any unpaid rent or other
charges which have been earned at the time of termination;
(B) The worth at the time of the award of the amount by which the
unpaid rent and other charges which would have been earned after termination
until the time of the award exceeds the amount of the loss of such rental or
other charges that Redeveloper proves could have been reasonably avoided;
(C) The worth at the time of the award of the amount by which the
unpaid rent and other charges for the balance of the term after the time of
the award exceeds the amount of the loss of such rental and other charges that
Redeveloper proves could have been reasonably avoided; and
(D) Any other amount necessary to compensate Agency for the
detriment proximately caused by Redeveloper's failure to perform its
obligations under this Lease or which in the ordinary course of things would
be likely to result therefrom.
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<PAGE>
As used in subsections (A) and (B) above, the "worth at the time of
the award" shall be computed by allowing interest at the rate of 10 percent
per annum. As used in subsection (C) above, the "worth at the time of the
award" shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award, plus one
percent.
(iii) Continuation of the Lease. Even though Redeveloper has
-------------------------
breached this Lease and abandoned the Property, at Agency's option this Lease
shall continue in effect for so long as Agency does not terminate
Redeveloper's right to possession, and Agency may enforce all of its rights
and remedies hereunder, including the right to recover rent as it comes due
under this Lease, and in such event Agency will permit Redeveloper to sublet
the Property or to assign its interest in the Lease, or both, with the consent
of Agency,which consent will not unreasonably be withheld provided the
proposed assignee or sublessee is reasonably satisfactory to Agency as to
credit and reputation and will occupy the Property for the same purposes
specified herein. For purposes of this subsection, the following shall not
constitute a termination of Redeveloper's right to possession: (i) acts of
maintenance or preservation or efforts to relet the Property; or (ii) the
appointment of a receiver under the initiative of Agency to protect Agency's
interest under this Lease.
(iv) Use of Redeveloper's Personal Property. In the event of
--------------------------------------
termination of the Lease for breach, Agency may at Agency's election use
Redeveloper's personal property and trade fixtures located on, about or
appurtenant to the Property or any of such property and fixtures without
compensation and without liability for use or damage, or store them for the
account and at the cost of Redeveloper. The election of one remedy for any
one item shall not foreclose an election of any other remedy for another item
or for the same item at a later time.
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<PAGE>
(v) Assignment of Subrents. Redeveloper assigns to Agency all
----------------------
subrents and other sums falling due from tenants, subtenants, licensees, and
concessionaires (herein collectively called "subtenants") during any period in
which Agency has the right under this Lease, whether exercised or not, to
reenter the Property for Redeveloper's default, and Redeveloper shall not have
any right to such sums during that period. This assignment is subject and
subordinate to any and all assignments of the same subrents and other sums to
the lender under a permitted first leasehold encumbrance. Agency may at
Agency's election upon the breach hereof by Redeveloper reenter the Property
with or without process of law, without terminating this Lease, and either or
both collect these sums or bring action for the recovery of the sums directly
from such obligors. Agency shall receive and collect all subrents and
proceeds from reletting, applying them: first, to the payment of reasonable
expenses (including attorneys' fees or brokers' commissions or both) paid or
incurred by or on behalf of Agency in recovering possession, placing the
Property in good condition, and preparing or altering the Property for
reletting; second, to the reasonable expense of securing new tenants or
subtenants; third, to the fulfillment of Redeveloper's covenants to the end of
the Term; and fourth, to Agency's uses and purposes. Redeveloper shall
nevertheless pay to Agency on the due dates specified in this Lease the
equivalent of all sums required of Redeveloper under this Lease, plus Agency's
expenses, less the proceeds of the sums assigned and actually collected under
this provision.
(d) Late Charge. Redeveloper hereby acknowledges that late payment
-----------
by Redeveloper to Agency of rent and other charges due under this Lease will
cause Agency to incur costs not contemplated by this Lease, the exact amount
of which will be extremely difficult to ascertain. Such costs include, but
are not limited to processing and accounting charges, and late charges which
may be imposed on Agency by the terms of any mortgage or trust deed covering
the Property, or bond issues of Agency. Accordingly, if any installment of
rent or any other charge due from Redeveloper is not received by Agency or
Agency's designee within ten (10) days after such amount shall be due, then,
at Agency's election and upon Agency's demand, Redeveloper shall pay to Agency
a late charge equal to five percent (5%) of such overdue amount. The parties
hereby agree that such late charge represents afair and reasonable estimate of
the costs Agency will incur by reason of the late payment by Redeveloper. No
late charge may be imposed more than once for the same late rental payment.
Acceptance of such late charge by Agency shall in no event constitute a waiver
of Redeveloper's default with respect to such overdue amount, nor prevent
Agency from exercising any other rights and remedies granted to it hereunder.
(e) Lender's Right to Cure Defaults.
-------------------------------
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<PAGE>
(i) Notice of Default. Concurrently with giving notice of default
-----------------
to Redeveloper under Section 20(a), above, Agency shall deliver a copy of such
notice of default to the lender under a permitted encumbrance at its address
as furnished to Agency in accordance with Section 19(e).
(ii) Lender's Right to Cure. During the continuance in effect of a
----------------------
permitted encumbrance, Agency will not terminate this Lease because of any
default on the part of Redeveloper if the lender, within 30 days after Agency
has sent a written notice pursuant to Section 20(a):
(A) Cures such default, if the default can be cured by the payment
of money, or, if the default is not curable by the payment of money, commences
or causes the trustee under the encumbrance to commence, and thereafter
diligently pursues to completion proceedings to foreclose the encumbrance; and
(B) Keeps and performs all of the covenants and conditions of this
Lease requiring the payment or expenditure of money by Redeveloper until such
time as Redeveloper's leasehold interest is sold upon foreclosure pursuant to
the encumbrance, or transferred by an assignment in lieu of foreclosure.
(iii) Transfer by Lender. Notwithstanding the provisions of
------------------
Section 19(a) hereof restricting assignment of this Lease, this Lease may be
assigned to the lender by judicial or non-judicial foreclosure or by
assignment in lieu of foreclosure (without, however, releasing Redeveloper
from any of its obligations hereunder) without further consent of Agency or
any assumption agreement by the lender, the liability of the lender being
limited to the period of its possession or ownership of this Lease. No other
or further assignment shall be made except in accordance with the provisions
of Section 19(a) of this Lease.
(f) Waiver of Rights. Redeveloper hereby waives any right of
----------------
redemption or relief from forfeiture under California Code of Civil Procedure
Sections 1174 or 1179, or under any other present or future law, in the event
Redeveloper is evicted or Agency takes possession of the Property by reason of
any default by Redeveloper hereunder.
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(g) Agency's Default. Agency shall not be deemed to be in default
----------------
in the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within ninety (90)
days after written notice by Redeveloper to Agency specifying wherein Agency
has failed to perform such obligation; provided, however, that if the nature
of Agency's obligation is such that more than ninety (90) days are required
for its performance, then Agency shall not be deemed to be in default if it
shall commence such performance within such ninety (90) day period and
thereafter diligently and in good faith prosecute the cure to completion.
21. Agency's Entry on Property. Agency and its authorized
--------------------------
representatives shall have the right to enter the Property at all reasonable
times upon reasonable notice to Redeveloper for any of the following purposes:
(a) To determine whether the Property is in good condition and
whether Redeveloper is complying with its obligations under this Lease;
(b) To do any necessary maintenance and to make any restoration to
the Property that Agency has the right to perform;
(c) To serve, post, or keep posted any legal notices required or
allowed under the provisions of this Lease;
(d) During the last two years of the Term hereof, to show the
Property to prospective brokers, agents, buyers, lenders, or persons
interested in an exchange, at any time during the Term.
Agency shall not be liable in any manner for any inconvenience, disturbance,
loss of business, nuisance, or other damage arising out of Agency's entry on
the Property as provided in this Section, except damage resulting from the
acts or omissions of Agency or its authorized representatives. Redeveloper
shall not be entitled to an abatement or reduction of rent if Agency exercises
any rights reserved in this Section. Agency shall conduct its activities on
the Property as allowed in this Section in a manner that reasonably attempts
to minimize any inconvenience, annoyance, or disturbance to Redeveloper's
construction or business operations.
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22. Notices. Any notice, demand, request, consent, approval or
-------
communication that either party desires or is required to give to the other
party shall be in writing and shall be given to the addresses set forth below,
and shall be deemed delivered three days after deposit into the United States
mail, postage prepaid, by registered or certified mail, return receipt
requested. Unless notice of a different address has been given in accordance
with this Section, all such notices shall be addressed as follows:
If to Agency, to: Community Redevelopment Agency of the City of
Compton
205 South Willowbrook Avenue
Compton, California 90220
Attn: Executive Director
With a copy to: Richards, Watson & Gershon
333 South Hope Street, 38th Floor
Los Angeles, California 90071
Attn: William L. Strausz
If to Redeveloper, to: Compton Entertainment, Inc.
15045 Salt Lake Avenue
Industry, California 91746
Attn: President
With a copy to: Mitchell, Silberberg & Knupp
11377 West Olympic Boulevard
Los Angeles, California 90064
Attn: Jerry Neuman
23. Interest on Past-due Obligations. Any amount due to Agency
--------------------------------
which not paid when due shall bear interest at the maximum rate then allowable
to be charged by non-exempt lenders under the usury and other applicable laws
of the State of California from the date due until paid. Payment of such
interest shall not excuse or cure any default by Redeveloper under this Lease.
24. Attorneys' Fees.
---------------
(a) If either party becomes a party to any litigation concerning
this Lease or the Property, by reason of any act or omission of the other
party or its authorized representatives, the other party shall be liable to
such party for such party's actual attorney's fees and court costs incurred by
it in the litigation. In the event of any litigation is undertaken against
Agency concerning the validity of this DDA, Redeveloper shall indemnify,
defend, and hold harmless Agency for all costs and expenses incurred by
Agency on account of such litigation. Such defense shall be undertaken by
legal counsel mutually selected by Agency and Redeveloper. Provided, however,
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if Agency shall become a defendant to any lawsuit concerning the validity of
this DDA, and Redeveloper informs Agency that it does not wish to indemnify,
hold harmless and defend Agency, then Agency may immediately cancel and
terminate this DDA without any liability to Redeveloper whatsoever, and
Redeveloper shall be relieved of all liability hereunder other than liability
for matters (other than the defense of such litigation) which arose prior to
such termination.
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(b) If either party commences an action against the other party
arising out of or in connection with this Lease, the prevailing party shall be
entitled to have and recover from the losing party reasonable attorneys' fees
and costs of suit.
25. Estoppel Certificates. At any time and from time to time,
---------------------
within thirty (30) days after notice of request by either party, the other
party shall execute, acknowledge, and deliver to the requesting party, or to
such other recipient as the notice shall direct, a statement certifying that
this Lease is unmodified and in full force and effect; or, if there have been
modifications, that it is in full force and effect as modified in the manner
specified in the statement and acknowledging that there are no uncured
defaults or failures to perform any covenant or provision of this Lease on the
part of the requesting party or specifying any such defaults or failures which
are claimed to exist. The statement shall also state the dates to which the
rent and any other charges have been paid in advance. The statement shall be
such that it can be relied on by any auditor, creditor, commercial banker, and
investment banker of either party and by any prospective purchaser or the
lender of the Property or all or any part or parts of Redeveloper's or
Agency's interests under this Lease. Either party's failure to execute,
acknowledge, and deliver, on request, the certified statement described above
within the specified time shall constitute a breach of this Lease.
26. Surrender of Property. At the expiration or earlier
---------------------
termination of the Term (other than by reason of the exercise of the option
set forth in Section 30 hereof), Redeveloper shall surrender to Agency the
possession of the Property. Surrender or removal of improvements, fixtures
and trade fixtures shall be as directed in the provisions of this Lease on
ownership of improvements, fixtures and trade fixtures at expiration or
termination. Except as provided in Section 25 hereof to the contrary,
Redeveloper shall leave the surrendered property and any other property in
good and broom clean condition. All personal property that Redeveloper is not
required to surrender but that Redeveloper does abandon shall, at Agency's
election, become Agency's property at the expiration or the sooner termination
of this Lease.
27. Form of Nondiscrimination and Nonsegregation Clauses; Local
-----------------------------------------------------------
Hiring and Affirmative Action.
-----------------------------
(a) Redeveloper shall refrain from restricting the rental, sale or
lease of the Property, or any portion thereof, on the basis of sex, age,
handicap, marital status, race, color, religion, creed, ancestry or national
origin of any person. All deeds, leases or contracts of sale shall contain or
be subject to substantially the following nondiscrimination or nonsegregation
clauses:
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1. In deeds: "The grantee herein covenants by and for himself, his
heirs, executors, administrators and assigns, and all persons claiming under
or through them, that there shall be no discrimination against or segregation
of, any person or group of persons on account of sex, marital status, race,
age, handicaps color, religion, creed, national origin or ancestry in the
sale, lease, sublease, transfer, use, occupancy, tenure or enjoyment of the
land herein conveyed, nor shall the grantee himself or any person claiming
under or through him, establish or permit any such practice or practices of
discrimination or segregation with reference to the selection, location,
number, use or occupancy of tenants, lessees, subtenants, sublessees or
vendees in the land herein conveyed. The foregoing covenants shall run with
the land."
2. In leases: "The lessee herein covenants by and for himself, his
heirs, executors, administrators and assigns, and all persons claiming under
or through him, and this lease is made and accepted upon and subject to the
following conditions:
'That there shall be no discrimination against or segregation of any
person or group of persons on account of sex, marital status, race, age,
handicap, color, religion, creed, national origin or ancestry, in the leasing,
subleasing, transferring, use, or enjoyment of the land herein leased, nor
shall the lessee himself, or any person claiming under or through him,
establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or
occupancy, of tenants, lessees, sublessees, subtenants or vendees in the land
herein leased.'"
3. In contracts relating to the sale or transfer of the Property or any
interest therein: "There shall be no discrimination against or segregation of
any person or group of persons on account of sex, marital status, race, age,
handicap, color, religion, creed, national origin or ancestry in the sale,
lease, sublease, transfer, use, occupancy, tenure or enjoyment of the land,
nor shall the transferee himself or any person claiming under or through him,
establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or
occupancy, of tenants, lessees, subtenants, sublessees or vendees of the
land."
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(b) Redeveloper further understands and agrees that in fulfillment
of the provisions of this DDA, including this Lease, and in complying with the
request of the Agency and the City Council of the City, that the creation of
new jobs from this Project shall be filled with residents of the City of
Compton who have lived in the City of Compton for more than one year, to the
extent that it is practical and reasonable. Redeveloper shall make every
reasonable effort to fulfill the provisions of this DDA, including the Lease,
by complying with Ordinance No. 1667 of the City of Compton, relating to an
Affirmative Action Program. Redeveloper shall work with local institutions to
establish training programs to assist in ensuring a qualified local applicant
base is established for all levels of employment at the Hotel, the
Entertainment Center, and any related enterprises. Further, preferences shall
be given to local residents when such residents demonstrate equal capability
relative to other applicants for the same job. The covenants and agreements
set forth in this subsection (b) shall survive the expiration or termination
of this Lease after acquisition of title to the Property by Redeveloper,
whether by exercise of the Option to purchase or otherwise.
28. Local Contractors. Redeveloper shall make commercially
-----------------
reasonable efforts to allocate the work associated with the construction of
the Initial Improvements in a manner which provides local contractors with an
opportunity to participate in such work. Contracts for the Initial
Improvements shall be let on the basis of price, quality of service and
reputation. Further, preferences shall be give to local contractors and
minority owned businesses when such contractors demonstrate equal capability
and bondability relative to other contractors for the scope of work to be
performed.
29. Expansion Parcels.
-----------------
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(a) Subject to the provisions of Section 29(b), during the first
fifteen (15) years Lease Years of the Term, Agency shall have the full right
to use the Expansion Parcels, without payment of consideration to Redeveloper.
Any such use shall be of a type which shall not disturb Redeveloper's quiet
enjoyment of the balance of the Property or otherwise adversely affect the use
thereof. Agency shall retain all rentals and other revenues payable on
account of the Expansion Parcels. Provided, however, that Redeveloper shall
have the right, upon ninety (90) days notice in writing to Agency, to
terminate Agency's use of the Expansion Parcels. Redeveloper shall terminate
Agency's use of the Expansion Parcels only upon delivery to Agency of plans
and specifications and financing commitments, as described in Section 11
hereof, for a new card club or casino or other use permitted by the Agency on
the Expansion Parcels, together with reasonable evidence satisfactory to
Agency that Redeveloper shall open the new card club or casino or other use
permitted by the Agency for business within nine (9) months after the
termination date of Agency's right to use the Expansion Parcels.
(b) If Redeveloper does not open the new card club or casino or
other use permitted by the Agency for business on the Expansion Parcels or
another portion of the Property in compliance with Section 9(g) hereof prior
to the expiration of the 15th Lease Year, and Agency receives a bona fide
proposal, from a reputable third party developer with the capacity to perform,
which proposal Agency wishes to accept, Agency shall give notice in writing
thereof to Redeveloper. Unless, within said ninety (90) day notice period,
Redeveloper irrevocably commits to either (i) open a new casino or card club
or other permitted use on the Expansion Parcels within one year thereafter, or
(ii) undertake the same type of development as has been proposed by the
offeror or one meeting or exceeding the benefit to the Agency of that of the
offeror, Agency shall have the right to proceed with the other transaction,
and, upon the closing thereof, all Redeveloper's rights in the Expansion
Parcels shall terminate and shall be of no further force or effect. In such
event, the purchase price set forth in the Option (described below), shall be
reduced as provided in Section 30(e) hereof, and the Base Rent shall be
equitably reduced (based upon the values established in the Agency's original
appraisal for the parcels comprising the Property), effective upon the closing
of the transaction between Agency and the third party developer. Any attempt
by Redeveloper to wrongfully interfere with the other transaction or the
closing thereof, other than by committing to the expansion as provided
hereinabove, may, at the option of Agency, be deemed default hereunder.
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30. Option to Purchase. Agency hereby grants to Redeveloper the
------------------
option to purchase the Leasehold Parcels, including all buildings, furniture,
furnishings and equipment and inventory of food, beverages and other supplies
(the "Option"), subject to the following terms and conditions:
(a) Subject to the provisions hereof, Redeveloper may deliver a
written notice of Redeveloper's election exercise the Option at any time
during the Term hereof. Escrow shall close on or before ninety (90) days
after receipt by Agency of Redeveloper's written notice of Redeveloper's
election to exercise the Option, and Agency shall deliver to Redeveloper
marketable title to the Leasehold Parcels free and clear of any encumbrances
other than those (i) in existence at the Effective Date, (ii) approved by
Redeveloper pursuant to this Lease, or (iii) created or incurred by
Redeveloper; provided, however, the Property shall be free and clear of all
monetary liens in existence on the Effective Date other than those created by
Redeveloper (including, without limitation, deeds of trust executed by the
Redeveloper, its successors and assigns, and mechanics liens resulting from
work performed at the request of the Redeveloper). Agency agrees that it will
not voluntarily encumber title to the Leasehold Parcels without Redeveloper's
prior written consent. At the closing, Agency shall deliver to Redeveloper a
good and sufficient grant deed with respect to the Leasehold Parcels.
(b) Redeveloper shall have no right to exercise the Option,
notwithstanding any provision in the grant of option to the contrary (i) at
any time when Redeveloper is in default hereunder and continuing until the
default is cured, or (ii) during the period of time commencing on the day
after a monetary obligation to Agency is due from Redeveloper and unpaid
(without any necessity for notice thereof to Redeveloper) and continuing until
the obligation is paid, or (iii) in the event that this Lease has been
terminated for any reason, or (iv) during any time Redeveloper's payment of
license fees required by Section 9-10 of the Compton Municipal Code, or
additional sums set forth in the City's Resolution No. 17,087, as amended, is
due and unpaid, or (v) during any time any license or permit of Redeveloper or
any subtenant or operator to operate a Card Club from the Property is
suspended and has not been reinstated, subject, however, to the right of
Redeveloper to replace an operator pursuant to Section 20(a)(xi) hereof.
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(c) All rights of Redeveloper under this Section shall terminate and
be of no further force or effect, if this Lease is terminated for any reason,
or if any license or permit from the City of Compton or the State of
California to operate a Card Club from the Property is terminated, annulled,
canceled, revoked, repealed, or rescinded, or any other failure of Redeveloper
or an operator claiming under Redeveloper to keep in full force and effect any
license or permit required to operate the Card Club from the Project, and the
expiration of all appeals thereof or the expiration of the time period for
applying for an appeal or other procedure to reinstate the license or permit
pursuant to the terms of any applicable ordinances, statutes, or regulations;
provided, however, notwithstanding the foregoing, if the reason for the
termination, annulment, cancellation, revocation, repeal, or rescission is
Redeveloper's failure to pay any fees to the City of Compton or the State of
California as and when due, then Redeveloper's rights under this Option shall
terminate if such fees are not paid within 60 days after their due date.
(d) The Option granted to Redeveloper in this Lease is personal to
Redeveloper, and may not be assigned voluntarily or involuntarily, or be
exercised by any person or entity other than Redeveloper or a permitted
assignee of Redeveloper.
(e) Redeveloper shall have the right to elect to purchase only the
Hotel Parcel and the Parking Parcels at the time Redeveloper exercises the
Option. In such case,at the time Redeveloper exercises the Option,
Redeveloper may elect either (i) to terminate this Lease as to the Expansion
Parcels, or (ii) continue this Lease with respect to the Expansion Parcels.
If Redeveloper elects to continue this Lease with respect to the Expansion
Parcels, then upon the close of escrow for the Hotel Parcel and Parking
Parcels, the Base Rent for the Expansion Parcels shall be fifty-nine percent
(59%) of the Base Rent set forth in Section 10, and there shall be a
termination of any remaining Rent Reduction/Credit pursuant to Section 10.
Thereafter, the Redeveloper shall continue to have the option to purchase the
Expansion Parcels, subject to the provisions hereof.
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(f) (i) If Redeveloper purchases all the Leasehold Parcels at once,
then the purchase price of the Leasehold Parcels shall be the sum of
$8,082,500.00, increased at the rate of two percent (2%) per annum, simple
interest, from the Effective Date, and decreased in an amount equal to
interest at the rate of five percent (5%) per annum, simple interest,
calculated on the purchase price of the Convention Center Parcel from the
Effective Date to the date of closing of the purchase under the Option;
provided, however, that the purchase price as so adjusted shall not be greater
than the fair market value of the Property but, in no case, shall the ultimate
purchase price be less than $8,082,500.00.
(ii) If Redeveloper purchases only the Hotel Parcel and the Parking
Parcels (whether due to the severing of the Expansion Parcel from this Lease
due to the provisions of Section , or Redeveloper's election to purchase only
the Hotel Parcel and Parking Parcels, as provided in Section ), then the
purchase price of the Hotel Parcel and the Parking Parcels shall be the sum of
$3,350,000.00, regardless of when purchased./1/
(iii) If upon acquisition of the Hotel Parcel and Parking Parcels
Redeveloper has elected to continue this Lease, and thereafter purchases the
Expansion Parcels, then the purchase price of the Expansion Parcels shall be
calculated pursuant to the following formula:
EPPP = 4,732,500 + (8,082,500 x .01 x (HPPD - ED)) + (4,732,500 x .02 x
(EPPD - HPPD))
utilizing the following definitions:
EPPP = Expansion Parcels Purchase Price
HPPD = Hotel Parcel and Parking Parcels Date of Purchase
ED = Effective Date
EPPD = Expansion Parcels Date of Purchase
utilizing the number of years, and any fraction thereof, between the HPPD, the
ED, and the EPPD for the purpose of calculating the resulting factors.
- -----------
/1/ This is due to the fact that the parties had agreed to a base price of
the Hotel Parcels and Parking Parcels in the sum of $3,350,000, increased at
the rate of 2% per annum from the Effective Date, and reduced by the sum of
the credit of 5% of the $2,000,000 purchase price for the Convention Center
Parcel. However, due to the fact that such amount would result in a purchase
price of less than $3,350,000, the parties have agreed to fix the purchase
price of the Hotel Parcels and the Parking Parcels at $3,350,000.
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(g) The purchase price shall be paid in all cash through the close
of escrow. Agency will pay the cost of a CLTA policy of title insurance, any
documentary transfer tax, and one half of the escrow fees. Redeveloper will
pay cost of recording, the additional premium and any expenses (including
survey costs) in the event Redeveloper desires to obtain an extended coverage
policy of title insurance, and the other half of the escrow fees. In
connection therewith, the parties shall execute normal and necessary escrow
instructions and all documents reasonably called for thereunder, so long as
such instructions and documents are not inconsistent herewith.
31. Holding Over. If Redeveloper, with Agency's consent, remains
------------
in possession of the Leasehold Parcels or any part thereof after the
expiration or termination of the Term of this Lease, such occupancy shall be a
tenancy from month to month upon all the provisions of this Lease pertaining
to the obligations of Redeveloper, except that the annual Base Rent shall be
150% of the annual Base Rent set forth in Section 10, above (as, and if,
adjusted pursuant hereto), and shall be payable monthly, in advance, in
installments equal to 1/12th of the annual Base Rent so calculated.
32. Force Majeure; Extension of Times of Performance.
------------------------------------------------
(a) Force Majeure. Except as otherwise provided in this Lease,
-------------
delay in performance by any party hereunder shall not be a default where
delays or defaults are due to war; insurrection; strikes; lock-outs; riots;
floods; earthquakes; fires; casualties; acts of God; acts of the public enemy;
epidemics; quarantine restrictions; freight embargoes; shortages of
transportation; unusually severe weather; or any other causes (other than
financial inability) beyond the reasonable control or without the fault of the
party claiming an extension of time to perform. An extension of time for any
such cause shall only be for the period of the delay, which period shall
commence to run from the time of the commencement of the cause, if written
notice by the party claiming such extension is delivered to the other party
within ten (10) days after commencement of the cause, and shall otherwise
commence to run from the date of delivery of such notice.
(b) Extension of Time. If prior to a date which is three months
-----------------
after the Effective Date, any lawsuit is filed by a third party against Agency
on account of the California Environmental Quality Act ("CEQA") or otherwise
challenging Agency's ability to enter into this transaction to lease the
Property for the purposes hereof, or against the City of Compton on account of
the card club license in favor of Redeveloper, then, to the extent permitted
by law, the time periods provided herein shall be tolled until resolution of
such lawsuits in favor of Agency or City, as the case may be or until there
has been
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<PAGE>
compliance with CEQA, and the parties shall cooperate in the defense of such
action, with the costs ofsuch defense being borne as hereinabove provided,
and/or shall take all steps necessary to comply with the requirements of CEQA.
33. Sale or Transfer by Agency. In the event of any transfer or
--------------------------
transfers of Agency's interest in the Property, other than a transfer for
security purposes only, the transferor shall automatically be relieved of any
and all obligations and liabilities on the part of the Agency accruing from
and after the date of such transfer; provided, however, that any funds in the
hands of Agency in which Redeveloper has an interest, at the time of such
transfer, shall be turned over to the transferee and upon such transfer,
Agency shall be discharged from any further liability with reference to such
funds. The covenants and obligations of Agency contained in this Lease shall
be binding upon Agency, its successors and assigns only during their
respective periods of ownership. Any transferee must, however, comply with
the requirements of the Gaming Laws of the State of California to the extent
applicable.
34. Limitation on Recourse Against Agency. Redeveloper agrees to
-------------------------------------
look solely to Agency's interest in the Property and the real property of
which it is a part (or the proceeds thereof) for the satisfaction of any
remedy of Redeveloper, for the collection of a judgment (or other judicial
process) requiring the payment of money by Agency in the event of any default
by Agency hereunder (other than with respect to Agency's obligations pursuant
to Section 10(b) hereof), and no other property or assets of Agency shall be
subject to levy, execution, or other enforcement procedure for the
satisfaction of Redeveloper's remedies under or with respect to this Lease,
the relationship of Agency and Redeveloper hereunder, or Redeveloper's use or
occupancy of the Property. Under no circumstances shall Redeveloper have any
recourse against any tax increment revenues of Agency. Any obligations of
Agency hereunder to deliver any funds to Redeveloper shall not be secured by
any lien upon or pledge of the Agency's tax increment, and such obligations
shall be subordinate and inferior to any and all rights, including but not
limited to a pledge of any such moneys, created by (A) any bonded indebtedness
now or hereafter created by the Agency, and (B) any loan agreement, lease
agreement, or other obligation or agreement now or hereafter entered into by
the Agency, or otherwise from time to time outstanding that is secured by a
pledge of tax increment.
35. Redeveloper's Representations and Warranties. Redeveloper
--------------------------------------------
makes the following representations and warranties as of the date of this
Lease and agrees that such representations and warranties shall survive and
continue thereafter:
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(a) Status. If Redeveloper is a corporation, it is duly organized,
------
validly existing, in good standing under the laws of the state of its
incorporation, has stock outstanding, which has been duly and validly issued,
and is qualified to do business and is in good standing in the State of
California with full power and authority to perform the obligations
contemplated hereby. If Redeveloper is a partnership, it is duly formed and
validly existing and has all power and authority to consummate the
transactions contemplated hereby. If Redeveloper is a limited liability
company, it is duly formed and validly existing and has all power and
authority to perform the obligations contemplated hereby.
(b) Authority. Redeveloper has complied with all laws and
---------
regulations concerning its organization, existence and transaction of
business. Redeveloper has the right and power to own and develop the Project
and Initial Improvements thereon as contemplated in this Lease.
(c) No Litigation. There is no litigation, action, suit, or other
-------------
proceeding pending or threatened against Redeveloper, the Property, or the
Project which may in any manner whatsoever substantially adversely affect the
validity, priority, or enforceability of this Lease or the construction, use,
occupancy or operation of the Project.
(d) Enforceability. Redeveloper has full right, power and authority
--------------
to execute and deliver this Lease and all instruments executed pursuant
hereto, and to perform the undertakings of Redeveloper contained in this Lease
and all agreements executed pursuant hereto. This Lease and all agreements
executed pursuant hereto constitute valid and binding obligations of
Redeveloper which are legally enforceable in accordance with their terms,
subject to the laws of bankruptcy, creditor's rights exceptions, and equity.
(e) No Breach. None of the undertakings of Redeveloper contained in
---------
this Lease and all agreements executed pursuant hereto violates or any
applicable statute, law, regulation or ordinance or any order or ruling of any
court or governmental entity, or conflicts with, or constitutes a breach or
default under, any agreement by which Redeveloper is, or the Project and
Improvements thereon are, bound or regulated.
(f) Financial Information. All financial information delivered to
---------------------
Agency by Redeveloper, including, without limit, information relating to
Redeveloper, the Property, the Project, and the Improvements thereon, fairly
and accurately represents such financial condition. No material adverse
change in such financial condition has occurred.
(g) Proceedings. To the best of Redeveloper's knowledge,
-----------
Redeveloper is not in violation of any statute, law,
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regulation or ordinance, or of any order of any court or governmental entity.
(h) Accuracy. To the best of Redeveloper's knowledge, all
--------
documents, reports, instruments, papers, data, information and forms of
evidence delivered to Agency by Redeveloper with respect to this Lease and all
agreements executed pursuant hereto are accurate and correct, are complete
insofar as completeness may be necessary to give Agency true and accurate
knowledge of the subject matter thereof, and do not contain any material
misrepresentation or omission. Agency may rely on such reports, documents,
instruments, papers, data, information and forms of evidence without any
investigation or inquiry.
(i) Taxes. To the best of Redeveloper's knowledge, Redeveloper has
-----
filed all federal, state, county and municipal tax returns required to have
been filed by Redeveloper, and has paid all taxes which have become due
pursuant to such returns or toany notice of assessment received by
Redeveloper. Redeveloper has no knowledge of any basis for additional
assessment with respect to such taxes.
36. Agency's Representations and Warranties. Agency makes the
---------------------------------------
following representations and warranties as of the date of this Lease and
agrees that such representations and warranties shall survive and continue
thereafter:
(a) No Litigation. There is no litigation, action, suit, or other
-------------
proceeding pending or threatened against Agency, the Property, or the Project
which may in any manner whatsoever substantially adversely affect the
validity, priority, or enforceability of this Lease or the construction, use,
occupancy or operation of the Project.
(b) Enforceability. Agency has full right, power and authority to
--------------
execute and deliver this Lease and all instruments executed pursuant hereto,
and to perform the undertakings of Agency contained in this Lease and all
agreements executed pursuant hereto. This Lease and all agreements executed
pursuant hereto constitute valid and binding obligations of Agency which are
legally enforceable in accordance with their terms, subject to the laws of
bankruptcy, creditor's rights exceptions, and equity.
(c) No Breach. None of the undertakings of Agency contained in this
---------
Lease and all agreements executed pursuant hereto violates or any applicable
order or ruling of any court or governmental entity, or conflicts with, or
constitutes a breach or default under, any agreement by which Agency is, or
the Project and Improvements thereon are, bound or regulated.
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(d) Entitlements. The proposed development and use of the Property
------------
is consistent with City's General Plan and all applicable zoning and land use
ordinances and regulations.
37. Miscellaneous.
-------------
(a) Governing Law. This Lease shall be construed and interpreted in
-------------
accordance with the laws of the State of California.
(b) Time of Essence. Time is of the essence herein.
---------------
(c) Additional Rent. Any monetary obligations of Redeveloper to
---------------
Agency under the terms of this Lease shall be deemed to be rent.
(d) Quiet Enjoyment. Upon Redeveloper's paying the Base Rent and
---------------
other sums provided hereunder when due, and observing and performing all of
the covenants, conditions, and provisions on Redeveloper's part to be observed
and performed hereunder, Redeveloper shall enjoy the quiet possession of the
Leasehold Parcels for the entire term hereof, subject to all of the provisions
of this Lease.
(e) Transfer of Agency's Interest. In the event of any transfer or
-----------------------------
transfers of Agency's interest in the Property, the transferor shall be
automatically relieved of any and all obligations and liabilities on the part
of Agency accruing from and after the date of such transfer.
(f) Waiver. The waiver by Agency or Redeveloper of any breach by
------
the other party of any term, covenant, or condition herein contained shall not
be deemed to be a waiver of such term, covenant, or condition or any
subsequent breach of the same or any other term, covenant, or condition herein
contained. The subsequent acceptance of all or part of the rent due hereunder
by Agency shall not be deemed to be a waiver of any preceding breach by
Redeveloper of any term, covenant, or condition of this Lease, other than the
failure to pay the particular rent so accepted, regardless of Agency's
knowledge of such preceding breach at the time of acceptance of such rent.
Acceptance by Agency of a part payment of the rent due shall not be construed
as a waiver by Agency of any rights to collect the balance of the rent due.
(g) Brokers. Each party warrants to and for the benefit of the
-------
other that it has had no dealings with any real estate broker or other agent
(attorneys excepted) in connection with the negotiation or making of this
Lease. Agency shall indemnify Redeveloper for breaches by Agency of this
warranty,
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and Redeveloper shall indemnify Agency for any breaches by Redeveloper of this
warranty.
(h) Headings. The captions of the various sections of this Lease
--------
are for convenience and ease of reference only and do not define, limit,
augment, or describe the scope, content, or intent of this Lease or of any
part or parts of this Lease.
(i) Inspection Of Books and Records. Agency shall have the right at
-------------------------------
all reasonable times to inspect the books and records of Redeveloper relevant
to the purposes of this Lease.
(j) Merger. The voluntary or other surrender of this Lease by
------
Redeveloper, or a mutual cancellation thereof, or a termination by Agency,
shall not work a merger, but instead, at the option of Agency, shall either
terminate all or any existing subtenancies, or at the option of Agency,
operate as an assignment to Agency of any or all of such subtenancies.
(k) Gender; Number. The neuter gender includes the feminine and
--------------
masculine, the masculine includes the feminine and neuter, and the feminine
includes the masculine and neuter, and each includes corporations,
partnerships and other legal entities whenever the context so requires. The
singular number includes the plural whenever the context so requires.
(l) No Joint Venture. Nothing contained herein shall be construed
----------------
to render the Agency in any way or for any purpose a partner, joint venturer,
or associated inany relationship with Redeveloper other than that of Agency
and Redeveloper, nor shall this Lease be construed to authorize either party
to act as agent for the other.
(m) Exhibits. All exhibits to which reference is made in this Lease
--------
are hereby incorporated by reference. Any reference to "this Lease" includes
matters incorporated by reference.
(n) Entire Agreement; Modification. This Lease contains the entire
------------------------------
agreement between the parties. No verbal agreement or implied covenant shall
be held to vary the provisions hereof, any statements, law or custom to the
contrary notwithstanding. No promise, representation, warranty, or covenant
not included in this Lease has been or is relied on by either party. Each
party has relied on its own inspection of the Property and examination of this
Lease, the counsel of its own advisors, and the warranties, representations,
and covenants in this Lease itself. The failure or refusal of either party to
inspect the Property, to read this Lease or other documents, or to obtain
legal or other advice relevant to this transaction constitutes a waiver of any
objection, contention, or claim that
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might have been based on such reading, inspection, or advice. No provision of
this Lease may be amended or varied except by an agreement in writing signed
by the parties hereto and the lender under a permitted first leasehold
encumbrance or their respective permitted successors.
(o) Joint and Several Obligations. "Party" shall mean Agency or
-----------------------------
Redeveloper; and if more than one person is Agency or Redeveloper, the
obligations imposed on that party shall be joint and several.
(p) Severability. The invalidity or illegality of any provision
------------
shall not affect the remainder of this Lease and all remaining provisions
shall, notwithstanding any such invalidity or illegality, continue in full
force and effect.
(q) Consents of Agency. Neither Agency's execution of this Lease
------------------
nor any consent or approval given by Agency hereunder in its capacity as
Agency shall waive, abridge, impair or otherwise affect Agency's powers and
duties as a governmental body. Any requirements under this Lease that
Redeveloper obtain consents or approvals of Agency or the City are in addition
to and not in lieu of any requirements of law that Redeveloper obtain
approvals, licenses, or permits.
(r) Records. Agency or any representative or designee thereof may
-------
at any time during normal business hours, upon 48 hours' notice, examine the
books and records of Redeveloper, or any officer, employee, agent, contractor,
affiliate, related person, assignee or franchise, to the extent that such
books and records relate, directly or indirectly, to the operation and income
of the Card Club from the Property. Redeveloper shall keep all such records
at the Property or at another location in Los Angeles County approved by
Agency.
(s) Recordation of Memorandum of Lease With Option to Purchase. This
----------------------------------------------------------
Lease shall not be recorded. A memorandum of the Lease with Option to
Purchase shall be recorded. The parties shall execute the memorandum in form
and substance approved by Agency and as required by the title insurance
company insuring Redeveloper's leasehold estate, and sufficient to give
constructive notice of this Lease and the option to purchase set forth herein
to subsequent purchasers and lenders.
(t) Execution in Counterparts. This Lease, or the memorandum of
-------------------------
this Lease, or both, may be executed in two or more counterparts, each of
which shall be an original, but all of which shall constitute one and the same
instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement at
Compton, California, as of the date first written above.
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COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF
COMPTON ("Agency")
By:__________________________________________
Chairman
ATTEST:
___________________________
Secretary
COMPTON ENTERTAINMENT, INC., a California
corporation ("Redeveloper")
By:__________________________________________
ROUBEN KANDILIAN, President
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EXHIBIT 1
LEGAL DESCRIPTIONS
ENTIRE PROPERTY
- ---------------
Parcels 2, 7, 8, 9, and 11, of Parcel Map No. 7899, in the City of Compton,
per map recorded in Book 79, Pages 47-49, of Parcel Maps, Official Records, Los
Angeles County, California.
Parcels 1 and 2 of Parcel Map No. 8669, in the City of Compton, per map
recorded in Book 87, Page 9, of Parcel Maps, Official Records, Los Angeles
County, California.
Parcels 1, 2, 3, and 4 Parcel Map No. 10784, in the City of Compton, per
map recorded in Book 112, Pages 96 and 97, of Parcel Maps, Official Records, Los
Angeles County, California.
Convention Center Parcel/2/
- ------------------------
Parcel 1 of Parcel Map No. 10784, in the City of Compton, per map recorded
in Book 112, Pages 96 and 97, of Parcel Maps, Official Records, Los Angeles
County, California, reserving and excepting therefrom easements for access to,
support of and parking for the Hotel Parcel.
Hotel Parcel/1/
- ------------
A parcel of air space which includes a nine (9) story hotel containing 290
guest rooms and ancillary areas such as lobbies, restaurant, kitchen, bars,
commercial areas and the like, on Parcel 1 of Parcel Map No. 10784, in the City
of Comptom, per map recorded in Book 112, Pages 96 and 97, of Parcel Maps,
Official Records, Los Angeles County, California.
Parking Parcels
- ---------------
Parcels 2, 3, and 4 Parcel Map No. 10784, in the City of Compton, per map
recorded in Book 112, Pages 96 and 97, of Parcel Maps, Official Records, Los
Angeles County, California.
Expansion Parcels
- -----------------
- -----------
/2/ The legal descriptions of the Hotel Parcel and the Convention Center Parcel
are subject to change based upon legal descriptions prepared by a licensed civil
engineer and approved by Agency and Redeveloper prior to the close of escrow for
the Convention Center Parcel.
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<PAGE>
Parcels 2, 7, 8, 9, and 11, of Parcel Map No. 7899, in the City of
Compton, per map recorded in Book 79, Pages 47-49, of Parcel Maps, Official
Records, Los Angeles County, California.
Parcels 1 and 2 of Parcel Map No. 8669, in the City of Compton, per map
recorded in Book 87, Page 9, of Parcel Maps, Official Records, Los Angeles
County, California.
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<PAGE>
EXHIBIT 2
SITE PLAN
[to be inserted]
-68-
<PAGE>
EXHIBIT 3
SCHEDULE OF PERFORMANCE
1. Execution of the DDA by Agency and Within 15 days of Agency
Redeveloper approval
2. Amendment of Redeveloper's Card Club Within 60 days of Agency
License from the City of Compton and approval
the City's adoption of an ordinance
to waive transient occupancy taxes and
valet taxes until the valet parking
operation at the Hotel is profitable
3. Redeveloper's Approval of Preliminary By May __, 1995
Title Report
4. Redeveloper's Approval of ALTA Survey By June 15, 1995
5. Redeveloper's approval of Physical By June 15, 1995
Condition of the Property
6. Recordation of Memorandum of Lease for On the close of escrow for the
the Project and issuance of leasehold Convention Center Parcel or
policy of title insurance July 31, 1995, whichever first
occurs (the "Effective Date")
7. Redeveloper's submission of Design Within 45 days after Agency's
Development Drawings execution of the DDA
8. Agency's approval or disapproval of Within 30 days after receipt of
Design Development Drawings same from Redeveloper
9. Redeveloper's delivery to Agency of Within 90 days after the
financing commitments for the Project Effective Date
10. Agency's approval of Redeveloper's Within 30 days from submittal
financing for the Project
11. Redeveloper's Submission of the Final Within 120 days after the
Construction Plans for Development Effective Date
of the Project (including construction
drawings) sufficient to obtain building
permits for the Initial Improvements
12. Agency's Approval of Final Construction 60 days after delivery of same
Plans (including construction drawings, to City and Agency, provided
and final grading and landscaping plans) they are acceptable to City
and Agency
13. Payment of fees and issuance of permits Within 30 days of approval of
for grading and site work, and plans
commencement of grading and site work
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<PAGE>
14. Payment of fees and issuance of building Within 10 days after issuance
permits and commencement of construction of grading permit
of the Initial Improvements
15. Commencement of Construction of Within 10 days from approval of
remaining work any construction plans
16. Completion of Construction of the Initial Within 12 months after the
Improvements and rehabilitation of Hotel, Effective Date, subject to the
and opening of the Hotel for business length of any delays by the
Agency or City in approving
plans or specifications from
the time periods set forth
herein, and subject to Force
Majeure
17. Opening of the Card Club for business Within 30 days of issuance of
a state license
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<PAGE>
EXHIBIT 4
CONDITIONS OF CONSTRUCTION
1. Submittal of Design Development Drawings and Preliminary Construction
---------------------------------------------------------------------
Budgets. Redeveloper shall prepare and deliver to Agency Design Development
- -------
Drawings and a Preliminary Construction Budget for the proposed Initial
Improvements to the Property. Upon Agency's reasonable approval of both the
Design Development Drawings and the Preliminary Budget, Redeveloper shall have
the right to partition the work represented by the Design Drawings in a manner
which will promote the most expeditious construction and completion of the
Initial Improvements. Notwithstanding the foregoing Redeveloper shall not
commence construction as to any portion of the work until such time as Agency
has approved complete Final Construction Plans, or if applicable, Final Interior
Design Documents, and the Budget relative to the portion of work for which
Redeveloper desires to commence construction.
"Design Development Drawings" shall be prepared by a licensed architect or
engineer, and shall include, but not be limited to, preliminary grading and
drainage plans, soil tests, utilities, sewer and service connections, locations
of ingress and egress to and from public thoroughfares, curbs, gutters,
parkways, street lighting, designs and locations for outdoor signs, storage
areas, and landscaping. The Design Development Drawings shall be based upon the
Scope of Development, and shall enable Agency to make an informed judgment about
the design and quality of construction. They shall also include delineation of
landscape and architectural features, floor plans, sections and elevations, site
treatment, proposed building materials and proposed colors, and other features.
The Design Development Drawings shall describe all major design features, as
well as the size, character and quality of the Project as to architectural and
structural systems. Key details of the Project will be provided and samples of
key materials to be used in public visible areas shall accompany the drawings.
With the Design Development Drawings, Redeveloper shall deliver to Agency the
certificate of the person who prepared the plans and specifications certifying
that Agency has fully paid for them or waiving payment and waiving any right to
a lien for preparing them and permitting Agency to use the Design Development
Drawings without payment for purposes relevant to and consistent with this DDA.
"Final Interior Design Documents" are those Final Construction Plans relating to
the interior design of the Initial Improvements.
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<PAGE>
2. Submittal of Final Construction Plans and Final Interior Design
---------------------------------------------------------------
Documents. Prior to the commencement of construction of any portion of the
- ---------
Initial Improvements, Redeveloper shall prepare complete Final Construction
Documents or, if applicable, Final Interior Design Documents, and submit such
documents to Agency for its approval. Upon receipt of approval from Agency,
Redeveloper may commence construction in a manner consistent with the approved
Final Construction Plans or Final Interior Design Documents.
3. Submittal of Construction Budgets. Upon obtaining bids relative to
---------------------------------
approved Construction Documents or Interior Design Documents, Redeveloper shall
submit to Agency a "bid based" Construction Budget outlining specific costs
associated with the work to be performed pursuant to the approved Construction
Documents or Interior Design Documents. Agency shall have the right to review
such bid based budgets and request any additional information reasonably
necessary to ascertain the appropriateness and reasonableness of the items
contained within such bid based Construction Budget. Agency may, in the exercise
of its reasonable, good faith judgment, determine whether the proposed budget is
unreasonable, and in such case, then the unreasonable portion shall not be
included in the Rent Reduction/Credit, unless such cost is shown to be
reasonable pursuant to the arbitration provisions of this paragraph. If the
parties cannot agree on a final budget, the question of whether such charge is
appropriate and reasonable shall be submitted to binding arbitration in
accordance with the Construction Industry Rules of the American Arbitration
Association. In no case shall payments be made to affiliates of the Redeveloper
without the Agency's prior written consent.
4. Final Construction Plan Documents. Redeveloper shall submit to Agency
---------------------------------
all Final Construction Plans approved by the appropriate governmental agencies
for issuance of the necessary permits to complete the Initial Improvements.
Changes from the Final Construction Plans may be made without the prior written
approval by Agency only if: a) they are not substantial or are made to comply
with exceptions, requests or requirements of any governmental agency or official
in connection with the inspection or approval of the work undertaken; or b) if
they do not materially depart in size, utility or value from the Initial
Improvements described in the Construction Documents or, if applicable, the
Interior Design Documents previously submitted to Agency.
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<PAGE>
5. Final Cost Breakdowns. Upon completion of the Initial Improvements,
---------------------
Redeveloper shall deliver to Agency a Final Cost Breakdown relative to the
Initial Improvements for which Redeveloper is requesting a rent credit pursuant
to Section 6 of the DDA. The form and content of the Final Cost Breakdown shall
be subject to Agency's reasonable approval and shall not deviate materially from
the Construction Budget absent good cause therefor (other than negligence or
mismanagement on the part of Redeveloper) being shown. Any dispute with respect
to such deviation shall be submitted to arbitration as provided herein above.
6. Procedure for Qualification of Rent Credits. As a condition precedent to
-------------------------------------------
Agency's, application of the rent credit described in Section 6 of the DDA,
Redeveloper shall provide to Agency evidence verifying the expenditures
represented in the Final Cost Breakdown. Such evidence may include, but not be
limited to, original paid invoices, names and addresses of persons or firms who
have furnished any work, labor or materials in connection with items contained
in the Final Cost Breakdown and/or receipts indicating full payment of
particular items contained in the Final Cost Breakdown. Agency reserves the
right to refuse to provide a rent credit as to particular items for which Agency
has evidence that such item was either not expended or paid in full; provided,
however, that Redeveloper shall have the right to cure any alleged misallocation
by presenting any contrary evidence to Agency. Redeveloper shall pay for and may
include in the cost of the Initial Improvements any construction manager,
project manager, accountants, auditors or supervisors hired by Agency, at
Agency's reasonable discretion, for the purposes of reviewing and inspecting the
course of construction and determining or confirming the appropriate rent credit
to be applied. Agency's representatives shall have the right to attend regular
construction meetings held by Redeveloper and its superintendents, contractors
and subcontractors. Redeveloper shall not be entitled to receive any rent credit
for materials or labor not actually incorporated into or used for the Initial
Improvements. During the course of construction, Redeveloper shall provide
Agency's representative (or Agency's Executive Director if no representative has
been appointed) with copies of all periodic or special reports with respect to
the work received by Redeveloper from its contractors, subcontractors,
architects, engineers or other consultants and, at least monthly, with a
statement of expenditures made to date.
7. Performance Bonds. Redeveloper shall
-----------------
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<PAGE>
provide a labor and material payment bond and a performance bond acceptable to
the Agency naming the Agency as co-obligee thereon; provided, however, if
Hollywood Park, Inc., shall guaranty to the Agency's satisfaction completion of
the Initial Improvements, then the Redeveloper shall not be required to provide
a labor and material payment bond or performance bond.
8. City and Other Governmental Agency Permits and Approvals. Before
--------------------------------------------------------
commencement of construction, Redeveloper shall secure, or cause to be secured,
any and all permits which may be required by the City of Compton or any other
governmental agency having jurisdiction over the construction or development of
the Project. Redeveloper shall carry out the construction of the Initial
Improvements in conformity with all applicable laws, including all applicable
Federal, State and local occupation, safety and health laws, rules, regulations
and standards.
9. Selection of Consultants. Redeveloper shall have the sole right to
------------------------
select architects, landscape architects, consultants, engineers, interior
designers, and contractors for the Project, provided such selection does not in
any way violate or contradict any portion of the DDA. Agency shall select any
consultants to perform the services described in Section 6 hereof.
10. Cooperation of Agency. Agency shall cooperate with Redeveloper in
---------------------
providing a "fast track" basis of construction to expedite the design,
construction and furnishing of the Initial Improvements. Additionally, Agency
shall cooperate with Redeveloper in expediting any necessary permits or
approvals on the part of the City of Compton for any portions of the work to be
performed.
11. Plans and Data. If the DDA is terminated for any reason, Redeveloper
--------------
shall deliver to Agency, without a cost or expense to Agency, copies of any and
all maps, architectural designs, engineering plans, drawings, studies, reports,
surveys or data pertaining to the Project, provided Redeveloper has title to
such items and the right to transfer such items free of claims or interest of
any third party. Additionally, upon completion of the work, Redeveloper shall
provide Agency with a set of "as built" plans for the Project.
12. Notification of Commencement of Work. Redeveloper shall notify Agency
------------------------------------
of Redeveloper's intention to commence a work of improvement at least twenty
(20) days before commencement of any such work or delivery of any materials in
connection therewith. The notice shall
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<PAGE>
specify the approximate location and nature of the intended improvements. Agency
shall have the right to post and maintain on the Property any notices of
nonresponsibility provided for under applicable law, and to inspect the property
in relation to the construction at all reasonable times.
13. Cost of Construction; Mechanics' Liens. Except to the extent of any
credit to Base Rent received by Redeveloper, the entire cost of constructing the
Initial Capital Improvements shall be borne by Redeveloper. Redeveloper shall
keep the Property free and clear of all mechanics' and materialmen's liens
resulting from construction done by or for Redeveloper. Redeveloper shall have
the right to contest the correctness or the validity of any such lien if,
immediately on demand by Agency, Redeveloper procures and records a lien release
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)(S)3143 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). Redeveloper shall hold harmless,
defend and indemnify Agency and the Property and the property against all
liability and loss of any type arising out of work performed on the Property by
Redeveloper, together with reasonable attorneys' fees and all costs and
expenses reasonably incurred by Agency in negotiating, settling, defending or
otherwise protecting against such claims. If Redeveloper does not cause to be
recorded the bond described in California Civil Code Section 3142 or otherwise
protect the Property under any alternative or successor statue, and a final
judgment has been rendered against Redeveloper by a court of competent
jurisdiction for the foreclosure of a mechanics' materialman's, contractor's or
subcontractor's lien claim, and if Redeveloper fails to stay the execution of
the judgment by lawful means or to pay the judgment, Agency shall have the
right, but not the duty, to pay or otherwise discharge, stay or prevent the
execution of any such judgment or lien or both. Redeveloper shall reimburse
Agency for all sums paid by Agency under this section, together with all
Agency's attorneys fees and costs, plus interest on those sums, fees, and costs,
at the maximum legal rate that may be charged by non-exempt lenders under the
usury laws of the State of California. On completion of any substantial work of
improvement during the term, Redeveloper shall file or cause to be filed a
notice of completion. Redeveloper hereby appoints Agency as Redeveloper's
attorney-in-fact to file the notice of completion on Redeveloper's failure to do
so after the work of improvement has been substantially completed.
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<PAGE>
EXHIBIT 5
SCOPE OF DEVELOPMENT
[To Be Inserted]
-76-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS
1. Purchase and Sale of the Convention Center Parcel 2
2. Lease of the Hotel and Other Parcels 4
3. Title and Survey 5
4. Term 6
5. Rent 7
6. Rent Reduction/Credit 8
7. Additional Consideration 9
8. Taxes 9
9. Use and Compliance with Laws 10
10. Physical Condition of the Property 12
11. Construction by Redeveloper 14
12. Certificate of Completion 17
13. Utilities and Services 18
14. Maintenance 18
15. Alterations 19
16. Destruction 19
17. Insurance and Indemnity 22
18. Condemnation 26
19. Assignment, Subletting and Encumbering 28
20. Default 30
21. Agency's Entry on Property 36
22. Notices 37
23. Interest on Past-due Obligations 37
24. Attorneys' Fees 37
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
25. Estoppel Certificates 38
26. Surrender of Property 38
27. Form of Nondiscrimination and Nonsegregation Clauses; Local
Hiring and Affirmative Action 39
28. Local Contractors 40
29. Expansion parcels 40
30. Option to Purchase 41
31. Holding Over 43
32. Force Majeure; Extension of Times of Performance 44
33. Sale or Transfer by Agency 44
34. Limitation on Recourse Against Agency 44
35. Redeveloper's Representations and Warranties 45
36. Agency's Representations and Warranties 46
37. Miscellaneous 47
(a) Governing Law 47
(b) Time of Essence 47
(c) Additional Rent 47
(d) Quiet Enjoyment 47
(e) Transfer of Agency's Interest 47
(f) Waiver 47
(g) Brokers 48
(h) Headings 48
(i) Inspection Of Books and Records 48
(j) Merger 48
(k) Gender; Number 48
(l) No Joint Venture 48
(m) Exhibits 48
(n) Entire Agreement; Modification 48
(o) Joint and Several Obligations 49
(p) Severability 49
(q) Consents of Agency 49
(r) Records 49
(s) Recordation of Memorandum of Lease With Option to Purchase 49
(t) Execution in Counterparts 49
</TABLE>
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<PAGE>
EXHIBIT 1 LEGAL DESCRIPTIONS 1
EXHIBIT 2 SITE PLAN 1
EXHIBIT 3 SCHEDULE OF PERFORMANCE 1
EXHIBIT 4 CONDITIONS OF CONSTRUCTION 1
EXHIBIT 5 SCOPE OF DEVELOPMENT 1
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<PAGE>
Exhibit 10.17
GUARANTY
--------
THIS GUARANTY is made this 31st day of July, 1995, by HOLLYWOOD PARK,
INC., a Delaware corporation ("Guarantor") in favor of the COMMUNITY
REDEVELOPMENT AGENCY OF THE CITY OF COMPTON, a public body, corporate and
politic ("Agency").
RECITALS
A. The Agency (as the "Agency" therein) and Compton Entertainment,
Inc., a California corporation ("CEI") (as the "Redeveloper" therein), are
parties to that certain Amended and Restated Disposition and Development
Agreement, Agreement of Purchase and Sale, and Lease with Option to Purchase
dated as of April 4, 1995 (the "DDA"), covering the real property (the
"Property") described in Exhibit A hereto. The DDA provides, among other
things, for the development of a hotel and card club (the "Project") on the
Property.
B. CEI has agreed to complete the construction and development of
certain improvements and the development of the Project on the Property
consistent with the Scope of Development attached as Exhibit 5 to the DDA, and
within the times specified in the Schedule of Performance attached as Exhibit 3
to the DDA.
C. Concurrently herewith, CEI is assigning all of its rights under
the DDA to HP/Compton, Inc., a California corporation ("HP/Compton"), and
HP/Compton is assuming all of CEI's obligations as Redeveloper under the DDA,
pursuant to an Assignment, Assumption and Consent Agreement (the "Assignment").
D. HP/Compton is a wholly owned subsidiary of Guarantor.
E. Guarantor is substantially and financially interested in the
business and affairs of HP/Compton; and it will be of substantial economic
benefit to Guarantor for HP/Compton to construct, develop and operate the
Project and perform all other obligations of Redeveloper pursuant to the DDA.
F. Agency would be unwilling to consent to the Assignment absent
assurances and guarantees from Guarantor that the construction of the Project
will be completed and the other obligations of the Redeveloper shall be
performed in accordance with the DDA.
NOW, THEREFORE, to induce Agency to consent to the assignment of the
DDA, Guarantor hereby guaranties, represents, warrants and covenants as follows:
-1-
<PAGE>
1. Guaranty
--------
The Guarantor unconditionally promises and agrees to perform and
comply with all provisions and conditions of the DDA and any modifications,
additions, amendments and supplements thereto, and the agreements, provisions
and conditions of any rider or exhibit thereto now or hereafter existing, or to
cause the same to be performed and complied with. The words "perform and comply
with" are used in their most comprehensive sense and include (i) payment of any
and all rental and other obligations of Redeveloper to pay money to Agency
arising under the DDA, including, without limitation, the obligation to pay any
and all interest on past due obligations of Redeveloper, any and all costs
advanced by Redeveloper, and all expenses (including, without limitation, court
costs and reasonable attorney's fees) that may arise in consequence of
Redeveloper's default under the DDA, (ii) payment and performance of all
obligations of Redeveloper to purchase the Property arising under the DDA, and
(iii) construction of the Project within the times and in the manner provided
for in or contemplated by the provisions of the DDA, including, to the extent
required by the DDA, payment of all costs and expenses thereof and payment of
and satisfaction or discharge of all liens, charges or claims that are or may be
imposed upon or claimed against the Property or any portion thereof. As a
condition to the Guarantor's obligations under this Guaranty, Agency shall
confer upon Guarantor all rights and benefits of Redeveloper under the DDA,
including, without limitation, the right to occupy and operate the Property and
the Project and any business thereon, notwithstanding any breach or default by
Redeveloper under the DDA. If within thirty (30) days following written demand
from the Agency, Guarantor fails to commence performance of and compliance with
all provisions and conditions of the DDA and thereafter to diligently perform
and comply therewith, Agency may, but shall have no obligation to, take such
actions as Agency deems appropriate with respect to the Project and the
Property, and Guarantor shall be liable to Agency as if Guarantor were the
Redeveloper under the DDA for failure to perform and comply with the provisions
and conditions of the DDA.
2. General
-------
(a) Guarantor authorizes Agency, without notice or demand and
without affecting Guarantor's liability under this Guaranty, to:
-2-
<PAGE>
(i) consent to any extensions, accelerations, or other changes
in the time for any payment or performance of obligations provided for in the
DDA, or consent to any other alteration of any covenant, term, or condition of
the DDA in any respect, and to consent to any assignment, subletting, or
reassignment of the DDA;
(ii) take and hold security for any payment provided for in
the DDA or for the performance of any covenant, term, or condition of the DDA,
or exchange, subordinate, waive, or release any security; and
(iii) apply this security and direct the order or manner of
its sale as Agency may determine.
(b) Notwithstanding any termination, renewal, extension or holding
over of the DDA, this Guaranty shall continue until all of the covenants and
obligations on the part of Redeveloper to be performed have been fully and
completely performed by Redeveloper and Guarantor shall not be released of any
obligation or liability under this Guaranty so long as there is any claim
against Redeveloper arising out of the DDA that has not been settled or
discharged in full.
(c) The liability of Guarantor hereunder shall be unaffected by
(i) any amendment or modification of the provisions of the DDA or any other
instrument delivered to or made with Agency by Redeveloper (including, without
limitation, the deed of trust described in Section 1(d)(iii) of the DDA (the
"Deed of Trust")), (ii) the release of Redeveloper from the performance or
observance of any of the agreements, covenants, terms or conditions contained in
any of said instruments by operation of law, foreclosure, deed in lieu of
foreclosure, termination of lease, or otherwise, (iii) the release, substitution
or addition of any one or more guarantors or endorsers, or (iv) the assignment
of this Guaranty in whole or in part, irrespective of the terms and conditions
upon which such actions are taken and whether made with or without the consent
of or notice to Guarantor.
-3-
<PAGE>
3. Independent Obligations. The obligations of Guarantor under this
-----------------------
Guaranty are independent of, and may exceed, the obligations of Redeveloper. A
separate action may, at Agency's option, be brought and prosecuted against
Guarantor, whether or not any action is first or subsequently brought against
Redeveloper, or whether or not Redeveloper is joined in any action, and
Guarantor may be joined in any action or proceeding commenced by Agency against
Redeveloper arising out of, in connection with, or based upon the DDA. Agency's
rights hereunder shall not be exhausted by its exercise of any of its rights or
remedies or by any such action or by any number of successive actions until and
unless all indebtedness and obligations hereby guaranteed have been paid and
fully performed. All of Agency's remedies against Guarantor are cumulative.
4. Waivers. Guarantor waives any right to:
-------
(a) require Agency to proceed against Redeveloper or any other
person or entity or pursue any other remedy in Agency's power before proceeding
against Guarantor;
(b) complain of delay or failure by Agency to exercise any right,
power or privilege under the DDA, this Guaranty, or any other document made to
or with Agency by Redeveloper; and
(c) require Agency to proceed against or exhaust any security held
by Agency.
-4-
<PAGE>
Guarantor waives any defense arising by reason of any disability or other
defense of Redeveloper or by reason of the cessation from any cause of the
liability of Redeveloper. Guarantor waives all demands upon and notices to
Redeveloper and to Guarantor, including, without limitation, demands for
performance, notices of nonperformance, notices of non-payment, and notices of
acceptance of this Guaranty. Guarantor waives (i) the defense of all statutes
of limitations in any action hereunder or for the performance of any obligation
hereby guaranteed; (ii) any defense that may arise by reason of the incapacity,
lack of authority, or disability of Redeveloper, or by Agency's failure to file
or enforce a claim against the estate (either in bankruptcy or any other
proceeding) of Redeveloper or any other person; (iv) any defense based upon or
arising out of any defense which Redeveloper may have to the payment or
performance of any part of the obligations hereby guaranteed; (v) presentment,
demand, protest and notice of any kind, including, without limiting the
generality of the foregoing, notice of the existence, creation or incurring of
any new or additional obligation or indebtedness or of any action or non-action
on the part of Redeveloper, Agency, any creditor of Redeveloper or any other
person whomsoever, in connection with any obligation or evidence of indebtedness
held by Agency as collateral or in connection with any obligation hereby
guaranteed; (vi) any defense based upon an election of remedies by Agency,
including, without limitation, an election to proceed by non-judicial rather
than judicial foreclosure, or to terminate the leasehold or other interests in
the DDA which destroys or otherwise impairs the subrogation rights of Guarantor
or the right of Guarantor to proceed against Redeveloper for reimbursement, or
both; (viii) diligence by Agency in the collection of the obligations set forth
in the DDA; (ix) any defense based upon any statute or rule of law which
provides that the obligation of a surety must be neither larger in amount nor in
other respects more burdensome than that of the principal; (x) any defense based
upon, or upon the effect of, California Code of Civil Procedure Sections 580a,
580b, 580d, and 726 or California Civil Code Sections 2809, 2810, 2819, 2839,
2845, 2849, 2850, 2899, 2924 and 3433 et seq.; (xi) any duty on Agency's part to
disclose to Guarantor any facts Agency may now or hereafter know about
Redeveloper regardless of whether Agency has reason to believe that any such
facts materially increase the risk beyond that which Guarantor intends to assume
or whether Agency has reason to believe that such facts are unknown to Guarantor
and whether Agency has a reasonable opportunity to communicate such facts to
Guarantor, it being understood and agreed that Guarantor is fully responsible
for being and keeping informed of the financial condition of Redeveloper and of
all circumstances bearing on the risk of non-performance of any obligations
hereby guaranteed; (xii) any defense arising because of Agency's election, in
any proceeding instituted under the federal Bankruptcy Code, of the application
of Section 1111(b)(2) of the
-5-
<PAGE>
federal Bankruptcy Code; and (xiii) any defense based on any borrowing or grant
of a security interest under Section 364 of the federal Bankruptcy Code, it
being agreed by the Guarantor that this Guaranty is an absolute guaranty of
payment and not of collection, that the failure of Agency to exercise any rights
or remedies it has or may have against Redeveloper shall in no way impair the
obligation of such guaranty and that the liability of the Guarantor hereunder is
and shall be direct and unconditional.
5. No Reporting Duty. Guarantor assumes full responsibility for
-----------------
keeping fully informed of the financial condition of Redeveloper and all other
circumstances affecting Redeveloper's ability to perform Redeveloper's
obligations under the DDA, and agrees that Agency will have no duty to report to
Guarantor any information that Agency receives about Redeveloper's financial
condition or any circumstances bearing on Redeveloper's ability to perform such
obligations.
6. Continuing Guaranty. This Guaranty shall remain in full force
-------------------
notwithstanding the appointment of a receiver to take possession of all or
substantially all of the assets of Redeveloper, or an assignment by Redeveloper
for the benefit of creditors, or any action taken or suffered by Redeveloper
under any insolvency, bankruptcy, reorganization, moratorium, or other debtor
relief act or statute, whether now existing or later amended or enacted, or the
disaffirmance of the DDA in any action or otherwise.
7. Joint and Several Obligations. If this Guaranty is signed, or if
-----------------------------
the obligations of Redeveloper are otherwise guaranteed, by more than one party,
their obligations shall be joint and several, and the release or limitation of
liability of any one or more of the guarantors shall not release or limit the
liability of any other guarantors.
8. Successors and Assigns. This Guaranty shall be binding upon
----------------------
Guarantor and Guarantor's heirs, administrators, personal and legal
representatives, successors, and assigns, and shall inure to the benefit of
Agency and Agency's successors and assigns. Agency may, without notice, assign
this Guaranty, the DDA, or the rents and other sums payable under the DDA, in
whole or in part.
9. Guaranty of Costs and Fees. In addition to the amounts
--------------------------
guaranteed, Guarantor agrees to pay reasonable attorney fees and all other costs
and expenses incurred by Agency in enforcing this Guaranty or in any action or
proceeding arising out of, or relating to, this Guaranty, whether or not any
suit is filed. Until paid to Agency such sums shall bear interest at the rate
of two (2) percentage points per annum in excess of the Bank of America
Reference Rate.
-6-
<PAGE>
10. Governing Law. This Guaranty shall be deemed to be made under
-------------
and shall be governed by California law in all respects, including matters of
construction, validity, and performance, and the terms and provisions of this
Guaranty may not be waived, altered, modified, or amended except in a writing
signed by an authorized officer of Agency and by Guarantor.
11. Waiver of Subrogation Rights. Guarantor waives all rights and
----------------------------
defenses arising out of an election remedies by the Agency, even though that
election of remedies, such as a nonjudicial foreclosure with respect to security
for a guaranteed obligation, has destroyed the Guarantor's rights of subrogation
and reimbursement against the Guarantor by the operation of Section 580d of the
Code of Civil Procedure or otherwise.
12. Bankruptcy Claims. Guarantor shall file in any bankruptcy or
-----------------
other proceeding in which the filing of claims is required by law all claims
which Guarantor may have against Redeveloper relating to any indebtedness of
Redeveloper to Guarantor and will assign to Agency all rights of Guarantor
thereunder. If Guarantor does not file any such claim, Agency, as attorney-in-
fact for Guarantor, is hereby authorized to do so in the name of Guarantor or,
in Agency's discretion, to assign the claim to a nominee and to cause proof of
claim to be filed in the name of Agency's nominee. The foregoing power of
attorney is coupled with an interest and cannot be revoked. Agency or its
nominee shall have the sole right to accept or reject any plan proposed in such
proceeding and to take any other action which a party filing a claim is entitled
to do. In all such cases, whether in administration, bankruptcy or otherwise,
the person or persons authorized to pay such claim shall pay to Agency the
amount payable on such claim and, to the full extent necessary for that purpose,
Guarantor hereby assigns to Agency all of Guarantor's rights to any such
payments or distributions to which Guarantor would otherwise be entitled;
provided, however, Guarantor's obligations hereunder shall not be satisfied
except to the extent that Agency receives cash by reason of any such payment or
distribution in such amount as is necessary to satisfy all amounts due under the
DDA; and provided further that Agency or its nominee shall remit to Guarantor
any amounts received which exceed the amounts owed to Agency under the terms of
the DDA. However, should any dispute arise as between Guarantor and any third
party (including the principal obligor) with respect to the rights to such
funds, Agency may interplead such funds and shall thereupon be released from any
obligation to pay such funds to Guarantor and shall be entitled to all costs,
including attorney's fees, incurred in the filing of such interpleader action.
If Agency receives anything hereunder other than cash, the same shall be held as
collateral for amounts due under this Guaranty.
-7-
<PAGE>
13. Change of Title. Guarantor agrees that no change of ownership or
---------------
legal title to the Property, whether effected with or without the consent of the
Agency, shall affect or change or discharge the obligations of the Guarantor
hereunder.
14. Receipt of DDA. Guarantor acknowledges receipt of a copy of the
--------------
DDA, and all of the instruments described therein, or attached thereto as
exhibits. All of the terms defined in the DDA, when used herein, shall have the
same meanings as defined in the DDA.
15. Warranties. Guarantor hereby represents and warrants to Agency
----------
that:
(a) Any financial statements and other information concerning
Guarantor heretofore delivered by Guarantor to Agency are true and correct in
all respects, have been prepared in accordance with generally accepted
accounting practices consistently applied, fairly present the financial
condition of Guarantor as of the dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor reflected therein since the
respective dates thereof. Guarantor shall deliver to Agency updated financial
statements annually or upon the happening of any material adverse change in the
financial condition of Guarantor.
(b) The assumption by Guarantor of the obligations of the DDA
will result in direct financial and material benefits to Guarantor.
(c) The assumption of the DDA by HP/Compton has been duly
authorized and executed by HP/Compton and is a legal, valid and binding
instrument, enforceable against HP/Compton in accordance with its terms.
(d) Guarantor (i) is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Delaware; (ii) has
the power and authority to own its properties and assets to carry on its
business as now being conducted (and as now contemplated); and (iii) has the
power to execute and perform all the undertakings of this Guaranty.
-8-
<PAGE>
(e) The execution and performance of this Guaranty by Guarantor
(i) has been duly authorized by all requisite corporate action, (ii) will not
violate any provision of law, rule, or regulation, any order of any court or
other agency of government, any provision of any charter document, or by-law of
Guarantor, and (iii) will not violate any provision of any indenture, agreement,
or other instrument, binding upon Guarantor or result in the creation or
imposition of any lien, charge or encumbrance of any nature on any asset of
Guarantor.
16. Severance. If any of the provisions of this Guaranty shall
---------
contravene or be held invalid under the laws of any jurisdiction, this Guaranty
shall be construed as if it did not contain those provisions, and the rights and
obligations of the parties shall be construed and enforced accordingly.
17. Successors. The provisions of this Guaranty shall bind and inure
----------
to the benefit of the heirs, executors, administrators, legal representatives,
successors and assigns of Agency and Guarantor. Whenever the context requires,
all terms used in the singular will be construed in the plural and vice-versa.
The term "Redeveloper" as used herein refers to both named Redeveloper and any
other person or entity at any time assuming or otherwise becoming primarily
liable on all or any part of the obligations of the DDA.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the
date first written above.
HOLLYWOOD PARK, INC.,
a Delaware corporation
By: /s/ G. Michael Finnigan
--------------------------------
President Gaming & Entertainment
By: /s/ Donald M. Robbins
--------------------------------
Assistant Secretary
"Guarantor"
-9-
<PAGE>
EXHIBIT 10.18
LEASE
by and between
HP/COMPTON, INC.,
a California corporation,
as "Landlord"
and
COMPTON ENTERTAINMENT, INC.,
a California corporation,
as "Tenant"
Dated: August 3, 1995
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
LEASE................................................ 1
RECITALS............................................. 1
Article 1. LEASE OF PREMISES......................... 1
1.01 Premises............................ 1
1.02 Landlord's Obligations.............. 1
Article 2. TERM; POSSESSION; ACCEPTANCE.............. 2
2.01 Term................................ 2
2.02 Termination Right................... 2
2.03 Possession.......................... 3
2.04 Acceptance of Premises; Premises
Remodeling........................ 3
Article 3. RENT...................................... 4
3.01 Monthly Rent........................ 4
3.02 Security Deposit; Account........... 4
3.03 Legal Tender........................ 5
3.04 Additional Rent; Rent Defined....... 5
3.05 Interest on Late Payments........... 5
Article 4. RECORDS AND ACCOUNTING.................... 6
4.01 Records................................ 6
4.02 Monthly Reports........................ 6
4.03 Audited Financial Statements........... 6
4.04 Landlord's Right to Audit.............. 7
Article 5. USE AND OPERATION OF PREMISES............ 7
5.01 Specific Use of Premises............... 7
5.02 Conduct of Business.................... 7
5.03 Compliance with Restrictions and
Laws................................. 8
5.04 Independent Business................... 8
Article 6. MAINTENANCE, REPAIRS AND ALTERATIONS..... 8
6.01 Tenant's Obligations to Repair......... 8
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
6.02 Landlord's Option to Make Major
Repairs.............................. 9
6.03 Damage to Premises..................... 9
6.04 Repair of Damage; Rent Abatement....... 10
6.05 Alterations; Improvements;
Additions............................ 10
6.06 Ownership of Improvements, Fixtures,
Furnishings and Equipment............ 11
6.07 Mechanic's Liens....................... 11
Article 7. INSURANCE, EXONERATION AND INDEMNITY..... 13
7.01 Liability Insurance.................... 13
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.................. 15
7.07 Exoneration and Indemnity.............. 15
Article 8. ASSIGNMENT, SUBLETTING, HYPOTHECATION.... 16
8.01 Consent Required....................... 16
8.02 Indirect Transfers..................... 17
8.03 Obligations of Transferees and
Subtenants........................... 17
8.04 Continued Liability; No Waiver......... 18
Article 9. EMINENT DOMAIN............................ 19
9.01 Effect on Lease........................ 19
9.02 Award.................................. 19
9.03 Rebuilding............................. 19
Article 10. TENANT'S BREACH; LANDLORD'S REMEDIES..... 20
10.01 Tenant's Breach....................... 20
10.02 Landlord's Remedies................... 21
10.03 Right to Cure Tenant's Default........ 22
10.04 Landlord's Remedies Not Exclusive..... 22
10.05 Right to Rents, Issues and Profits.... 23
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
10.06 Receipt of Rents...................... 23
Article 11. LANDLORD'S DEFAULT; TENANT'S REMEDIES... 23
11.01 Landlord's Default.................... 23
11.02 Tenant's Remedies..................... 24
11.03 Tenant's Remedies Not Exclusive....... 24
11.04 Payment of Rents...................... 24
Article 12. MORTGAGE OF LANDLORD'S INTEREST......... 24
12.01 Subordination......................... 24
12.02 Tenant's Obligations With Respect
to Landlord's Mortgage.............. 25
12.03 Definition of Landlord's Mortgage
and Landlord's Mortgagee............ 25
Article 13. OPERATING EXPENSES...................... 25
13.01 Definitions........................... 25
13.02 Survival.............................. 26
Article 14. TAXES AND OTHER CHARGES.................. 26
14.01 Tenant's Taxes........................ 26
Article 15. UTILITY AND OTHER SERVICES............... 27
15.01 Utility Charges....................... 27
15.02 Compliance With Governmental
Regulations......................... 27
15.03 Security; Landlord
Nonresponsibility; Indemnity........ 27
Article 16. GENERAL PROVISIONS....................... 28
16.01 Estoppel Certificates................. 28
16.02 Landlord's Right of Entry............. 29
16.03 Waiver................................ 29
16.04 Surrender of Premises; Holding
Over................................ 29
16.05 Notices............................... 30
16.06 Partial Invalidity; Construction...... 30
16.07 Captions.............................. 31
16.08 Short Form Lease...................... 31
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
16.09 Brokers' Commissions.................. 31
16.10 Attorneys' Fees....................... 31
16.11 Counterparts.......................... 31
16.12 Sole Agreement........................ 31
16.13 Successors and Assigns................ 32
16.14 Time is of the Essence................ 32
16.15 Survival of Covenants................. 32
16.16 Landlord's Consent or Approval........ 32
16.17 Joint and Several Obligations......... 32
16.18 No Offer.............................. 32
16.19 Corporate Resolution.................. 33
</TABLE>
<PAGE>
LEASE
THIS LEASE is made and entered into this 3rd day of August, 1995 by and
between HP/COMPTON, INC., a California corporation, hereinafter called
"Landlord", and COMPTON ENTERTAINMENT, INC., a California corporation,
hereinafter called "Tenant".
RECITALS
--------
A. Landlord is the owner and the lessee of real property in the City of
Compton, California (the "City"), which property is more particularly described
on Exhibit A attached hereto (the "Property").
B. Landlord intends to cause to be constructed on a portion of the
Property a casino card club (which may include restaurant and retail uses) to be
known as Pyramid Casino (the "Card Club") pursuant to certain plans and
specifications therefor (the "Plans").
C. Landlord desires to lease the Card Club portion of the Property to a
licensed card club operator, together with all fixtures, furniture, equipment
and supplies required to operate a card club, until it can obtain its own
license to operate the Card Club.
D. Tenant is a California corporation which is in the process of being
licensed by the State of California to operate the Card Club and Tenant is
licensed by the City to operate the Card Club.
Article 1.
LEASE OF PREMISES
-----------------
1.01 Premises
--------
(a) Subject to the terms and conditions and reservations provided herein,
Landlord hereby grants, demises and leases to Tenant, and Tenant hereby hires
from Landlord, the Property and all fixtures, furniture, equipment, supplies and
all replacements thereof necessary to operate the Card Club (collectively, the
"Premises").
<PAGE>
(b) This Lease is subject to the terms, covenants and conditions herein set
forth and each party covenants, as a material part of the consideration for this
Lease, to keep and perform each and all of said terms, covenants and conditions
by it to be kept and performed.
1.02 Landlord's Obligations.
----------------------
Prior to the Commencement Date, as that term is hereinafter defined,
Landlord shall, to Tenant's reasonable satisfaction, fully improve, equip,
fixture, furnish and provide all necessary supplies for the Premises, at
Landlord's sole cost and expense, in accordance with the Plans to enable Tenant
to operate the Card Club on the Premises in a first class manner. The
performance of Landlord's obligations under this Section 4 shall comply with
any and all Applicable Laws (as hereinafter defined) and shall be at Landlord's
sole cost and expense; provided that Landlord shall not be required to expend
more than Twenty Million Dollars ($20,000,000) of its own funds for the
purchase, development and furnishing of the Premises.
Article 2.
TERM; POSSESSION; ACCEPTANCE
----------------------------
2.01 Term
----
The term of this Lease shall commence on the date upon which Tenant opens
the Card Club for business to the general public (the "Commencement Date") and
shall continue until midnight on the date sixty (60) months after the
Commencement Date (the "Expiration Date") unless sooner terminated pursuant to
any provision hereof (the "Term" or "the term of this Lease"). Upon
determination of the actual Commencement Date, Landlord and Tenant mutually will
execute a written instrument specifying the Commencement Date and the Term.
2.02 Termination Right
-----------------
(a) Tenant and Landlord agree that at any time after the date hereof,
should either Landlord or any Affiliate (as hereinafter defined) become eligible
to be licensed to operate a card club in the State of California, and if all
necessary
<PAGE>
state and local governmental approvals are first obtained, then Landlord and
Tenant shall execute a partnership agreement in substantially the form of the
partnership agreement attached hereto as Exhibit "B" (the "Partnership
Agreement"), in which event this Lease shall terminate and from and after such
termination, the use of the Premises shall be governed by the terms of the
Partnership Agreement; provided, however, that the foregoing shall in any event
be subject to the following conditions and limitations:
(i) This Lease may not be terminated, and the Partnership Agreement shall
not be entered into or otherwise become effective, until such time as the
following conditions have been satisfied:
(A) the City has taken all actions legally necessary to approve
Landlord or its Affiliate as the owner of an interest in the Card Club operated
by Tenant on the Premises and otherwise approves the partial transfer of
ownership of the Card Club that would be effected by entering into the
Partnership Agreement;
(B) such transfer is in compliance with all applicable provisions of
the Compton Municipal Code, as amended from time to time; and
(C) Landlord (or an Affiliate) is eligible under the laws of the
State of California to own an interest in and otherwise participate in the Card
Club and has been duly licensed by the Attorney General of the State of
California to own such interest.
(ii) Unless and until all appropriate governmental approvals as described
above have been obtained, the Partnership Agreement shall be of no force or
effect.
(iii) For the purposes of this Lease, the term "Affiliate" means any
parent corporation, subsidiary or brother-sister corporation of Landlord or any
entity owned or controlled by Landlord or by any parent, subsidiary or brother-
sister corporation of Landlord, or any individual or entity which owns or
controls Landlord or any parent corporation, subsidiary or brother-sister
corporation of Landlord, including, without limitation, Hollywood Park Operating
Company.
<PAGE>
(iv) Tenant hereby covenants and agrees to use its best efforts to
ensure that no provisions of the Compton Municipal Code are enacted that would
preclude or limit the rights of Landlord or its Affiliate to become an owner and
operator of the Card Club and further agrees to fully cooperate with Landlord
and the City in Landlord's efforts to become licensed as such owner and
operator.
(b) The failure by Tenant at any time to be licensed under state or local
law to operate a card club or the disqualification of Tenant as such card club
operator for any reason, including a suspension of license which continues for a
period of five (5) days, shall constitute an Event of Default (as defined in
Section 10.01). Tenant and Landlord agree that in such event, in addition to
and not in limitation of Landlord's remedies under Article 10, Landlord shall
have the right to terminate this Lease without liability upon written notice to
Tenant and thereafter this Lease shall be of no further force or effect.
2.03 Possession
----------
Any access to or possession of the Premises by Tenant prior to the
commencement of the Term shall be on and subject to all of the terms,
provisions, covenants and conditions of this Lease except that no Rent shall be
due and except as otherwise expressly herein provided. Landlord shall not have
any control over Tenant and shall not direct or control the operation of the
business of the Card Club on the Premises throughout the Term of this Lease or
any extension thereof.
2.04 Acceptance of Premises; Premises Remodeling
-------------------------------------------
All improvements constructed and maintained by or under the direction of
Landlord or its Affiliates shall be constructed and maintained in accordance
with "Applicable Laws," as that term is defined in Section 13 hereof. Tenant
agrees to accept the Premises subject to (i) all Applicable Laws regulating or
in any manner applicable to any use or occupancy thereof by Tenant (as limited
by this Lease); (ii) the provisions of that certain Disposition and Development
Agreement, dated December 10, 1992, between Tenant and the Community
Redevelopment Agency ("CRA") of the City (the "Old DDA"); (iii) the provisions
of that certain
<PAGE>
Disposition and Development Agreement, dated June 20, 1995, between Landlord (as
Tenant's assignee) and the CRA of the City (the "New DDA"); and (iv) all liens,
encumbrances, easements, rights of way, covenants, conditions, restrictions,
servitudes, licenses and other matters of record or which have been disclosed in
writing to Tenant prior to the execution of this Lease.
Article 3.
RENT
----
3.01 Monthly Rent
------------
Tenant shall pay to Landlord as monthly rent, a monthly amount equal
to 2.65% of HPI's Total Investment in the Property (as that term is defined in
that certain Agreement in Principle, dated April 29, 1994, by and between Tenant
and Landlord, as amended and referred to herein as the"AIP") as the monthly rent
for the Premises (the "Monthly Rent"). Upon the determination of the exact
amount of the Monthly Rent, Landlord and Tenant mutually will execute a written
instrument specifying the exact amount of the Monthly Rent. The Monthly Rent
shall be paid in arrears for the immediately preceding month on or before the
last day of each calendar month during the Term hereof, without any deduction or
offset, prior notice or demand. Tenant's obligation to pay Monthly Rent shall
commence on the Commencement Date. If the Term shall commence on a day other
than the first day of a calendar month or shall end on a day other than the last
day of a calendar month, then the Monthly Rent for the first and/or last partial
calendar month of the Term, as the case may be, shall be prorated on a per diem
basis. This Lease is a "Triple Net Lease," it being understood that Landlord
shall receive the Monthly Rent free and clear of any and all Operating Expenses
and any and all other charges or expenses of any nature whatsoever incurred by
Landlord or Tenant in connection with the ownership and operation of the
Premises.
3.02 Security Deposit; Account
-------------------------
(a) In order to provide Landlord with adequate security for the
faithful performance by Tenant of all of the terms, covenants and conditions of
this Lease during the Term, on a monthly basis, Tenant will deposit into an
account (the "Account") an amount equal to 66.667% of the Card Club's "net
<PAGE>
after-tax income" (the "Monthly Security Deposit"). The term "net after-tax
income" shall mean net income before taxes, reduced by an amount equal to 47% of
such income as an allowance for federal and state income taxes; provided,
however, if the Monthly Rent paid for a particular month exceeds the Monthly
Security Deposit for that month, no payment under this Section 3.02 shall be
due. By way of example, if the "net after-tax income" for a full month equals
$7,000,000 and Tenant has paid Monthly Rent for such month in the amount of
$6,000,000, the Monthly Security Deposit would equal $4,666,690 and no Monthly
Security Deposit would be due for that month. If the "net after-tax income" for
a full month equals $12,000,000.00 and Tenant has paid Monthly Rent for such
month in the amount of $6,000,000, the Monthly Security Deposit shall equal
$2,000,040 (i.e. (12,000,000 x 66.667) (-) 6,000,000). Tenant shall be entitled
to withdraw an amount equal to 47% of the annual earnings of the Account as an
allowance for federal and state income taxes on such earnings; the balance of
the earnings of the Account shall be retained in the Account.
(b) If, on audit, any portion of the Rent paid by Tenant to Landlord
under this Lease is held not to be deductible by Tenant for federal or state tax
purposes, thereby resulting in Tenant or its principal shareholder owing any tax
deficiency, then Tenant shall give prompt notice thereof to Landlord and
Landlord shall have the right to participate with Tenant in contesting such
holding. Tenant shall bear all costs and expenses of any such contest. If
Tenant and/or its principal shareholder are held liable for such tax deficiency,
then the amount of such tax deficiency, plus any interest due thereon, may be
paid out of the Account. If the amount of such federal and/or state tax
deficiency plus interest thereon exceeds the amount in the Account, then
Landlord shall pay Tenant an amount equal to such excess amount as a refund of
Monthly Rent and any such amount shall be subject to the Monthly Rent accrual
provisions of Section 3.02 hereof.
(c) Pursuant to a separate Security Agreement to be executed between
Landlord and Tenant concurrently with the establishment of the Account, Landlord
shall have a security interest in the Account during the Term. Tenant agrees to
take all necessary action and execute all instruments and documents necessary
for Landlord to have a perfected security interest in the Account during the
Term of this Lease.
<PAGE>
(d) If an Event of Default of Tenant occurs under this Lease,
including, but not limited to, Tenant's failure to pay any Rent, Landlord, at
its option, may require Tenant to apply all or any part of the Account to the
payment of any Rent or any other sum then due, or to compensate Landlord for any
loss or damage which Landlord may suffer by reason of Tenant's failure. If
Tenant shall fully and faithfully perform every provision of this Lease to be
performed by it and any Events of Default have been cured, any remaining balance
in the Account may be withdrawn by Tenant upon termination of this Lease whether
the Partnership Agreement is entered into or not.
3.03 Legal Tender
------------
Rent and all other sums payable under this Lease must be paid in
lawful money of the United States of America, without demand, offset or
deduction.
3.04 Additional Rent; Rent Defined
-----------------------------
(a) In addition to the Monthly Rent, Tenant shall also pay as
additional rent ("Additional Rent"), without deduction or offset, all Operating
Expenses, 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 Monthly Rent
for the Premises and Additional Rent.
3.05 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,
<PAGE>
if such rate is greater than the maximum rate of interest then permitted to be
charged by law, the Agreed Rate shall be the maximum rate of interest then
permitted to be charged 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.
Article 4.
RECORDS AND ACCOUNTING
----------------------
4.01 Records
-------
For the purposes of ascertaining compliance by Tenant of its
obligations under Article 3.02 and Article 5 hereof, Tenant agrees to prepare
and keep or cause to be prepared and kept on the Premises (or at such other
location approved by Landlord, which approval shall not be unreasonably
withheld) for a period of not less than thirty-six (36) months following the end
of the Term adequate records which shall show all receipts at the Premises, as
well as all charges, fees, costs, taxes, impositions, expenses and other sums
paid or required to be paid by Tenant in connection with its operation of the
Premises ("expenses") and other information reasonably requested by Landlord
from all sales and other transactions on the Premises by Tenant and by all
Subtenants (as hereinafter defined) in the event Landlord were to approve any
other Subtenancy (as hereinafter defined). The requesting or obtaining of
information by Landlord shall not be deemed to make Landlord responsible for
verifying the accuracy of any such information or make the Landlord responsible
for compliance of Tenant's obligations under Articles 3 and 5, which shall
remain the obligations of Tenant.
4.02 Monthly Reports
---------------
Tenant shall submit to Landlord on or before the fifteenth (15th) day
following the end of each calendar month during the Term (including the 15th day
of the calendar month following the end of the Term), a written statement of
income
<PAGE>
and expense signed by Tenant, and certified by it (or if Tenant is a corporation
or a partnership, by a duly authorized corporate officer or general partner of
Tenant) to be true and correct, showing in reasonable, accurate detail the
amount of Tenant's receipts, expenses and other information requested pursuant
to Section 4.01 for the immediately preceding period. The certification of each
such statement shall be satisfactory to Landlord in scope and substance and
without qualification except as may be expressly permitted by Landlord. The
statements referred to herein shall be in such form and style and contain such
details and breakdown as Landlord may reasonably determine.
4.03 Audited Financial Statements
----------------------------
Promptly following the end of each calendar year, Tenant shall cause
to be conducted, at its sole cost and expense, an annual audit of its books and
records by Arthur Andersen & Co., Inc. or such other "Big Six" accounting firm
selected by Tenant and acceptable to Landlord. Within sixty (60) days after the
end of each such calendar year, Tenant shall deliver audited financial
statements for the business conducted at the Premises, certified without
qualification by such auditors. Such audited financial statements shall be the
conclusive determination for all calculations required under Article 3.
4.04 Landlord's Right to Audit
-------------------------
If Tenant omits to prepare and deliver promptly any statement, report
or financial statements required by the provisions of this Article 4, Landlord
shall have the right, in addition to all other rights available to Landlord upon
Tenant's default, to make, or cause to be made, an audit of all books and
records of Tenant and any Subtenants, including their respective bank accounts
which in any way pertain to or show Tenant's activities, and to prepare, or
cause to be prepared, the statement, report or financial statements which Tenant
has failed to prepare and deliver; Tenant shall give Landlord 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 Landlord. The statements
or reports so prepared shall be conclusive on Tenant, and Tenant shall pay
<PAGE>
all expenses of the audit and other costs incurred by Landlord in connection
therewith. If any such audit shall disclose any willful inaccuracy of Tenant,
such inaccuracy shall constitute an incurable breach of this Lease.
Article 5.
USE AND OPERATION OF PREMISES
-----------------------------
5.01 Specific Use of Premises
------------------------
Tenant shall use and occupy the Premises as the Card Club and for no
other use or purpose.
5.02 Conduct of Business
-------------------
(a) Landlord and Tenant acknowledge that Tenant's obligation to
operate a business in conformance with this Article 5 is a material inducement
to Landlord to enter into this Lease, without which Landlord would not have
entered into this Lease. Accordingly, except as expressly provided elsewhere
herein, Tenant agrees to conduct business continuously at the Premises during
the entire Term of this Lease, except when prevented from doing so by reason of
the acts or omissions of Landlord or any Affiliate, strikes, lockouts, casualty
damage, the order of any governmental agency having jurisdiction over the
Premises and/or the conduct of Tenant's business therein or other reasons (other
than financial inability) beyond Tenant's reasonable control or during such
periods that alterations or repairs are being made to the Premises which make it
impracticable to keep the Premises open. Tenant agrees that, commencing with
the Commencement Date and continuing for the remainder of the Term, Tenant shall
be open for business on a 24-hour a day basis except to the extent prohibited by
law. Tenant shall at all times actively and diligently operate its business on
the Premises in a commercially reasonable manner. Selection and termination of a
Card Club General Manager shall be subject to Landlord's prior approval.
(b) In the event that Landlord consents to any subleasing, Tenant
shall cause all Subtenants to comply with all of the requirements of this
Section 12 to the same extent as if each such Subtenant were the Tenant
hereunder.
<PAGE>
(c) Tenant shall at all times during the Term of this Lease remain
fully licensed as a "card club operator" in good standing.
5.03 Compliance with Restrictions and Laws
-------------------------------------
Tenant shall, at its sole cost, comply with all of the requirements of
all covenants, conditions and restrictions of record applicable to the Premises
or any part thereof and shall faithfully observe all such covenants, conditions
and restrictions. Tenant shall, at its sole cost, comply with all federal,
state and local laws, regulations, rules, ordinances, zoning variances,
conditional use permits and orders now in force or which may hereafter be in
force applicable to Tenant, any Subtenant, the Premises, and/or the use or
occupancy of the Premises or the conduct of business therein or thereon,
including all applicable provisions of the DDA ("Applicable Laws"). Tenant
acknowledges that it is familiar with such conditions, and agrees that all of
such conditions (and all additional conditions which may be imposed in the
future) constitute "Applicable Laws" within the meaning of this Lease. Tenant
shall cause any Subtenants to comply with and observe all such covenants,
conditions, restrictions and Applicable Laws.
5.04 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 6.
MAINTENANCE, REPAIRS AND ALTERATIONS
------------------------------------
6.01 Tenant's Obligations to Repair
------------------------------
Tenant shall at its sole cost and expense, maintain in clean and safe
condition, and make all repairs and replacements to the Premises and every part
thereof, structural and non-structural, so as to keep, maintain and preserve the
Premises in first class condition and repair,
<PAGE>
including, without limitation, the roof, the foundation, the heating,
ventilation and air conditioning system ("HVAC"), elevators, if any, all
plumbing and sewage facilities, fire sprinklers, electrical and lighting
facilities, systems, appliances, and equipment within the Premises, fixtures,
interior and exterior walls, floors, ceilings, windows, doors, entrances, all
interior and exterior glass (including plate glass), and skylights located
within the Premises, and all sidewalks, service areas, parking areas and
landscaping comprising part of the Premises. All repairs and replacements
required to be made by Tenant shall be made promptly with new materials of like
kind and quality to those used in the original construction of the Premises. If
the repair or replacement work affects the structural parts of the Premises, or
if the estimated cost of any item or repair or replacement exceeds $10,000, then
Tenant shall first obtain Landlord's written approval of the scope of work,
plans therefor, and materials to be used. Any such work shall be performed by
Landlord's contractor or by such contractor as Tenant may choose from an
approved list to be submitted by Landlord. Landlord shall have the right to make
any repairs or replacements which are not promptly made by Tenant and charge
Tenant, as Additional Rent, for the cost thereof together with interest thereon
at the Agreed Rate from the date of payment thereof by Landlord. Without
limiting any of Tenant's obligations hereunder, during the Lease Term Tenant, at
its expense, shall obtain and keep in force an HVAC service contract and a roof
maintenance program satisfactory to Landlord. Tenant hereby waives the benefit
of any statute now or hereafter in effect which would otherwise afford Tenant
the right to make repairs at Landlord's expense or to terminate this Lease
because of Landlord's failure to keep the Premises in good condition, order and
repair. Tenant specifically waives all rights it may have under Sections
1932(1), 1941 and 1942 of the California Civil Code, and any similar or
successor statute or law. Notwithstanding anything to the contrary contained
herein, Landlord shall exercise its rights under any guaranties or warranties
relating to the original construction of the Premises if the need to make
repairs arises due to a defect therein; provided, however, Landlord shall not
have any liability or be required to expend any funds if such guaranties or
warranties are not honored by the makers hereof.
6.02 Landlord's Option to Make Major Repairs.
---------------------------------------
<PAGE>
Notwithstanding anything to the contrary herein, in lieu of Tenant
making any repairs to or replacements of the structural roof, exterior or load-
bearing walls or foundation, or any replacement or resurfacing of the parking
area, which Tenant would otherwise be obligated to make pursuant to Section 6.01
hereof, Landlord instead may elect to perform any or all such repairs or
replacements itself, in which case Tenant shall pay to Landlord the full cost
thereof within 15 days after Landlord's submission of a bill therefor.
6.03 Damage to Premises
------------------
In the case of damage to or destruction of the Premises by fire or
other casualty, Tenant's rental obligation shall continue as provided in Article
3 above to the extent of rental loss insurance and/or business interruption
insurance proceeds, and Tenant shall rebuild and restore such casualty damage,
unless Tenant elects to terminate the Lease pursuant to the further terms of
this Article 6. In the event that Tenant undertakes any restoration and/or
repair work, such work shall be done in accordance with the provisions of
Section 6.05 hereof and Landlord shall make the casualty insurance proceeds
available to Tenant for that purpose.
If the Premises are damaged to the extent that Tenant is unable to
operate a first class card club therein and such damage cannot be repaired
within one hundred eighty (180) days from the date of damage, Tenant may
terminate this Lease by giving written notice to Landlord no later than ten (10)
days after the date of occurrence of such damage. In the event either party duly
elects to terminate this Lease, this Lease shall be deemed to have been
terminated as of the date of occurrence of such damage and neither party shall
have any further liability under this Lease except for the provisions herein,
which by their terms survive the expiration or earlier termination of this
Lease.
6.04 Repair of Damage; Rent Abatement
--------------------------------
(a) If this Lease is terminated pursuant to any of the provisions of
Section 6.03 hereof, the Monthly Rent, Additional Rent and other payments
provided for herein shall be paid by Tenant through the date that Tenant closes
the Card Club and all rents and other payments made by Tenant to
<PAGE>
Landlord shall be appropriately prorated through the date of such closure.
6.05 Alterations; Improvements; Additions
------------------------------------
Tenant shall not make or permit the making of any alterations,
improvements, additions or installations ("Alterations") in, on or about the
Premises without Landlord's prior written consent and unless and until the
drawings, plans and specifications for such Alteration shall have been first
submitted in triplicate to and approved by Landlord and, if required, by any and
all mortgagees of Landlord. Landlord's approval to any such Alteration shall
not be unreasonably withheld or delayed.
Landlord, acting reasonably, may, as a condition to its consent
pursuant to this Section 6.05, require Tenant to furnish Landlord, prior to the
commencement of any work that could constitute the basis for a mechanic's lien
on the Premises and before any building materials are delivered to the Premises,
with a bond by a responsible surety company licensed to do business in
California, in a form and with a company satisfactory to Landlord, in an amount
equal to one and one-half times the estimated cost of the work to be done and
the materials to be supplied, such bond to remain in effect until all such costs
shall have been fully paid and the improvements fully insured by Tenant as
herein provided. Such bond, if required, shall secure completion by Tenant, or
on its default by the surety, of all work free from any and all liens of
contractors, subcontractors, materialmen, laborers or others and shall defend
and indemnify Landlord from and against any loss, damage or liability in any
manner arising out of or connected with such work. Landlord may also impose
additional reasonable conditions upon its consent pursuant to this Section 6.05,
including, but not limited to, a requirement that any work be supervised by a
qualified engineer or architect approved by Landlord and that appropriate
"builder's risk" insurance be obtained.
Any Alterations made in, on or about the Premises by or at the
direction of Tenant (or any Subtenant), shall be made and completed with due
diligence, in a good and workmanlike manner, in strict compliance with the
requirements of all Applicable Laws and all conditions of Landlord's consent.
<PAGE>
Tenant agrees to carry such insurance as required by Section 7.02 hereof
covering each and every such Alteration.
So long as there exist any restrictions on the square footage of
improvements on the Property, Tenant shall not, under any circumstances, do
anything which would increase the square footage of the Premises.
6.06 Ownership of Improvements, Fixtures, Furnishings and Equipment
--------------------------------------------------------------
All improvements, alterations, additions and installations
constructed, installed, affixed or otherwise made in, on or about the Premises
by or at the direction of either Landlord or Tenant (or any Subtenant) at any
time prior to or during the term of this Lease, including, without limitation,
any and all carpeting, floor coverings, wall coverings, lighting and hardware
fixtures, window treatments and ceilings, trade fixtures whether or not
permanently affixed to the Premises, furniture, business equipment and stock in
trade, shall at once become a part of the realty, if applicable and, in any
event belong to Landlord, without any obligation on the part of Landlord to
compensate Tenant or any other person therefor, except as expressly set forth in
the AIP and that certain Amended and Restated Agreement Respecting Pyramid
Casino, dated July 14, 1995, executed by Landlord and Tenant (the "Amended and
Restated Agreement". Any damage to the Premises resulting from the removal of
any items permitted or required to be removed by Tenant hereunder shall be
promptly repaired by Tenant at its sole cost and expense.
6.07 Mechanic's Liens
----------------
Tenant shall promptly pay 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 fifteen (15) days after
written
<PAGE>
demand for such removal is made by Landlord. If Tenant shall fail to discharge
any such lien within such 15-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 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
<PAGE>
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).
Except for Landlord's express obligations relating to the improvement,
maintenance and repair of the Premises, nothing in this Lease shall be deemed to
be, or construed in any way as constituting, the consent or request of Landlord,
express or implied, to or for the performance of any labor or the furnishing of
any materials for any construction, rebuilding, alteration or repair of or to
the Premises or any part thereof by any person or as giving Tenant any right,
power or authority to contract for or permit the rendering of any services or
the furnishing of any materials which might in any way give rise to the right to
assert any lien against Landlord's interest in any property. 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 lien.
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 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 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 contain
the "Amendment of the Pollution Exclusion" for damage caused by heat, smoke, or
fumes from a hostile fire. Such policy shall not contain
<PAGE>
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. The
limits of insurance required by this Lease or otherwise carried by Tenant shall
not, however, limit the liability of Tenant nor relieve Tenant of any obligation
hereunder. All insurance to be carried by Tenant shall be primary to and not
contributory with any similar insurance carried by Landlord, whose insurance
shall be considered excess insurance only. 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. Tenant shall obtain and keep in force
-------------------------
during the Term a policy or policies of insurance in the name of Landlord, with
loss payable to Landlord 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 Premise, 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, the perils of flood and/or earthquake; provided, however,
that Tenant shall consent to Landlord's request to carry such insurance if
Landlord reasonably determines, from time to time, taking into account Tenant's
financial condition, that the value of minimizing the risk of loss outweighs the
financial burden of carrying such insurance), 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
<PAGE>
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 Five Thousand Dollars and No Cents ($5,000.00) per
occurrence, and Tenant shall be liable for such deductible amount in the event
of an insured loss.
(b) Rental Value. Tenant shall, in addition, obtain and keep in force
------------
during the Term (or if only available to Landlord, reimburse Landlord) for the
costs of a policy or policies in the name of Landlord, with loss payable to
Landlord, insuring the loss of the Monthly 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 Monthly 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 shall also obtain business interruption insurance, in form and
substance reasonably acceptable to Landlord.
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 Five Thousand Dollars and No Cents ($5,000.00) 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.
<PAGE>
7.05 Insurance Policies. Insurance required hereunder shall be kept
------------------
in companies duly licensed to transact business in the State of California and
maintaining during the policy term a "General Policyholders Rating" of at least
A, VIII or other rating as may be required by Landlord, as set forth in the most
current issue of "Best's Insurance Guide." Tenant shall not do or permit to be
done anything which shall invalidate the insurance policies referred to in this
Article. With respect to insurance required of Tenant hereunder, Tenant shall
cause to be delivered to Landlord 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 to Landlord. Tenant shall, at least thirty (30) days prior
to the expiration of such policies, furnish Landlord with evidence of renewals
or "insurance binders" evidencing renewal thereof, or else Landlord may order
such insurance and charge the cost thereof to Tenant, which amount shall be
payable by Tenant to Landlord upon demand. If Tenant shall fail to procure and
maintain the insurance required to be carried by Tenant under this Article,
Landlord may, but shall not be required to, procure and maintain such insurance,
but at Tenant'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 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 VII
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 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
<PAGE>
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 22) 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) any
failure by Tenant to perform any material obligation to be performed by Tenant
under the terms of this Lease; or (ii) any wrongful act, wrongful omission,
negligence or wilful misconduct of Tenant or any of its agents, employees,
<PAGE>
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 the terms of this Lease; or (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. 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 Consent Required
----------------
Except as hereinafter provided in this Article 8, Tenant shall not
voluntarily, involuntarily or by operation of law assign, transfer, mortgage,
pledge, hypothecate or otherwise encumber or transfer (collectively, a
"Transfer") all or any part of Tenant's interest in this Lease or in the
Premises or sublet the whole or any part of the Premises, or permit any other
person, firm or corporation (a "Subtenant") to occupy by license, concession or
otherwise any portion of the Premises (collectively, a "Subletting"), without
first obtaining in each and every instance the prior written consent of
Landlord.
<PAGE>
Any Transfer or further subletting by a Subtenant shall be considered
a Subletting or Transfer hereunder and shall require the prior written consent
of Landlord. Consent to any type of Transfer may be withheld in Landlord's sole
discretion.
Any purported Transfer or Subletting without Landlord's prior written
consent shall be null and void and have no force or effect whatever and shall
constitute an incurable breach of this Lease.
8.02 Indirect Transfers
------------------
If, at any time during the Term, Tenant is a partnership, the death,
insolvency, withdrawal, substitution, addition or change in the identity of any
general partner of Tenant (including, without limitation, any transfer of any
stock of any corporation which is a partner of Tenant) following the date such
partnership becomes the Tenant hereunder shall be deemed a Transfer within the
meaning of this Lease. If, at any time during the Term, Tenant is a
corporation, the transfer of the stock of Tenant to any person who is not as of
the date hereof a shareholder of Tenant shall be considered a Transfer for
purposes of this Lease whether such change occurs by reason of transfer,
redemption, issuance of additional stock, operation of law, or any other cause
whatever, except that Mikael Aloyan shall be permitted to own stock in Tenant
equivalent to a nine percent (9%) ownership interest and each of Tom Atoyan and
Art Atoyan shall be permitted to own stock in Tenant equal to a two and one-half
percent (2 1/2%) ownership interest. Notwithstanding any of the foregoing,
Tenant may not transfer any stock if the proposed transferee (including, without
limitation, the permitted transferees referred to above) is not compatible with
the licensing, permitting, regulatory and other governmental restrictions
applicable to Tenant, Landlord or Landlord's Affiliates.
8.03 Obligations of Transferees and Subtenants
-----------------------------------------
(a) Each person or entity obtaining ownership of Tenant's interest in
this Lease, or any portion thereof, by reason of a Transfer (a "Transferee"),
shall unqualifiedly agree in writing, for the benefit of Landlord, to perform
all of the obligations of Tenant under this Lease. Such agreement
shall be in form and substance satisfactory to Landlord and
<PAGE>
shall be delivered to Landlord no later than the date of such Transfer.
(b) In connection with any Subletting, Tenant shall use only such form
of agreement with a Subtenant concerning such Subletting (a "Sublease") as shall
have been approved, as to form and substance, by Landlord, acting reasonably and
after approval, such Sublease shall not be amended or modified in any material
respect without the prior written consent of Landlord. Each Subtenant shall, by
reason of having entered into such Sublease, be deemed to have agreed, for the
benefit of Landlord (i) to the provisions specified in Section 33 hereof, and
(ii) to comply with each and every obligation to be performed by Tenant
hereunder (specifically including Section 12 hereof and this Article 8),
except (i) Tenant's obligation to pay Rent to Landlord; and (ii) the minimum
policy limits of any insurance to be carried by a Subtenant. Concurrently with
any Subletting, Tenant shall provide Landlord with written notice of the name
and address of any Subtenant for the purpose of giving notices to such
Subtenant.
8.04 Continued Liability; No Waiver
------------------------------
Any consent to any Transfer or Subletting which may be given by
Landlord shall not constitute a waiver by Landlord of the provisions of this
Article, or a consent to any other or further Transfer or Subletting, or, in the
event of a Subletting, a release of Tenant from primary liability for the full
performance by it of the provisions of this Lease. Notwithstanding any
Subletting, Tenant shall continue to be liable for the full performance of each
and every obligation under this Lease to be performed by Tenant, regardless of
whether Tenant is in possession of the Premises or has any power or legal
ability to perform such obligations. Notwithstanding any Transfer (or multiple
Transfers) the person named herein as Tenant (and any Transferee) shall continue
to be primarily liable in any and all events for the full performance of each
and every obligation under this Lease to be performed by Tenant, and the
obligations under this Lease of the person named herein as Tenant and any and
all Transferees shall be joint and several.
8.05 Right of First Opportunity to Purchase. Provided an Event of
--------------------------------------
Default of Tenant has not occurred, Tenant shall be afforded, during the Term of
this Lease, the right of first
<PAGE>
opportunity to acquire the Premises pursuant to the terms and in accordance with
Section 10.2 of the Amended and Restated Agreement.
8.06 Transfer of Landlord's Interest. The term "Landlord" as used
-------------------------------
herein shall mean and include only the owner or owners, at the time in question,
of the fee title to the Premises. In the event of any transfer, assignment or
other conveyance or transfers of any such title to any party other than an
Affiliate, Landlord herein named (and in case of any subsequent transfers or
conveyances, the then grantor) shall be automatically freed and relieved from
and after the date of such transfer, assignment or conveyance of all liability
as respects the performance of any covenants or obligations on the part of
Landlord contained in this Lease thereafter to be performed and, without further
agreement, the transferee of such title or interest shall be deemed to have
assumed and agreed to observe and perform any and all obligations of Landlord
hereunder, during its ownership of the Premises. Landlord may transfer its
interest in the Premises and/or this Lease without Tenant's consent and such
transfer or subsequent transfer shall not be deemed a violation by Landlord of
any of the terms and conditions hereof. Concurrently with a transfer by Landlord
of its interest in this Lease, Landlord shall also assign all of its right,
title and interest in and to the AIP and the Agreement Respecting Pyramid
Casino.
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 "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
<PAGE>
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 Monthly 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. In the event the condemning authority does not make
separate awards, Landlord and Tenant agree that any award shall be allocated
first to Landlord to take into account any unreturned portion of HPI's Total
Investment (determined in accordance with Exhibit "A" to the AIP, with the
months for which rent (including Additional Rent) was not fully paid deemed
"Remaining", less any amounts equal to any partial payments of Monthly Rent. Any
award remaining after Landlord's recovery of the foregoing amounts shall be
allocated two-thirds (2/3) to Landlord and one-third (1/3) to Tenant.
9.03 Rebuilding
----------
<PAGE>
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 Monthly 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.
(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 29, 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 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 by Tenant.
(d) The failure by Tenant to remain fully licensed as a "card club
operator" in good standing at all times during the
<PAGE>
Term of this Lease which failure shall continue for a period of five (5) days.
(e) 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.
(f) A general assignment by Tenant for the benefit of creditors.
(g) 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.
(h) 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.
(i) The attachment, execution or judicial seizure of 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.
(j) The admission in writing by Tenant of its inability to pay its
respective debts or perform its obligations as they become due.
(k) 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.
(l) 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.
(m) The occurrence of any event which expressly constitutes an
incurable breach of this Lease.
<PAGE>
The notices specified in subsections (a) and (b) of this Section 29
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 29 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
<PAGE>
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 31 shall include the Monthly 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 Tenant's right to possession, and Landlord may
enforce 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.
Tenant's right to possession of the Premises shall not be deemed to have been
terminated by Landlord unless express written notice to such effect is given by
Landlord to Tenant, and Tenant's right to possession of the Premises shall in no
event be deemed terminated without such notice on account of acts of maintenance
or preservation of or efforts to relet the Premises by Landlord or by reason of
the appointment of a receiver upon the initiative of Landlord.
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
<PAGE>
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.
10.05 Right to Rents, Issues and Profits
----------------------------------
In the event this Lease is terminated pursuant to the provisions of this
Article 10, all of the right, title, estate and interest of Tenant in and to (a)
the Premises; (b) all rents, issues and profits of the Premises whether then
accrued or to accrue; (c) all insurance policies and all insurance monies paid
or payable to Tenant with respect to the Premises, any property thereon and any
business conducted thereon; and (d), at the election of Landlord, all Subleases
then in existence for any part or parts of the Premises, shall, without
compensation being paid therefor, pass unto and vest in and become the property
of Landlord, free of any trust or claim thereto by Tenant. Tenant hereby
assigns to Landlord all subrents and other sums falling due from Subtenants
during any period in which Landlord has the right under this Lease, whether
exercised or not, to reenter the Premises upon Tenant's breach of this Lease,
and Tenant shall not have any right, interest or claim in or to such sums during
any such period. By its acceptance of an interest subject to this Lease, each
Subtenant shall be deemed to have agreed, and Tenant shall require each
Subtenant to expressly agree in writing (i) upon receipt of written notice from
Landlord that Tenant has breached this Lease, to make all payments of subrents
directly to Landlord, which payments shall be received by Landlord without any
liability or obligation to such Subtenant or otherwise (except to credit such
payments against the rents and other sums due under this Lease from Tenant), and
(ii) at the election of Landlord in its sole
<PAGE>
discretion, to attorn to Landlord in the event this Lease is terminated as the
result of Tenant's breach.
Each Sublease shall terminate upon the termination of this Lease for
Tenant's breach unless Landlord shall expressly elect by written notice to the
Subtenant thereunder to continue such Sublease in effect following a termination
of the Lease. Neither Landlord's consent to such Sublease, nor Landlord's
receipt of subrents from the Subtenant thereunder, nor any other act or omission
by Landlord other than Landlord's express written election to keep such Sublease
in effect following termination of this Lease, shall be construed as a consent
to the continued use or occupancy of the Premises by the Subtenant thereunder
following the termination of this Lease for Tenant's breach.
10.06 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
-----------------
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
<PAGE>
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, at Tenant's option, shall be offset against future Rent or
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.
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, 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.
11.04 Payment of Rents
----------------
Tenant's payment of full or partial payment of Rent following any default
of Landlord under this Lease shall not constitute a waiver of such default.
Article 12.
MORTGAGE OF LANDLORD'S INTEREST
-------------------------------
12.01 Subordination
-------------
The rights of Tenant hereunder shall be subject and subordinate to the lien
or interest of any Landlord's mortgage but only upon execution and delivery to
Tenant of a subordination, non-disturbance and attornment agreement executed by
Landlord's mortgagee in form and substance reasonably acceptable to Tenant.
12.02 Tenant's Obligations With Respect to Landlord's Mortgage
--------------------------------------------------------
<PAGE>
Tenant shall at any time and from time to time, upon not less than twenty
(20) days' prior written request by Landlord, deliver to Landlord either or both
of the following:
(a) Such financial information concerning Tenant and Tenant's operations as
reasonably may be required by any mortgagee or prospective mortgagee under any
Landlord's mortgage; provided, however, that any such financial information
shall be required and used only for bona fide business reasons related to such
mortgage or the obtaining thereof; and
(b) An executed and acknowledged instrument amending this Lease in such
respect as may be reasonably required by any mortgagee or prospective mortgagee
under any Landlord's mortgage; provided, however, that any such amendment shall
not materially alter or impair any of the rights and remedies of Tenant under
this Lease.
12.03 Definition of Landlord's Mortgage and Landlord's Mortgagee
----------------------------------------------------------
As used in this Lease, the term "Landlord's mortgage" refers to each
mortgage or deed of trust which may in the future encumber, the Premises or any
part thereof, and each lease of which Landlord is the lessee which covers, or
may in the future cover, the Premises or any part thereof. As used in this
Lease, the terms "Landlord's mortgagee" and "mortgagee of Landlord" include the
mortgagee, or bondholder under each such mortgage, the beneficiary under each
such deed of trust and the lessor under each such lease.
Article 13.
OPERATING EXPENSES
------------------
13.01 Definitions.
-----------
(a) "Operating Expenses" shall include all expenses and costs of every kind
and nature (including without limitation, payments to independent contractors)
which Landlord shall pay or become obligated to pay because of or in connection
with the ownership and operation of the Premises and surrounding property and
supporting facilities, and additional facilities
<PAGE>
(as such additional facilities may be determined by Landlord to be reasonably
necessary in subsequent years), including, without limitation: (i) all Tax
Costs; (ii) all Insurance Costs; (iii) any deductible portion of an insured loss
occurring to the Premises; (iv) expenses payable for the Premises under any
reciprocal easement agreement or other expense sharing arrangement with adjacent
property owner(s); and (v) all other expenses incurred by Landlord in connection
with the Premises.
(b) As used herein, the term "Insurance Costs" shall mean and refer to all
insurance premiums paid by Landlord with respect to insuring the Premises or any
portion thereof or the interest of Landlord or any mortgagee of Landlord
therein, including, without limitation, premiums for fire, extended coverage,
earthquake, business interruption, loss of rents and liability insurance, and
any other insurance which Landlord deems necessary or advisable.
(c) As used herein, the term "Tax Costs" shall mean and refer to all real
estate taxes, personal property taxes, privilege taxes, gross income taxes
assessed on the income of the Card Club, excise taxes, gross sales or use taxes,
water charges, sewer charges, assessments (including, but not limited to,
assessments for public improvements or benefits) and all other governmental
taxes, fees, impositions and charges of every kind and nature, whether or not
now customary or within the contemplation of the parties hereto, which shall be
or become due and payable under or by virtue of any law, statute, ordinance,
regulation or other requirement of any governmental authority, whether federal,
state, county, city, municipal or otherwise, (i) which shall be levied, assessed
or imposed upon Landlord or the owner of the Premises, or (ii) which shall be or
become liens upon or against the Premises or any portion thereof, or any
interest of Landlord or Tenant, or (iii) which shall be levied, assessed or
imposed or shall be or become liens upon or against any personal property used
in connection with the Premises or (iv) which shall be levied or imposed upon or
with respect to the ownership, possession, leasing, operation, management,
maintenance, improvement, alteration, repair, use or occupancy of the Premises
or any portion thereof. Landlord and Tenant recognize that there may be imposed
new forms of taxes, assessments, charges, levies or fees, or there may be an
increase in certain existing taxes, assessments, charges,
<PAGE>
levies or fees placed on, or levied in connection with the ownership, leasing,
occupancy or operation of the Premises and its facilities. All such new or
increased taxes, assessments, charges, levies or fees which are imposed or
increased, including, but not limited to, any taxes, assessments, charges,
levies and fees assessed or imposed due to the existence of this Lease or for
the purpose of funding services or special assessment districts theretofore
funded by real property taxes, shall also be included within the meaning of "Tax
Costs" as used herein. "Tax Costs" shall also include any costs incurred in
negotiating or contesting any of the foregoing taxes, fees, impositions and
charges. "Tax Costs" shall not include estate, inheritance, gift or franchise
taxes of Landlord or the federal or state net income tax imposed on Landlord.
13.02 Survival. Any sum payable by Tenant under this Article 13 which
--------
would not otherwise be due until after the termination of this Lease, shall, if
the exact amount is uncertain when this Lease terminates, be paid by Tenant to
Landlord upon such termination in an amount to be estimated by
Landlord with an adjustment to be made once the exact amount in known.
Article 14.
TAXES AND OTHER CHARGES
-----------------------
14.01 Tenant's Taxes
--------------
Tenant agrees that it will pay and discharge, punctually as and when the
same shall become due and payable without penalty, all personal property taxes,
excise taxes and all other governmental taxes, fees, impositions and charges
payable by Tenant of every kind and nature, whether or not now customary or
within the contemplation of the parties hereto, which shall be or become due and
payable under or by virtue of any law, statute, ordinance, regulation or other
requirement of any governmental authority, whether federal, state, county,
municipal or otherwise (all of such taxes, charges, assessments and other
governmental impositions being hereinafter collectively referred to as "Tenant's
Tax" or "Tenant's Taxes") which shall be levied, assessed or imposed, or shall
be or become liens, upon or against any personal
<PAGE>
property of Tenant or any interest of Tenant therein or under this Lease.
Notwithstanding the foregoing provisions of this Section 14.01,
nothing contained in this Lease shall require Tenant to pay any franchise,
estate, inheritance, succession, capital levy or transfer tax of Landlord or any
net income or excess profits tax which is in fact personal to Landlord.
Article 15.
UTILITY AND OTHER SERVICES
--------------------------
15.01 Utility Charges
---------------
Tenant 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.
15.02 Compliance With Governmental Regulations.
----------------------------------------
Landlord and Tenant shall comply with all rules, regulations and
requirements promulgated by national, state or local government agencies or
utility suppliers concerning the use of utility services, including any
rationing, limitation, or other control. Landlord may cooperate voluntarily in
any reasonable manner with the efforts of all governmental agencies or utility
suppliers in reducing consumption of energy or other resources. Tenant shall
not be entitled to terminate this Lease nor to any reduction or abatement of
Rent by reason of such compliance or cooperation. Tenant agrees at all times to
cooperate fully with Landlord and to abide by all rules, regulations and
requirements which Landlord may prescribe in order to maximize the efficiency of
the HVAC system and all other utility systems.
15.03 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
<PAGE>
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.
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 Monthly Rent, Additional Rent and all other charges
hereunder have been paid; and
<PAGE>
(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
-------------------------
Provided that Landlord does not unreasonably interfere with the operation
of Tenant's business on the Premises, Landlord and its agents shall have the
right:
(a) To display the Premises to prospective tenants. If Tenant vacates the
Premises prior to the expiration of the Term, Landlord, at its sole cost and
expense, may from and after Tenant's vacation decorate, remodel, repair, alter,
improve or otherwise prepare the Premises for reoccupancy.
(b) To enter the Premises at any reasonable time for inspections, to
exhibit the Premises to others, such as prospective purchasers and insurance,
building and lender's inspectors, to perform its obligations under this Lease
and for any purpose whatsoever reasonably related to the safety, protection or
preservation of the Premises or Landlord's interest therein, without being
deemed guilty of an eviction or disturbance of Tenant's use and possession,
provided that
<PAGE>
Landlord shall not unreasonably interfere with Tenant's business operation.
Tenant shall deliver to Landlord all keys necessary to unlock all of the
doors in, on or about the Premises, except Tenant's vaults and safes, and
Landlord shall have the right to use any and all means which Landlord may deem
proper in order to obtain entry in an emergency.
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
-----------------------------------
Subject to Landlord's obligations to maintain and repair the Premises,
Tenant agrees on the last day of the Term or on the earlier termination of this
Lease to surrender the Premises, in good order, condition and repair, reasonable
wear and tear excepted.
If Tenant fails to surrender the Premises upon the termination of this
Lease, Tenant agrees to and shall indemnify and hold harmless Landlord from and
against any loss or liability, including costs and attorneys' fees, resulting
from such failure to surrender the Premises, including but not
<PAGE>
limited to, any claims made by, or loss of rent from, any succeeding tenant
based on or resulting from such failure to surrender. Nothing contained herein
shall be construed as a consent to Tenant's occupancy or possession of the
Premises beyond the expiration or earlier termination of this Lease.
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, return receipt requested,
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: Compton Entertainment, Inc.
P. O.Box 90038
City of Industry, CA 91715-0038
Attention: Rouben Kandilian
With a copy to: Jerry Neuman, Esq.
Mitchell, Silberberg & Knupp
11377 West Olympic Blvd.
Los Angeles, CA 90064
Fax: (310) 312-3100
If to Landlord: Hollywood Park, Inc.
1050 So. Prairie Ave.
Inglewood, California 90301
Attn: G. Michael Finnigan
With a copy to: Sandra G. Kanengiser, Esq.
Irell & Manella
1800 Avenue of the Stars
Suite 900
Los Angeles, California 90067
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
<PAGE>
delivered or two (2) business days after the date deposited in the United States
mail in accordance with this Section 18.05.
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.
16.08 Short Form Lease
----------------
At the request of Landlord, Tenant agrees to join in the execution and
delivery of a short form memorandum of this Lease to be recorded in the Official
Records of Los Angeles County, California. The terms, covenants and conditions
of this Lease shall control over any such memorandum. In no event shall Tenant
have this Lease recorded without the prior written consent of Landlord, which
consent may be withheld in Landlord's sole and absolute discretion.
16.09 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
<PAGE>
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.
16.10 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.
16.11 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.
16.12 Sole Agreement
--------------
This Lease, together with the Agreement Respecting Pyramid Casino and the
AIP, 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.
16.13 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.
16.14 Time is of the Essence
----------------------
<PAGE>
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.
16.15 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.
16.16 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.
16.17 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
<PAGE>
obligations of each general partner shall be joint and several.
16.18 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.
16.19 Corporate Resolution
--------------------
If Tenant is a corporation, Tenant shall deliver to Landlord, 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of
the day and year first above written.
LANDLORD: HOLLYWOOD PARK, INC.,
a Delaware corporation
By:____________________________
Title:_________________________
TENANT: COMPTON ENTERTAINMENT, INC.,
a California corporation
By:____________________________
Title:_________________________
<PAGE>
EXHIBIT 10.19
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (the "Agreement") is made as of the 27th day
---------
of October, 1995, by and among FIRST UNION NATIONAL BANK OF FLORIDA ("FUNB"),
----
BANK ONE LEXINGTON, N.A. ("B-One"), BANK MIDWEST, N.A. ("B-MW"), INTRUST BANK,
----- ----
N.A. ("INTRUST"), FCLT LOANS, L.P., a Texas limited partnership ("FCLT") (FUNB,
------- ----
B-One, B-MW, INTRUST and FCLT sometimes being collectively referred to herein as
the "Bank Group" and FUNB, as agent for itself and the other members of the Bank
----------
Group, sometimes being referred to herein as the "Agent") and SUNFLOWER RACING,
-----
INC., a Kansas corporation ("Sunflower").
---------
WITNESSETH:
WHEREAS, the parties hereto were parties to, or are successors in
interest to parties to, a certain Amended and Restated Credit And Security
Agreement dated March 23, 1994 which was made by and among Sunflower, B-One,
Texas Commerce Bank National Association (the interests of which in the loan
transaction described in such document having since been assigned to FCLT), Home
State Bank of Kansas City (now known as B-MW), INTRUST and First Union National
Bank of North Carolina (the interests of which in the loan transaction described
in such document having since been assigned to FUNB), as since amended in
writing by that certain First Amendment dated August 1, 1994 made by and among
the same parties and that certain Second Amendment and Waiver dated December 19,
1994 made by and among the same parties (such agreement as so amended in writing
being referred to herein as the "Credit Agreement");
----------------
WHEREAS, the Credit Agreement and certain other "Loan Documents" [such
--------------
term being used herein with the same definition as in the Credit Agreement
except that such term shall also refer to this Agreement, the Credit Agreement
itself (including without limitation the aforesaid First Amendment and the
aforesaid Second Amendment and Waiver), any documents executed or delivered
subsequent to the date of the Credit Agreement but which fit within said
definition, and the documents executed by any party hereto or delivered to the
Bank Group or Agent pursuant to or in conjunction with the execution of any of
the foregoing, including, without limitation, that certain December 19, 1994
Subordination Agreement executed by Sunflower and the party hereinafter defined
as the "Guarantor" and those documents hereinafter defined as the "Inducement
Certificates"] relate to the obligations and indebtedness of Sunflower to
members of the Bank Group which are evidenced, created or secured by the Loan
Documents (such indebtedness and obligations provided for in the Loan Documents,
including without limitation, any provided for
-1-
<PAGE>
herein or in any document executed pursuant hereto, being collectively
referred to herein as the "Debt");
----
WHEREAS, the Debt is secured by the liens, pledges and security
interests which are evidenced, described, created, granted or perfected in and
by the Loan Documents, including without limitation the lien of a mortgage on
that certain real property located in Wyandotte County, Kansas which is more
fully described in Exhibit A, which is attached hereto and incorporated herein
---------
by this reference (such real property together with all fixtures and
improvements thereon being referred to herein as the "Real Property") (all such
-------------
liens, pledges and security interests which secure the Debt and the property
encumbered thereby being collectively referred to herein sometimes as the
"Collateral");
- -----------
WHEREAS, the members of the Bank Group have not received the quarterly
installments of interest and principal which were due to them on or before July
1, 1995 under the "Notes" which constitute the "Term Loan" (as those capitalized
----- ---------
terms are defined in the Credit Agreement and hereinafter used) and the failure
to pay such amounts could be declared by the Agent or the Bank Group to be an
"Event of Default" (as that capitalized term is defined under Section 7.1 of the
- -----------------
Credit Agreement and, as amended in Subsection 9(b) hereof, is hereinafter
used);
WHEREAS, Sunflower has requested that the Agent and the Bank Group
refrain from declaring the failure to pay said quarterly installments to be an
Event of Default and also has requested that the Bank Group and the Agent
refrain from exercising the remedies to collect the Debt which would only be
available to them after declaring an Event of Default under the Loan Documents
until the "Termination Date" (as that term is hereinafter defined); and
WHEREAS, the Agent and Bank Group, after negotiations which Sunflower
acknowledges were conducted in good faith, are willing to so refrain from either
declaring an Event of Default or exercising such remedies as would only be
available to them under the Loan Documents after such a declaration until the
"Termination Date" (as that term is hereinafter defined), upon the terms and
conditions herein set forth.
NOW, THEREFORE, upon the request of Sunflower and in consideration of
the foregoing premises and the mutual agreements and promises and other good and
valuable consideration herein exchanged and received, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Incorporation of Recitals.
--------------------------
-2-
<PAGE>
The foregoing recitals, and the Exhibit, defined terms and Loan
Documents referenced therein, are hereby incorporated herein by this reference.
2. Forbearance by Bank Group and Agent.
------------------------------------
(a) Bank Group hereby agrees that until the soonest to occur of:
(i) a default hereunder, as defined in Section 9 hereof;
(ii) the passage of the end of the so-called "veto session" of
the 1996 Session of the Kansas Legislature without the
adoption by both the Kansas House of Representatives and
the Kansas Senate of legislation which would permit slot
machine or casino gambling to occur at pari-mutuel
racetrack facilities in Kansas which (with necessary
licensing) would include at least the Real Property, with
or without first being approved in local or statewide
elections or if such legislation passes by such date but
approval by the Governor of Kansas after such date is
necessary thereafter, then passage of the deadline for
such approval by the Governor without such approval being
given; and
(iii) the passage of July 1, 1996;
(the soonest of such dates being referred to herein as the "Termination Date"),
----------------
neither any member of the Bank Group nor Agent shall, directly or indirectly,
institute or cause to be instituted any judicial proceedings against Sunflower
or SR Food & Beverage Company, a Kansas corporation ("SRF&B") to enforce the
-----
Loan Documents or to collect the Debt, seek the appointment of a receiver for
all or part of the Collateral, seek foreclosure of all or part of the Collateral
or exercise any other rights or remedies otherwise permitted to be exercised by
the Loan Documents or applicable law only upon an Event of Default under the
Loan Documents.
(b) Until the Termination Date, neither any member of the Bank Group
nor Agent shall, directly or indirectly, institute or cause to be instituted any
judicial proceedings against Hollywood Park, Inc., a Delaware corporation (the
"Guarantor") to enforce the Guaranty (as that term is defined in Subsection 7(a)
- ----------
hereof).
(c) Nothing in this Agreement shall be construed as in any way
limiting, waiving or otherwise affecting any rights, remedies or liens which the
Agent or the Bank Group may have in
-3-
<PAGE>
order to collect any portion or all of the Debt or to foreclose upon any portion
or all of the Collateral on or after the Termination Date, if the Debt is not
satisfied in full by the Termination Date. Without limiting the generality of
the foregoing, neither the Bank Group nor the Agent is waiving the right to
declare the failure to make payments due on July 1, 1995 or any other events of
which the Agent is or is not presently aware, to be an Event of Default, but
rather, the Agent and Bank Group hereby expressly reserve the right, subject to
the express terms hereof, to declare hereafter that any or all such
circumstances constitute an Event of Default under the terms of the Credit
Agreement and the other Loan Documents; provided that no default rate of
interest or late fee permitted under the Loan Documents shall be assessed for
time periods prior to the Termination Date. Also, without limiting the
generality of the first sentence of this Subsection 2(c), the Bank Group and the
Agent hereby reserve all of the rights of the Bank Group and of the Agent to
pursue Sunflower, SRF&B or both for all or any portion of the Debt, to pursue
Guarantor for liability under the Guaranty or any other Loan Document to which
Guarantor is a party and also to pursue any and all Collateral which is pledged,
mortgaged, assigned or otherwise liable for all or any portion of the Debt under
the terms of the Loan Documents.
(d) Nothing in this Agreement shall be construed as preventing the
Agent or the Bank Group from participating in any hearing or proceeding in any
judicial, bankruptcy or other proceeding of any type instituted by any other
person or entity, including without limitation by the judge presiding therein.
(e) Nothing in this Agreement shall be construed as in any way
limiting, waiving or otherwise affecting any rights which the Agent or Bank
Group would have under the Loan Documents or otherwise with respect to
administering or enforcing the Loan Documents in the absence of a default
hereunder or an Event of Default under any other Loan Documents.
(f) Nothing in this Agreement shall be construed as an agreement by
the Bank to provide any additional funding whatsoever to Sunflower or any other
party.
(g) Upon the Termination Date occurring without the Debt being
satisfied in full, notwithstanding any contrary provisions of any of the Loan
Documents, without any notice, demand, declaration, or grace period from the
Agent or the Bank Group: (i) Sunflower shall be deemed to be in default under
the respective terms of this Agreement, as well as the Loan Documents; (ii) the
Bank Group, and the Agent acting on its behalf, shall be entitled to the full
payment and performance of all of the indebtedness and other obligations
constituting the Debt immediately; and (iii) the Bank Group, and the Agent
acting on its behalf, can immediately exercise any or all of its rights
-4-
<PAGE>
or remedies provided for by law, this Agreement and the Loan Documents,
including without limitation the rights to seek a judgment against Sunflower and
any other person or entity which either is itself, or which has an interest in
property that is, liable for the payment or performance of all or some portion
of the Debt, subject, in the case of the Guarantor, to the limitations set forth
in the Guaranty (as that term is hereinafter defined), to enforce any such
judgment rendered, to exercise any non-judicial remedies which the Bank Group or
the Agent acting on its behalf may have, whether hereunder, under the Loan
Documents or under applicable law, and to foreclose upon or obtain a
receivership for any or all of the Collateral.
3. Acknowledgments by Sunflower.
-----------------------------
(a) In order to induce Agent and Bank Group to enter into this
Agreement, Sunflower specifically agrees and acknowledges that:
(i) Now and after the execution hereof and of any document
executed pursuant hereto Sunflower is and will be absolutely
and unconditionally liable for the full payment and
performance of all and of each and every portion of the
Debt notwithstanding anything to the contrary in any of the
Loan Documents and notwithstanding any actions or omissions
heretofore taken by the Bank Group, the Agent, or the
predecessors in interest of either;
(ii) But for the forbearance provided for in Section 2 hereof,
Bank Group and the Agent acting on its behalf would now be
entitled to declare that an Event of Default had occurred
under the Loan Documents and to enforce the indebtedness and
obligations constituting the Debt by any legal means,
including, without limitation, by taking steps to foreclose
upon any or all of the Collateral and by instituting suit
against Sunflower and such other persons and entities as are
necessary in order to realize upon the Collateral; and
(iii) as of the date hereof, the sum of the unpaid principal
balances of the Notes constituting the Term Loan is
$28,666,666.69 and, prior to the partial payments of
interest provided for in Section 4 hereof, the sum of the
accrued but unpaid interest due thereunder as of August 31,
1995, was $933,981.49.
-5-
<PAGE>
(b) Sunflower acknowledges and agrees that, in entering into this
Agreement, Bank Group and Agent are, among other things, relying upon: (i) the
execution and performance of the terms hereof by Sunflower; (ii) the
representations and warranties of Sunflower set forth herein; (iii) the fact
that this Agreement does not constitute a novation or extinguishment of the Debt
and that the Loan Documents remain in full force and effect, subject to the
terms hereof and of the Loan Documents executed pursuant to the terms hereof;
and (iv) the execution and delivery of any other documents or consents to the
Agent or Bank Group pursuant hereto, including, without limitation, the
Guarantor's execution of the Guaranty (as that term is hereinafter defined) and
the execution and delivery of the inducement certificates referred to in Section
7 hereof by the parties identified therein.
(c) Sunflower acknowledges and agrees that FUNB has succeeded to all
of the interests in the Loan Documents heretofore held by FUNB or by First
National Bank of North Carolina, including the rights thereof to act as Agent
for the Bank Group.
(d) Sunflower acknowledges and agrees that FCLT has, subject to the
final approval by the Kansas Racing Commission ("KRC") of a background check by
---
the Kansas Bureau of Investigation of Shawmut Bank Connecticut, succeeded to all
of the interests in the Loan Documents heretofore held by Texas Commerce Bank
National Association.
4. Payments.
---------
(a) On the first day of each calendar month which occurs after the
date hereof and prior to the Termination Date, monthly payments consisting of
one-half of the interest calculated in accordance with Section 6(a) hereof which
has accrued on the outstanding principal balance of the "Notes" (as that term is
-----
defined in the Credit Agreement and hereinafter used) during the preceding
calendar month (each singly a "Monthly Installment" and one or more,
-------------------
collectively, the "Monthly Installments") shall be due and payable by Sunflower
--------------------
to the Agent (on behalf of the Bank Group); provided that, except as is
otherwise specifically provided in this Agreement, all other interest, whether
heretofore accrued or hereafter accruing, all principal and all other monetary
and non-monetary obligations constituting the Debt shall be due and payable on
the Termination Date. Notwithstanding anything else in this Subsection 4(a) to
the contrary, Sunflower shall not be in default for failure to pay any Monthly
Installment unless and until Sunflower fails to make such payment on or before
the later of the first day of the calendar month on which such Monthly
Installment was to have been paid and five days after Bank Group or Agent gives
Sunflower
-6-
<PAGE>
written notice of the amount thereof and the method by which Bank Group or Agent
calculated said amount.
(b) In addition to all other payments from Sunflower provided for
under this Agreement, upon the date hereof Sunflower shall pay to the Agent (on
behalf of the Bank Group) the sum of $92,569.44 representing one-half of the
interest which accrued on the outstanding principal balance of the Notes during
the month of September, 1995.
(c) In addition to all other payments from Sunflower provided for
under this Agreement, upon the date hereof Sunflower shall pay to the Agent (on
behalf of the Bank Group) the sum of $466,990.75, representing one-half of the
interest which had accrued on the outstanding principal balance of the Notes but
which remained unpaid as of August 31, 1995; provided that Sunflower shall do so
by cooperating with Agent so as to cause Boatmen's Trust Company/Kansas City
Division (the "Escrow Agent") to pay the amounts then in the "Escrow Account"
------------ --------------
[as that term is defined in that certain Escrow Agreement dated September 13,
1995 made by and among Escrow Agent, Sunflower and Agent, as the same may be
extended in written documents signed by the parties thereto (the "Interest
--------
Escrow Agreement") and is hereinafter used] to the Agent (on behalf of the Bank
- ----------------
Group).
(d) In addition to all other payments from Sunflower provided for
under this Agreement, Sunflower shall cooperate with Agent in causing the Escrow
Agent to pay any interest earned on the Escrow Account, less any fees charged by
the Escrow Agent to Agent (on behalf of the Bank Group), all in accordance with
the terms of the Interest Escrow Agreement, for a credit against the then
accrued but unpaid interest due on the Debt. For purposes hereof, in
cooperating with the Agent, Sunflower shall take such steps, and execute such
documents, as the Agent shall reasonably request from time to time.
(e) In addition to all other payments from Sunflower provided for
under this Agreement, Sunflower will, within fifteen (15) days after every third
fiscal month of Sunflower (the first calculation being done after the fiscal
month of Sunflower ending in December, 1995), (for purposes of this Subsection
4(e), the three fiscal months ending on such date and each succeeding set of
three fiscal months each being referred to as a "Quarter") pay to the Agent (on
-------
behalf of the Bank Group) sixty percent (60%) of Sunflower's "Excess Cash Flow
after Operational Expenses" (as hereinafter defined), based upon the
"Operational Program" dated June, 1995 prepared by Sunflower, with later
adjustments made as a result of the modifications thereafter made in the horse
and dog racing schedules at the Real Property which were approved by the KRC.
For purposes of this Subsection 4(e) only, the following terms shall have the
following meanings:
-7-
<PAGE>
(i) "Accounts Attributable to Sunflower and SRF&B" shall mean the
--------------------------------------------
Sunflower operational account, the SRF&B operational account, purse
accounts, exchange accounts, and the TRAK East operational account.
(ii) "Purse Payments and Purse Supplements" shall mean any accrued
------------------------------------
obligation for payment or actual payment by Sunflower or TRAK East to
accounts maintained for the ultimate distribution and payment of
greyhound, horse or simulcast purses.
(iii) "Host Track Payments" shall mean actual payments or accrued
-------------------
obligations for payments to track facilities simulcasting a live race
signal to the Woodlands racetrack facility.
(iv) "Inter-Track Payments" shall mean any reconciliation payments or
--------------------
accrued obligations for reconciliation payments between racetrack
facilities and arising out of wagering payoffs from simulcast
wagering.
(v) "Breakage" shall mean those obligations for payment as defined by
--------
K.S.A. 74-8802(a).
(vi) "Outs" shall mean the obligations for payment of unclaimed winning
----
tickets referred to in K.S.A. 74-8822.
(vii) "Payroll" shall mean the normal weekly payroll obligations of TRAK
-------
East, Sunflower and SRF&B for their permanent, part-time and temporary
work forces.
(viii) "Taxes" shall mean those payments and accruals of payments for
-----
personal property taxes, real property taxes and special assessments
upon the real property.
(ix) "Bank Interest Payments" shall mean those payments made or accrued for
----------------------
payment hereunder to the Agent for the Bank Group.
For purposes of the calculation contemplated by this Subsection 4(e), "Excess
------
Cash Flow After Operational Expenses" shall be determined by a mathematical
- ------------------------------------
calculation commencing with a determination of the ending balance for the
Quarter of all Accounts Attributable to Sunflower and SRF&B and subtracting
therefrom all accrued or outstanding obligations associated with greyhound,
horse and simulcast Purse Payments and Purse Supplements, Host Track Payments,
Inter-Track Payments, Breakage, Outs, Payroll, Taxes, Bank Interest Payments and
all operations and vendor payables normally referenced upon the business ledgers
of said companies. Any positive quarterly calculation shall be deemed to be
Excess Cash Flow after Operational Expenses subject
-8-
<PAGE>
to percentage division and payment as described herein. Within ten (10) days
from the date hereof, Sunflower will prepare and deliver to Agent a certain
Schedule (the "Schedule"), reasonably satisfactory in form and content to Agent
--------
given the provisions hereof which shall consist of some past financial
statements of Sunflower on which the specific accounts and amounts which would
have constituted the terms defined hereinabove, as of the date of such
statements, are designated. In order to identify the Schedule for future
reference, when a Schedule reasonably satisfactory to Agent has been delivered,
Agent and Sunflower shall attach thereto a certificate executed by Sunflower and
Agent which makes reference to this Subsection 4(e). The parties agree that
subject to the terms of this Subsection 4(e) the corresponding accounts and
amounts on future financial statements of Sunflower will constitute the
foregoing defined terms and that the sample calculation included within such
Schedule is the method of calculation contemplated hereunder. The parties agree
that notwithstanding any other accounting treatment which Sunflower may give
various payments and accruals: Sunflower will not be able to double count any
item as both an accrual and as a payment made within a quarter in making the
calculations provided for in this Subsection 4(e); the forty percent (40%) of
the Excess Cash Flow after Operational Expenses for any Quarter not paid to the
Agent will be retained by Sunflower or SRF&B, as the case may be, and shall be
excluded from future calculations made under this Subsection 4(e); and, except
for property taxes, purse related items, Breakage and Outs, accruals cannot be
made except for items due no later than the next succeeding Quarter. Any
payments made to the Agent under this Subsection 4(e) will be applied as a
credit against the then accrued but unpaid interest due on the Debt.
5. Property Taxes.
---------------
(a) The amount of property taxes for 1995 on the Real Property, as
calculated by the government of Wyandotte County, Kansas (the "County") (such
------
amount being referred to as the "1995 Tax Deposit"), will be paid to the County
----------------
or deposited into escrow with the Escrow Agent in accordance with the terms of
this Section 5 pursuant to the form of escrow agreement attached hereto as
Exhibit B, which exhibit is hereby incorporated herein by reference (the "Tax
- --------- ---
Escrow Agreement"). On or before December 20, 1995, Sunflower will pay the
- ----------------
County, or escrow in the Tax Escrow Account, pursuant to the Tax Escrow
Agreement, no less than $400,000.00 of the total of the 1995 property taxes on
the Real Property, as calculated by the County. On or before March 31, 1996,
Sunflower will pay to the County, or escrow in the Tax Escrow Account, pursuant
to the Tax Escrow Agreement, at least the balance of the first half of the 1995
property taxes on the Real Property. On or before June 20, 1996, Sunflower will
pay the County, or escrow in the Tax Escrow Account, pursuant to the Tax Escrow
Agreement, no less than the then unpaid balance of
-9-
<PAGE>
the 1995 property taxes on the Real Property, as calculated by the County.
Unless hereafter otherwise agreed by the parties to the Tax Escrow Agreement,
the 1995 Tax Deposit will be held in the Tax Escrow Account until the date (the
"1995 Determination Date") that Agent or Sunflower notifies the other and Escrow
-----------------------
Agent that the amount of property taxes due on the Real Property for 1995 has
been determined, whether by means of the execution of a written stipulation or
settlement between Sunflower and the County or the issuance of a final order of
the Kansas Board of Tax Appeals or of a court of competent jurisdiction, which
order is either non-appealable or for which the time to appeal has expired
without the filing of an appeal. Upon the 1995 Determination Date, the principal
of the 1995 Tax Deposit, and any earnings thereon shall be applied in the
following order, to-wit: first, to the County to the extent necessary to fully
pay the 1995 property taxes on the Real Property; and second, any excess then
remaining being delivered to Sunflower. Any earnings in the Escrow Account on
the 1995 Tax Deposit, less any fees to the Escrow Agent earned thereon pursuant
to the Tax Escrow Agreement, will be applied in the same order as the principal.
(b) In order to secure the Debt further, Sunflower hereby pledges and
grants a security interest in the amounts escrowed in the Tax Escrow Account,
from time to time, to the Bank Group and agrees that, notwithstanding anything
else herein to the contrary, if the Termination Date occurs without the full
payment and performance of the Debt having occurred, the Bank Group, acting
through the Agent, will be entitled to the immediate payment of the entire
amount then in the Tax Escrow Account, less the fees theretofore earned by the
Escrow Agent under the Tax Escrow Agreement. Any amount so obtained by the Bank
Group will be applied to the Debt in such manner as the Bank Group shall
determine.
6. Modification of Loan Documents.
-------------------------------
(a) Notwithstanding anything to the contrary herein or in the Loan
Documents, from and after September 1, 1995 until the Termination Date, interest
will accrue on the principal portion of the Debt at a rate calculated as being
LIBOR plus 1.75% per annum on each of the dates that the interest rate is able
to change under the terms of the Loan Documents without reference to this
Agreement; provided that the method of determining the applicable LIBOR rate
shall be the same as that which was used in setting LIBOR interest rates under
the Credit Agreement prior to the execution hereof.
(b) By execution of this Agreement, the Loan Documents are hereby
modified in all respects necessary to implement the terms and provisions of this
Agreement, and hereafter all references herein and in any of the Loan Documents
to any of the Loan Documents shall refer to such Loan Documents as amended
hereby.
-10-
<PAGE>
7. Additional Guaranty, Inducement Certificates and Subordinations.
----------------------------------------------------------------
(a) Within five (5) days of the date hereof, Sunflower shall deliver
to the Bank Group a guaranty executed by the Guarantor in the form attached
hereto as Exhibit C, which is hereby incorporated herein by reference (the
---------
"Guaranty"); provided that on the date hereof Sunflower shall fax to Agent a
- ---------
copy of the signature page executed by Guarantor.
(b) Within sixty (60) days from the execution hereof, Sunflower shall
deliver to the Bank Group a certificate executed by The Racing Association of
Kansas East, a Kansas not-for-profit corporation ("TRAK East"), which shall have
---------
been approved by the KRC by said date, in the form attached hereto as Exhibit D,
---------
which is hereby incorporated herein by reference, or such other substantially
similar form as the Bank Group may approve, in which TRAK East shall agree that,
notwithstanding the execution hereof, TRAK East's covenants and agreements for
the benefit of the Bank Group in any of the Loan Documents, including without
limitation that certain Consent to Collateral Assignment of Lease and Management
Agreement dated March 23, 1994, remain in full force and effect.
(c) Contemporaneously with the execution hereof, Sunflower shall
deliver to the Bank Group a certificate executed by SRF&B which shall be in the
form attached hereto as Exhibit E, which is hereby incorporated herein by
---------
reference, or such other substantially similar form as the Bank Group may
approve, in which SRF&B shall agree that, notwithstanding the execution hereof,
SRF&B's covenants and agreements for the benefit of the Bank Group in any of the
Loan Documents, including without limitation that certain Unconditional Guaranty
Agreement (the "1994 Guaranty") and that certain Security Agreement, both of
-------------
which are dated March 23, 1994, remain in full force and effect.
(d) Within five (5) days of the date hereof, Sunflower shall deliver
to the Bank Group a certificate executed by the Guarantor which shall be in the
form attached hereto as Exhibit F, which is hereby incorporated herein by
---------
reference, or such other substantially similar form as the Bank Group may
approve, in which Guarantor shall agree that, notwithstanding the execution
hereof, Guarantor's covenants and agreements for the benefit of the Bank Group
that certain Pledge Agreement dated March 23, 1994, remain in full force and
effect; provided that on the date hereof Sunflower shall fax to Agent a copy of
the signature page thereof, executed by Guarantor.
(e) Within five (5) days of the date hereof, Sunflower shall deliver
to the Bank Group a certificate executed by R.D. Hubbard ("Hubbard") which shall
-------
be in the form attached hereto as
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<PAGE>
Exhibit G, which is hereby incorporated herein by reference, or such other
- ---------
substantially similar form as the Bank Group may approve, in which Hubbard shall
agree that, notwithstanding the execution hereof, Hubbard's covenants and
agreements for the benefit of the Bank Group in that certain Subordination and
Amendment Agreement dated March 23, 1994 and that certain Certificate of R.D.
Hubbard dated March 23, 1994, remain in full force and effect.
(f) Within the respective time periods referenced in Subsections 7(a)
through (e) hereof, Sunflower will deliver to the Bank Group one or more
certificates executed, and containing representations and warranties, by
Sunflower, TRAK East, SRF&B, Guarantor, Hubbard and all other persons or
entities with debts from Sunflower which have been subordinated to the Debt, and
shall certify that there have been no payments, directly or indirectly, made in
violation of any such subordinations.
(g) Contemporaneously with the execution hereof, and from time to time
within thirty (30) days of the Bank Group's request therefor prior to the
Termination Date, Sunflower shall deliver to the Bank Group one or more
certificates, in such form(s), executed by either or both of Sunflower and
SRF&B, or their successors, as the Bank Group may request, in which such
persons or entities will certify that such persons' or entity's obligations to
the Bank Group under any of the Loan Documents to which such person or entity is
a party or successor remain in full force and effect, that as of said date
neither such person or entity nor Sunflower has committed any defaults under
such Loan Documents, other than the "Known Current Defaults" (as that term is
hereinafter defined); provided that Sunflower's execution of this Agreement
constitutes its contemporaneous certificate required hereunder.
(h) Within five (5) days from Agent's request therefor, Sunflower
shall deliver to the Bank Group subordinations or other similar documents, from
such persons and entities as are designated by, and in such forms as are
acceptable to, the Bank Group in order to preserve, or to document the
preservation of, the priority of all liens, encumbrances and security interests
in property constituting Collateral, as such priority was provided for in the
Loan Documents without reference to this Agreement, notwithstanding the
execution hereof.
8. Draft of Petition.
------------------
(a) Without limiting the generality of the acknowledgements made by
Sunflower herein, Sunflower hereby acknowledges and agrees that that certain
form of Petition (the "Petition"), to which a certificate executed by Sunflower
--------
and Agent which makes reference to this Section 8 is attached and which names
the members of the Bank Group as plaintiffs and
-12-
<PAGE>
Sunflower, SRF&B, Guarantor and the others named therein as defendants,
accurately alleges a cause of action which, if a valid Event of Default was
declared by the Agent or the Bank Group by reason of one of the Known Current
Defaults (as that term is hereinafter defined), would exist against the
defendants named therein and the Collateral for their respective liabilities, or
that of their property, as the case may be, for the payment and performance of
all or any portion of the Debt.
(b) Sunflower hereby agrees that if the Termination Date occurs
without the Debt being fully paid or performed, the Bank Group and Agent acting
on its behalf will not be precluded from filing the Petition or, in its
discretion, a different form of petition, in a court of competent jurisdiction.
(c) Sunflower hereby waives any claim for defamation or libel which it
might otherwise have a right to make by reason of the making of the allegations
set forth in the Petition in a document not filed in a court of competent
jurisdiction.
9. Default.
--------
(a) Sunflower acknowledges and agrees that, in the sole discretion of
the Bank Group, exercisable without notice, Sunflower shall be deemed to be in
default under the terms of this Agreement, and the full performance and
satisfaction of all of the indebtedness and obligations to the Bank Group, the
Agent or third parties hereunder, or under the Loan Documents, including without
limitation those to pay and perform the Debt in full, shall be immediately due,
payable and performable, without any notice, right to cure period or declaration
from or by Bank Group or the Agent, if:
(i) any statement, representation, recital or warranty set forth
herein, in any inducement or estoppel certificate
contemporaneously herewith or hereafter pursuant hereto,
including, without limitation, any provided for in Section 7
hereto (collectively, the "Inducement Certificates"), or in any
-----------------------
financial statement, projection or other report or statement
given to Bank Group or Agent by or on behalf of Sunflower or the
maker of such certificate is knowingly false or intentionally
incomplete on a date as of which it is made; or
(ii) Bank Group or Agent hereafter learns of any material default in
any obligation of the Loan Documents in existence as of the date
hereof, other than the failure to make payments to the Bank Group
and the Agent when heretofore due under the Loan Documents and
those defaults which have heretofore occurred and are
specifically listed in
-13-
<PAGE>
that certain letter dated October 31, 1995 written by counsel for
Sunflower to counsel for the Bank Group and Agent (collectively,
the "Known Current Defaults"); or
----------------------
(iii) Sunflower or a party (other than the Agent or a member of the
Bank Group) to a Loan Document (or the successor of such party)
hereafter defaults in any of its respective obligations set forth
herein or any obligations in any of the Loan Documents (as
modified hereby) or commits or permits to continue, beyond any
period of time specified in the applicable Loan Documents (as
modified by the terms hereof), a default under the applicable
Loan Documents; provided that the mere passage of the "Loan
Maturity Date" (as that term is defined in the Credit Agreement)
and the continuing existence of the Known Current Defaults shall
not constitute a default for purposes hereof until the
Termination Date occurs pursuant to the terms hereof; or
(iv) the KRC fails to approve the Inducement Certificate to be
executed by TRAK East and delivered to the Bank Group within
sixty (60) days from the date hereof.
(b) From and after the date hereof, the term "Event of Default" shall
also include, in addition to any matters already contained within such term's
definition, the occurrence of any of the matters which would constitute a
default under the provisions of Subsection 9(a) hereof.
10. General Warranties and Representations.
---------------------------------------
Sunflower represents and warrants to the Bank Group, which representations
and warranties shall continue and survive so long as any part of the Debt
remains unsatisfied, that:
(a) each of Sunflower and SRF&B is a legal entity, duly created and
validly existing and in good standing under the laws of the State of Kansas, and
has full power and authority to enter into this Agreement and any other document
into which it enters, or into which Sunflower is required to cause it to enter,
pursuant to the terms hereof, to incur all obligations for which it could be
liable as provided for herein, in the Inducement Certificates or in any of the
other Loan Documents to which it is a party and to take all of the actions
referred to herein, in the Inducement Certificates or the Loan Documents to
which it is a party. The execution and performance of the terms hereof and of
the Inducement Certificates have been duly authorized by any and all necessary
corporate, administrative, judicial or other
-14-
<PAGE>
action, and will not violate any provision of law or of any applicable articles
of incorporation, bylaws or judicial or administrative ruling or decree. Except
for filing this Agreement and other documents to be executed pursuant hereto
with the KRC which Sunflower agrees to accomplish, and to provide the Bank Group
with reasonable written evidence of, within thirty (30) days of the date hereof,
no other consent or approval of, or filing with, any public authority,
regulatory agency or other person or entity whatsoever is required as a
condition to the validity of the obligations of Sunflower or SRF&B under this
Agreement, the Inducement Certificates or any of the other Loan Documents to
which it is a party; provided that Sunflower makes no representation or warranty
as to the necessity of any member of the Bank Group to obtain any consent or
approval for such member of the Bank Group to enter into this Agreement from any
public authority, regulatory agency or other person or entity whatsoever or as
to the effect on Sunflower's obligations if such a consent or approval is needed
but not obtained by such member of the Bank Group.
(b)(i) This Agreement and all other documents contemplated hereby,
when signed and delivered pursuant hereto, will, and (ii) each of the Loan
Documents and the Debt do, constitute valid and legally binding indebtedness and
obligations of Sunflower, SRF&B (but subject to, and limited by, the terms of
the 1994 Guaranty) and Guarantor (but subject to, and limited by, the terms of
the Guaranty), supported by good, valuable, adequate and sufficient
consideration, enforceable in accordance with the respective terms thereof (but
subject to the terms hereof). Neither Sunflower nor SRF&B has any meritorious
defense, right of set-off, dispute, claim, counterclaim, argument or contention
whatsoever as against the enforceability of said indebtedness and obligations.
(c) This Agreement and the Loan Documents to which any of Sunflower
and SRF&B are parties, were, and will have been, as the case may be, duly and
properly executed by persons authorized to do so on behalf of the respective
person or entity or their predecessor or successor in interest.
(d) Except for the Known Current Defaults, neither Sunflower nor SRF&B
knows of any event that has occurred or condition existing which, with the
giving of notice, the passage of time or both, could constitute an Event of
Default under the Loan Documents.
(e) All of the statements, acknowledgments, representations and
warranties of facts, status or effect which are made by Sunflower, SRF&B or both
and which are set forth in this Agreement, or any document to be executed or
delivered pursuant to the terms hereof, are, to the best of Sunflower's and
SRF&B's knowledge, true and complete.
-15-
<PAGE>
(f) None of the representations or warranties contained in this
Agreement or in any of the financial statements required to be furnished to the
Bank Group pursuant hereto or pursuant to the Loan Documents, or in any other
document, certificate or statement which has been furnished to the Bank Group by
any one or more of Sunflower and SRF&B, does or shall hereafter, on a date as of
which it is made, knowingly contain any untrue statement of a fact or omit to
state a material fact necessary in order to make the statements contained
therein true.
(g) The extension of credit which created the indebtedness that
constitutes a portion of the Debt was for business purposes (other than
agricultural purposes) only, and not for consumer, family or household purposes.
(h) Sunflower has all licenses which it is required to have in order
to conduct the operations which it is permitted to conduct, or to permit other
persons or entities to conduct, on the Real Property or with any items of the
Collateral under the Loan Documents.
(i) Until the Debt is satisfied in full, no payments will be made, or
property conveyed in lieu of payments, to or for the benefit of any of SRF&B,
TRAK East, Guarantor or Hubbard, directly or indirectly, by Sunflower, SRF&B or
any party acting on their respective behalf except for: (i) any payments to
TRAK East by Sunflower or SRF&B which are required to be made by Kansas law or a
written agreement between Sunflower, SRF&B and TRAK East (provided that the
latter cannot exceed amounts due and payable under the September 14, 1989
Agreement and Restatement of Lease and Management Agreement to which Sunflower,
SRF&B and TRAK East are parties, as modified by the Loan Documents); (ii) any
payments made between Sunflower and SRF&B in the ordinary course of business;
(iii) any reimbursements (except to the extent, if any, that reimbursements of
any such advances would have been subordinated under the Loan Documents to which
the Guarantor is a party) to Guarantor for amounts actually theretofore advanced
by the Guarantor to pay indebtedness of Sunflower or SRF&B to third parties
(other than Bruce Rimbo or entities in which Guarantor, directly or indirectly,
has an ownership interest) incurred for services or goods theretofore actually
received by Sunflower or SRF&B; and (iv) reimbursements of out of pocket
ordinary course of business, travel expenses actually theretofore incurred and
paid by Hubbard in hereafter performing services for Sunflower, of the type, if
any, which are currently being paid by Sunflower to Hubbard. Except as expressly
permitted above, if any of such entities has received since July 1, 1995 (or
earlier in violation of any subordination agreement), or hereafter receives, any
sum or property from or for Sunflower or SRF&B, they, and each of them, shall be
deemed to hold all such sums in trust for benefit of the Bank Group and
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<PAGE>
Sunflower shall cause them to promptly deliver the same to the Bank Group which,
upon receipt, shall apply the same on the Debt.
11. Waiver of Previous Rights.
--------------------------
(a) Sunflower, for itself and SRF&B, and for their respective
representatives, beneficiaries, trustees, successors, assigns, general partners,
shareholders, directors, officers, agents and employees, hereby releases,
acquits and forever discharges FUNB (both as a member of the Bank Group and as
Agent), B-One, B-MW, INTRUST, FCLT and their respective stockholders, directors,
officers, representatives, agents, employees, attorneys, predecessors in
interest (including, without limitation, Texas Commerce Bank National
Association, First City National Bank of Houston, First Union National Bank of
North Carolina, Kansas State Bank & Trust Company, Home State Bank and the
Federal Deposit Insurance Corporation), successors and assigns of and from any
and all actions, causes of action, claims, counterclaims, cross claims, debts,
demands, executions, garnishments, judgments, lawsuits, proceedings, and suits
of every kind and character, previously or now existing, whether known or
unknown, and relating in any manner whatsoever to, or arising in any manner
whatsoever from, the dealings or negotiations, of any of such persons or
entities being released hereby, with Sunflower, SRF&B, TRAK East, Guarantor,
Hubbard and any of the other persons on behalf of whom Sunflower is making this
covenant through the date hereof, including, without limitation, those dealings
which are evidenced by or relate to the Debt, including without limitation this
Agreement and the other Loan Documents.
(b) Sunflower, for itself and SRF&B, waives the benefit of any
"antideficiency", res judicata, marshalling of assets or one action legislation,
doctrine or rule which might otherwise bar any recovery against either of them
or any of the Collateral because of Bank Group's election of remedies, including
but not limited to an exercise of power of sale under any mortgage, deed of
trust, assignment or other security agreement. Sunflower agrees that
notwithstanding any foreclosure of any lien created or evidenced by any of the
Loan Documents with respect to any or all of any real or personal property
constituting all or any portion of the Collateral, which secures the Debt,
whether by the exercise of the power of sale contained therein, by an action for
judicial foreclosure or by an acceptance of a deed or bill of sale in lieu of
foreclosure, Sunflower and SRF&B shall remain bound under their respective
obligations to the Bank Group. Sunflower, for itself and SRF&B, expressly
acknowledges their obligations under each and every agreement they have
heretofore executed, as those agreements have heretofore been amended in a
writing executed by Bank Group or any of its member's predecessors in interest,
and further acknowledges that Sunflower
-17-
<PAGE>
and SRF&B hereby waive any defenses existing as of the date hereof to any of
their respective obligations.
(c) Sunflower hereby waives any rights of redemption which it might
otherwise have by operation of law or pursuant to the terms of any of the Loan
Documents with respect to any of the Collateral.
12. Further Assurances.
-------------------
(a) If Agent hereafter requests, within thirty (30) days thereafter,
Sunflower shall furnish to Bank Group, for each of Sunflower, SRF&B, Guarantor
and TRAK East, certified copies of resolutions of the directors (or, in
Guarantor's case, its Executive Committee) and (except in Guarantor's case)
shareholders of said corporation, ratifying all of the terms of each of the Loan
Documents to which such corporation is a party or for the performance of which
such corporation or at least some of its property is liable and also authorizing
or ratifying the execution and performance of the terms of this Agreement and of
any other documents contemplated hereby to which such corporation is a party.
(b) If Agent hereafter requests, within thirty (30) days thereafter,
Sunflower shall deliver to Bank Group Certificates of Good Standing issued by
the Secretary of State of Kansas indicating that Sunflower is in good standing
in such state and similar certificates from the secretaries of state (or
equivalent public official) of the states of incorporation of each of SRF&B,
Guarantor and TRAK East.
(c) Within thirty (30) days after Agent's request therefor, Sunflower
shall furnish to the Bank Group a written opinion(s) issued by counsel
representing each of said party and SRF&B (the form of said opinion to be
subject to the reasonable approval of the Bank Group) stating: (i) that each of
Sunflower and SRF&B is a legal entity, duly created and validly existing under
the laws of the jurisdiction in which it was created, has full power and
authority to enter into this Agreement, to incur all obligations provided for
herein, and to take all of the actions referred to herein; (ii) that the
execution and performance of the terms hereof by Sunflower and SRF&B have been
duly authorized or ratified by any and all necessary corporate or administrative
action and has not, and that the execution, and to the best of counsel's
knowledge, the performance hereof, will not, violate any provision of law or of
any applicable charter, bylaws, articles of incorporation, or judicial or
administrative ruling or decree; (iii) that no other consent or approval of any
public authority, regulatory agency or of any other person or entity whatsoever,
excepting the action of the KRC referred to in Section 7(b), is then required as
a condition to the validity of the obligations of Sunflower and SRF&B under the
Loan Documents
-18-
<PAGE>
to which they are already parties as modified by this Agreement and any
documents contemplated hereby to which they shall become parties; (iv) that this
Agreement and the Loan Documents constitute the valid and legally binding
obligations of Sunflower, enforceable against Sunflower and its successors and
assigns and all of the Collateral in accordance with the respective terms
thereof.
(d) Sunflower agrees that, at the option of the Bank Group, Sunflower
shall execute and the Bank Group may record in the office of the Register of
Deeds of the County or any other public office, such form(s) of recordable
instrument and financing statements which the Bank Group may require, which
reasonably describes the provisions hereof, in order to modify or amend any or
all of the Loan Documents which are of record in such office(s) or to perfect
any security interests granted herein or in any of the Loan Documents.
13. Bank Group's Continuing Rights and Remedies.
--------------------------------------------
(a) Notwithstanding the execution hereof and of any documents executed
contemporaneously with the execution hereof, it is expressly understood and
agreed that, except as otherwise provided by any directly conflicting terms of
this Agreement, the terms of the Loan Documents and all of the Agent's or Bank
Group's liens, security interests, rights and remedies contained in, evidenced
by or created by the Loan Documents shall not in any way be considered to have
been modified, diminished, decreased or to have lost any priority as against
Sunflower, SRF&B, the pledged property of any of them, the Collateral or any
third parties or the property thereof, as the case may be, and shall be
considered to have been in continuous force and effect since the execution of
such documents and agreements and the granting of such liens, security
interests, rights and remedies in the original notes, deeds of trust, mortgages,
guaranties and other agreements and documents. The parties acknowledge that,
except as otherwise provided by any directly conflicting terms of this
Agreement, neither Bank Group nor the Agent does hereby intend to modify,
diminish, decrease or subordinate the Loan Documents or any liens, security
interests, rights or remedies which the Agent or Bank Group would otherwise have
as against Guarantor, Hubbard, any other third parties or the property thereof,
as the case may be.
(b) To the extent that any term or provision thereof, or of the Loan
Documents as now or previously amended, is or is held or deemed to be
inconsistent with any other term or provision hereof or thereof, the term(s) or
provision(s) Bank Group or Agent acting for the Bank Group may elect to enforce
from time to time in the sole discretion of Bank Group and Agent, in such order
and manner as Agent determines may provide Bank Group the fullest security for
the Debt and afford Bank Group and
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<PAGE>
the Agent acting therefor the maximum legal and financial protection, shall
control.
(c) The Bank Group and Agent acknowledge that neither Guarantor nor
Hubbard is personally liable for the Debt, except, in Guarantor's case, to the
extent that Guarantor guarantees the Monthly Installments under the Guaranty;
provided that nothing in this sentence should be construed as releasing any of
the Collateral, including any portions thereof in which Guarantor or Hubbard has
any interest, from any lien, pledge, security interest or other encumbrance
which secures all or any portion of the Debt or as releasing Guarantor or
Hubbard from the obligations they respectively do have to Bank Group or Agent
under the Loan Documents to which Guarantor or Hubbard is a party, respectively.
The Bank Group and Agent acknowledge that effective upon the execution hereof by
all parties hereto and timely delivery to the Agent of the Inducement
Certificate to be executed by Hubbard pursuant to, and in the form provided for
by, Subsection 7(e) hereof (the "Hubbard Inducement Certificate"), Hubbard shall
------------------------------
have no obligations or liabilities to any of the Bank Group and Agent relating
to the Loan Documents and/or the loan transaction contemplated therein except
those provided for in the Subordination Agreement (as defined in the Hubbard
Inducement Certificate) and in the Hubbard Inducement Certificate (collectively,
"Hubbard's Documents"); provided that Bank Group and Agent are making this
-------------------
acknowledgment in reliance upon the material truthfulness and completeness of
all material representations and warranties heretofore made in writing for the
benefit of the Bank Group and Agent (and their respective predecessors in
interest) in Hubbard's Documents by Hubbard and, if any such material
representations or warranties are or were materially false or incomplete so as
to make them materially misleading as of the time that such representations and
warranties were effective by their terms this sentence shall not be construed as
a waiver of any claim that Bank Group or Agent might otherwise have had against
Hubbard or any other person or entity which arises from or is related to the
matter which makes such representation or warranty materially false or
misleading. The Bank Group and Agent acknowledge that effective upon the
execution hereof by all parties hereto and timely delivery to the Agent of the
Inducement Certificate to be executed by Guarantor pursuant to, and in the form
provided for by, Subsection 7(d) hereof (the "Guarantor Inducement
--------------------
Certificate"), the Guarantor shall have no obligations or liabilities to any of
- -----------
the Bank Group and Agent relating to the Loan Documents and/or the loan
transaction contemplated therein except those provided for in the Guarantor
Inducement Certificate, the documents listed on Schedule F-1 thereto and the
Guaranty (collectively, the "Guarantor Documents"); provided that Bank Group and
-------------------
Agent are making this acknowledgment in reliance upon the material truthfulness
and completeness of all material representations and warranties heretofore made
in writing for the benefit of the Bank
-20-
<PAGE>
Group and Agent (and their respective predecessors in interest) in the Guarantor
Documents by Guarantor and, if any such material representations or warranties
are or were materially false or incomplete so as to make them materially
misleading as of the time that such representations and warranties were
effective by their terms, this sentence shall not be construed as a waiver of
any claim that Bank Group or Agent might otherwise have had against Guarantor or
any other person or entity which arises from or is related to the matter which
makes such representation or warranty materially false or misleading. In making
the acknowledgements in this Subsection the Bank Group and Agent are acting in
reliance upon the material truthfulness and completeness of all material
representations and warranties heretofore made in writing for the benefit of the
Bank Group and Agent (and their respective predecessors in interest) in the Loan
Documents by any party thereto (other than the Bank Group, Agent and their
respective predecessors in interest) and, if any such material representations
or warranties are or were materially false or incomplete so as to make them
materially misleading as of the time that such representations and warranties
were effective by their terms, this sentence shall not be construed as a waiver
of any claim (arising from or related to the matter which makes such
representation or warranty materially false or misleading) that Bank Group or
Agent might otherwise have had against any person or entity who or which
knowingly and materially participated in, or knowingly and materially benefitted
from, the matter which makes such representation or warranty materially false or
misleading.
14. Financial Information.
----------------------
(a) At such times as are provided for in the Loan Documents, Sunflower
shall provide to Bank Group financial statements prepared in accordance with the
terms of the Loan Documents for Sunflower and SRF&B. In addition to any
specific new requirements made herein or requested pursuant hereto, the
financial statements and information to be provided by Sunflower and SRF&B shall
include statements and information substantially similar in scope, content,
format and frequency to that previously given to the Bank Group for Sunflower.
Without limiting the generality hereof, Sunflower shall also provide Agent with
financial statements for Sunflower and SRF&B within twenty days of the end of
each fiscal month of Sunflower which shall include an accounts payable aging
summary in a form reasonably satisfactory to Agent.
(b) From time to time during regular business hours, and five business
days after notice is given by the Agent, Sunflower shall give the Agent's
personnel and agents access to all books and records which reflect any
information pertinent to an evaluation of the accuracy or completeness of the
financial statements previously provided, or hereafter to be provided by
Sunflower or SRF&B pursuant to the terms hereof and of any
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<PAGE>
representations or covenants made by Sunflower herein or in any of the Loan
Documents. At Agent's request, Sunflower shall disclose to Agent the names of
such of Sunflower's and SRF&B's accountants and officers who have knowledge of
Sunflower's or SRF&B's financial condition or the accuracy or completeness of
the financial statements and of such representations and covenants provided to
the Bank Group or Agent. Sunflower shall instruct, and cause, all such persons
to disclose all information which they have concerning the accuracy or
completeness of said financial statements, representations and covenants to the
Bank Group or Agent if and when such persons are requested to provide such
information by the Agent or Bank Group.
15. Future Licenses. In the event that a slot or casino license can be
----------------
applied for at Sunflower's Woodlands facility prior to the Termination Date,
Sunflower agrees to reasonably promptly either apply for the same in Sunflower's
own name or otherwise to use best efforts to cause any other party which so
applies to enter into such agreements as would provide the Bank Group with the
equivalent collateral for the Debt as having the license in the name of
Sunflower would provide.
16. Costs and Expenses. Without limiting any covenants by Sunflower
-------------------
contained in any of the Loan Documents to pay similar or different items of cost
or expense, within thirty (30) days of the Agent or Bank Group sending a
statement therefor or notice thereof to Sunflower, Sunflower shall pay all
expenses and fees incurred by Bank Group or the Agent acting on its behalf in
enforcing this Agreement, and in enforcing all prior Loan Documents, including,
without limitation, all recording, filing, registration and UCC or title search
fees and taxes, all attorney fees and disbursements, and all expenses incurred
by Agent or Bank Group in connection with the enforcement of the Debt after the
Termination Date, the foreclosure of any lien provided for herein or in any of
the Loan Documents and participation in any bankruptcy or other insolvency
proceedings, including without limitation the consideration of any plan, cash
collateral order, motions to lift or modify stay or otherwise.
17. Notices. Notwithstanding any other provisions to the contrary in any
--------
of the Loan Documents, hereafter all notices and other correspondence required
or permitted under this Agreement (except that interest amounts and calculations
provided for in Subsection 4(a) which need only be given to Sunflower by telefax
at the number specified hereinbelow) or any Loan Documents, shall be deemed to
have been given if put in writing and personally delivered or sent by first
class registered or certified mail, return receipt requested and postage and
registration or certification fees prepaid, and transmitted by telefax, to the
respective parties at the respective addresses and telefax numbers specified
hereinbelow, on or before the dates such notice or other correspondence must
otherwise be given:
-22-
<PAGE>
If to any member of the Bank Group or the Agent:
First Union National Bank of Florida
Attention: Mr. Marinus Otte
Suite 400
4299 Northwest 36 Street
Miami Springs, Florida 33166
Telefax Number: 305-883-4141
with a copy to:
Harry E. Wigner, Jr.
Lathrop & Norquist, L.C.
9401 Indian Creek Parkway, Suite 1050
Overland Park, Kansas 66210
Telefax Number: 913-451-0875
If to Sunflower:
Sunflower Racing, Inc.
Attention: Bruce Rimbo
P.O. Box 12036
99th & Leavenworth Road
Kansas City, Kansas 66112
Telefax Number: 913-596-5943
with copies to:
Hollywood Park, Inc.
Attention: G. Michael Finnigan
1050 South Prairie Avenue
Inglewood, California 90301
Telefax Number: 310-673-2582
and
R. Scott Beeler
Gage & Tucker L.C.
9401 Indian Creek Parkway, Suite 400
Overland Park, Kansas 66210
Telefax Number: 816-292-2150
or to such other address as may be specified by notice given as herein provided;
provided, however, that a notice of a change of address shall be effective upon
a party hereto only upon receipt by said party.
18. General. Each party agrees to perform any further acts and to deliver
--------
any additional documents that may be reasonably requested and necessary to carry
out the provisions of this Agreement. Should any part, term, or provision of
this Agreement
-23-
<PAGE>
be declared illegal or in conflict with any law, rule, or regulation, the
validity of the remaining portions, terms, or provisions shall not be affected
thereby. The captions used herein are used for convenience only and are not to
be used in attempting to construe any part of this Agreement. Unless the context
indicates otherwise, words importing the singular number shall include the
plural and vice versa, words importing person shall include firms, associations,
general and limited partnerships and corporations, including public bodies and
entities, as well as natural persons, and words of masculine gender shall be
deemed and construed to include correlative words of the feminine and neuter
genders and vice versa. None of the provisions of this Agreement may be amended
without the written consent of Sunflower and the Required Banks (as defined in
the Credit Agreement and hereinafter used). Any waiver of any provision or
condition of this Agreement shall only be in writing and shall not be construed
or deemed to be a waiver of any other provision or condition of this Agreement,
nor a waiver of a subsequent breach of the same provision or condition, unless
such waiver be so expressed in writing and signed by the party so waiving. Any
waiver by the Bank Group, Agent or Required Banks of any performance by any
party to any of the Loan Documents shall not affect the liability of any other
party or the Collateral to the Bank Group. This Agreement and the documents
required to be executed or delivered pursuant hereto, shall be construed under,
and governed by, Kansas law, regardless of the choice of law provisions of
Kansas law or of any other jurisdictions. This Agreement shall be binding upon
and inure to the benefit of, and be enforceable by, the heirs, legal
representatives, successors and assigns of the parties as the case may be. This
Agreement may be executed in any number of originals or counterparts, each of
which shall be deemed an original, but all of which together shall constitute
only one instrument. The terms and conditions contained herein and in the
documents incorporated herein or executed pursuant to the terms hereof
constitute the entire agreement of the parties with respect to the Debt and the
Collateral and supersede all prior written and oral agreements and
understandings relating to the subject matter hereof, including, without
limitation, that certain letter of intent dated September 8, 1995 written by
counsel for the Bank Group to Sunflower.
ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES TO EXTEND OR RENEW SUCH DEBT
ARE NOT ENFORCEABLE. TO PROTECT YOU (SUNFLOWER) AND US (BANK GROUP AND AGENT)
FROM MISUNDERSTANDING OR DISAPPOINTMENT, ANY AGREEMENTS WE REACH COVERING SUCH
MATTERS ARE CONTAINED IN THIS WRITING AND THE OTHER LOAN DOCUMENTS EXPRESSLY
REFERRED TO HEREIN WHICH ARE THE COMPLETE AND EXCLUSIVE
-24-
<PAGE>
STATEMENT OF THE AGREEMENT BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING
TO MODIFY IT.
THIS DOCUMENT, TOGETHER WITH ALL OTHER LOAN DOCUMENTS BETWEEN THE AGENT OR
THE MEMBERS OF THE BANK GROUP OR THEIR RESPECTIVE PREDECESSORS IN INTEREST AND
SUNFLOWER IS THE FINAL EXPRESSION OF THE CREDIT AGREEMENT BETWEEN SUCH PARTIES.
THIS DOCUMENT MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS
ORAL CREDIT AGREEMENTS OR PRIOR WRITTEN CREDIT AGREEMENTS OTHER THAN WRITTEN
LOAN DOCUMENTS BETWEEN SUCH PARTIES. ANY ADDITIONAL TERMS OF THE CREDIT
AGREEMENT BETWEEN SUCH PARTIES ARE SET FORTH BELOW.
THERE ARE NO UNWRITTEN CREDIT AGREEMENTS BETWEEN SUCH PARTIES.
(INITIAL) ________ SUNFLOWER RACING, INC.
________ FIRST UNION NATIONAL BANK OF FLORIDA
________ BANK ONE LEXINGTON, N.A.
________ BANK MIDWEST, N.A.
________ INTRUST BANK, N.A.
________ FCLT LOANS, L.P.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
effective as of the date first set forth above.
SUNFLOWER RACING, INC.,
a Kansas corporation
By:
Name:
Title:
STATE OF _______________)
) ss
COUNTY _________________)
Before me, a notary public in and for said County and State personally
appeared ____________________, personally known to me to be the
__________________, of SUNFLOWER RACING, INC., a Kansas corporation, and who, as
such officer, executed the foregoing instrument this date and personally
appeared before me and
-25-
<PAGE>
acknowledged before me that he had executed said instrument freely and
voluntarily for the uses and purposes therein expressed and with full authority
of and on behalf of said corporation, as an authorized officer thereof.
(SEAL)
Name:
Title: Notary Public
My Commission Expires:
- ----------------------
FIRST UNION NATIONAL BANK
OF FLORIDA
By:
Name:
Title:
STATE OF _______________)
) ss
COUNTY _________________)
Before me, a notary public in and for said County and State personally
appeared ____________________, personally known to me to be the
__________________, of FIRST UNION NATIONAL BANK OF FLORIDA, and who, as such
officer, executed the foregoing instrument this date and personally appeared
before me and acknowledged before me that he had executed said instrument freely
and voluntarily for the uses and purposes therein expressed and with full
authority of and on behalf of said national bank, as an authorized officer
thereof.
(SEAL)
Name:
Title: Notary Public
My Commission Expires:
- ----------------------
BANK ONE LEXINGTON, N.A.
-26-
<PAGE>
By:
Name:
Title:
STATE OF _______________)
) ss
COUNTY _________________)
Before me, a notary public in and for said County and State personally
appeared ____________________, personally known to me to be the
__________________, of BANK ONE LEXINGTON, N.A., and who, as such officer,
executed the foregoing instrument this date and personally appeared before me
and acknowledged before me that he had executed said instrument freely and
voluntarily for the uses and purposes therein expressed and with full authority
of and on behalf of said national bank, as an authorized officer thereof.
(SEAL)
Name:
Title: Notary Public
My Commission Expires:
- ----------------------
INTRUST BANK, N.A.
By:
Name:
Title:
STATE OF _______________)
) ss
COUNTY _________________)
Before me, a notary public in and for said County and State personally
appeared ____________________, personally known to me to be the
__________________, of INTRUST BANK, N.A., and who, as such officer, executed
the foregoing instrument this date and personally appeared before me and
acknowledged before me that he had executed said instrument freely and
voluntarily for the uses
-27-
<PAGE>
and purposes therein expressed and with full authority of and on behalf of said
national bank, as an authorized officer thereof.
(SEAL)
Name:
Title: Notary Public
My Commission Expires:
- ----------------------
BANK MIDWEST, N.A.
By:
Name:
Title:
STATE OF _______________)
) ss
COUNTY _________________)
Before me, a notary public in and for said County and State personally
appeared ____________________, personally known to me to be the
__________________, of BANK MIDWEST, N.A., and who, as such officer, executed
the foregoing instrument this date and personally appeared before me and
acknowledged before me that he had executed said instrument freely and
voluntarily for the uses and purposes therein expressed and with full authority
of and on behalf of said national bank, as an authorized officer thereof.
(SEAL)
Name:
Title: Notary Public
My Commission Expires:
- ----------------------
FCLT LOANS, L.P.,
a Texas limited partnership
By: FCLT Loans Asset Corp., a
Texas corporation
-28-
<PAGE>
By:
Name:
Title:
STATE OF _______________)
) ss
COUNTY _________________)
Before me, a notary public in and for said County and State personally
appeared ____________________, personally known to me to be the
__________________, of FCLT LOANS ASSET CORP., a Texas corporation, in its
capacity as the general partner of FCLT LOANS, L.P., a Texas limited
partnership, and who, as such officer, executed the foregoing instrument this
date and personally appeared before me and acknowledged before me that he had
executed said instrument freely and voluntarily for the uses and purposes
therein expressed and with full authority of and on behalf of said corporation
in its capacity as the general partner of such limited partnership, as an
authorized officer thereof.
(SEAL)
Name:
Title: Notary Public
My Commission Expires:
- ----------------------
EXHIBIT A
---------
LEGAL DESCRIPTION
-----------------
EXHIBIT B
---------
ESCROW AGREEMENT
----------------
THIS ESCROW AGREEMENT (the "Escrow Agreement") is made as of the _____ day
----------------
of _______________, 1995, by and among BOATMEN'S TRUST COMPANY / KANSAS CITY
DIVISION ("Escrow Agent"), SUNFLOWER RACING, INC., a Kansas corporation
------------
("Sunflower") and FIRST UNION NATIONAL BANK OF FLORIDA ("FUNB") as agent for
- ----------- ----
itself and the other following lenders (which together with FUNB are
collectively sometimes referred to herein as the "Bank Group"), to-wit: BANK
----------
ONE LEXINGTON, N.A. ("Bank One"); FCLT LOANS, L.P. ("FCLT"); BANK MIDWEST, N.A.
-------- ----
("Bank Midwest"); and INTRUST BANK,
------------
-29-
<PAGE>
N.A. ("Intrust") (FUNB as such agent being referred to herein sometimes as the
-------
"Bank Group Agent").
----------------
WITNESSETH:
WHEREAS, Sunflower and the members of the Bank Group or their predecessors
in interest were parties to that certain Standstill Agreement dated
____________________, 1995 (the "Standstill Agreement") and certain related loan
--------------------
documents defined therein as the "Loan Documents";
WHEREAS, Sunflower and the Bank Group desire that certain sums of money be
placed into an escrow account with the Escrow Agent and that the same be held
and disbursed in accordance with the terms and conditions hereof; and
WHEREAS, Escrow Agent is willing to handle such sums in accordance with the
terms and conditions hereof;
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Escrow Account. Escrow Agent hereby agrees to open an escrow account
--------------
to be held and disbursed pursuant to the terms and conditions hereof (the
"Escrow Account").
- ---------------
2. Deposits. Sunflower agrees to make the following deposits into the
--------
Escrow Account, or, in the alternative as to any portion or all of any of them,
to pay said amount to the Treasurer of Wyandotte County, Kansas, as a payment
upon the 1995 property taxes on the Real Property (as that term is defined in
the Standstill Agreement and used herein) as calculated by Wyandotte County,
Kansas (the amount of such taxes, as calculated by said county, being referred
to as the "Billed Taxes") on or before the dates indicated, to-wit: (a) on or
------------
before December 20, 1995, the sum of $400,000.00; (b) on or before March 31,
1996, an amount equal to the balance of the first half of the Billed Taxes; and
(c) on or before June 20, 1996, the then unpaid balance of the Billed Taxes
(such payments being collectively referred to herein as the "Deposits").
3. Investment of Deposits. Unless hereafter otherwise directed by both
----------------------
Sunflower and the Bank Group Agent in writing, Escrow Agent agrees to invest and
re-invest the Deposits and any other sums deposited into the Escrow Account or
earned on the sums in the Escrow Account, from time to time, in Escrow Agent's
"Pilot Treasury Fund". Escrow Agent represents that such "Pilot Treasury Fund"
is, and, unless the other parties hereto are notified otherwise by Escrow Agent,
during the term hereof, will be, an investment in "Treasuries" which are
obligations of the United States of America and fully collateralized REPOS.
Escrow Agent represents that the annualized rate of return of such "Treasury
Fund" on September 8, 1995 was 5.542%.
-30-
<PAGE>
4. Escrow Agent's Incorporated Terms and Fees. The terms and conditions
------------------------------------------
attached hereto as Exhibit A are hereby incorporated herein by reference. As
---------
full compensation for the performance of Escrow Agent's obligations hereunder,
the parties agree that Escrow Agent will charge a one time fee of $500.00 plus
the sweep fee referred to in Exhibit A (the "Cash Sweep Fee"); provided that the
--------------
parties agree that the Cash Sweep Fee will only be assessed one time and only on
the interest or earnings of the Escrow Account, as such interest and earnings,
are posted. The $500.00 fee will be deducted by Escrow Agent from the Escrow
Account at the time the principal therein is disbursed in accordance with
Section 5 hereof.
5. Term and Disbursements. Unless extended by the written agreement of
----------------------
the parties hereto, the escrow provided for herein will terminate upon that date
(the "Escrow Termination Date") on which either Sunflower or Bank Group Agent
-----------------------
notifies the Escrow Agent that the amount of property taxes due on the Real
Property for 1995 has been determined, whether by means of the execution of a
written stipulation or settlement between Sunflower and Wyandotte County,
Kansas, or the issuance of a final order of the Board of Tax Appeals of Kansas
or of a court of competent jurisdiction, which order is either non-appealable or
for which the time to appeal has expired without the filing of an appeal. Upon
the next business day after the Escrow Termination Date, the principal of the
Deposits and, no later than the first banking calendar month following the month
in which the Escrow Termination Date occurs, any earnings thereon, less the
Escrow Agent's fees provided for herein, shall be applied in the following
order, to-wit: first, to the extent necessary to pay that portion of the 1995
property taxes then due and payable on the Real Property, to Wyandotte County,
Kansas, and, second, any excess in the Escrow Account, to Sunflower.
Notwithstanding the passage of the deadlines specified in the preceding
sentence, Escrow Agent will not be in default under its obligations to disburse
the funds in the Escrow Account until it has received written transfer
instructions from the party(ies) giving Escrow Agent notice that the Escrow
Termination Date has occurred.
6. Notices. All notices to Escrow Agent will be deemed delivered when
-------
given in accordance with the provisions of Section 5 of Exhibit A hereto. All
notices and other correspondence required or permitted to be given to Sunflower
or Bank Group Agent under this Escrow Agreement shall be in writing and shall be
deemed to have been given if personally delivered or sent by first class
registered or certified mail, return receipt requested and postage and
registration or certification fees prepaid, to the respective parties at the
following addresses on or before the date such notice or other correspondence
must be given:
-31-
<PAGE>
If to Sunflower:
Sunflower Racing, Inc.
P.O. Box 12036
99th and Leavenworth Road
Kansas City, Kansas 66112
Attention: Bruce Rimbo
with a copy to:
R. Scott Beeler
Gage & Tucker L.C.
9401 Indian Creek Parkway
Suite 400
Overland Park, KS 66210
If to Bank Group Agent:
First Union National Bank of Florida
4299 Northwest 36 Street
Suite 400
Miami Springs, FL 33166
Attention: Marinus Otte
with a copy to:
Harry E. Wigner, Jr.
Lathrop & Norquist, L.C.
9401 Indian Creek Parkway
Suite 1050
Overland Park, KS 66210
or to such other address as may be specified by notice given as herein provided;
provided, however, that notice of a change of address shall be effective only
upon receipt by the other party.
7. Miscellaneous. This Escrow Agreement contains the entire agreement of
-------------
the parties relating to the subject matter hereof and replaces any prior or
contemporaneous agreement or understandings unless specifically incorporated
herein. No modification of this Escrow Agreement shall be valid unless made in
accordance with any applicable laws and in a writing signed by the parties
hereto. The captions appearing in this Escrow Agreement are inserted only as a
matter of convenience and for reference and in no way define, limit or describe
the scope and intent of this Escrow Agreement or any of the provisions hereof.
Should any part, term or provisions of this Escrow Agreement be declared to be
illegal or in conflict with any law, rule or regulation, the validity of the
remaining portions, terms or provisions shall not be affected thereby. This
Escrow Agreement may be executed in any number of counterparts, each of which
-32-
<PAGE>
shall be deemed an original but all of which together shall constitute only one
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement
as of the date first above set forth.
BOATMEN'S TRUST COMPANY SUNFLOWER RACING, INC.
/KANSAS CITY DIVISION
By:____________________ By:___________________
Name:__________________ Name:_________________
Title:_________________ Title:________________
FIRST UNION NATIONAL BANK
OF FLORIDA AS AGENT FOR
ITSELF, BANK ONE LEXING-
TON, N.A., FCLT LOANS, L.P.,
BANK MIDWEST, N.A. AND
INTRUST BANK, N.A.
By:____________________
Name:__________________
Title:_________________
EXHIBIT C
---------
UNCONDITIONAL GUARANTY AGREEMENT
--------------------------------
THIS UNCONDITIONAL GUARANTY AGREEMENT (this "Guaranty") is dated as of
--------
October _____, 1995, by HOLLYWOOD PARK, INC., a Delaware corporation (the
"Guarantor"), in favor of FIRST UNION NATIONAL BANK OF FLORIDA ("FUNB"), BANK
- ---------- ----
ONE LEXINGTON, N.A. ("B-One"), BANK MIDWEST, N.A. ("B-MW") INTRUST BANK, N.A.
----- ----
("INTRUST"), FCLT LOANS, L.P., a Texas limited partnership ("FCLT") (FUNB, B-
- --------- ----
One, B-MW, INTRUST and FCLT sometimes being collectively referred to herein as
the "Bank Group" and FUNB, as agent for itself and the other members of the Bank
----------
Group, sometimes being referred to herein as the "Agent").
-----
Statement Of Purpose
--------------------
The Bank Group and Sunflower Racing, Inc., a Kansas corporation (the
"Borrower") entered into a Standstill Agreement of even date (the "Standstill
- --------- ----------
Agreement"). Through its ownership of the Borrower, Guarantor will benefit both
- ---------
directly and indirectly from the transactions contemplated by the Standstill
Agreement and as a condition precedent thereto, the Bank Group
-33-
<PAGE>
has requested, and the Guarantor has agreed to execute and deliver, this
Guaranty.
NOW, THEREFORE, in consideration of the premises and the mutual agreements
set forth herein, and to induce the Bank Group to enter into and consent to the
transactions contemplated by the Standstill Agreement, it is agreed as follows:
SECTION 1. Definitions. Capitalized terms used herein (including the
-----------
preamble hereto) shall have the meaning assigned to them in the Standstill
Agreement, unless the context otherwise requires or unless otherwise defined
herein. References in the Standstill Agreement to the "Guaranty" or herein to
this "Guaranty" shall include and mean this Guaranty, including all amendments
and supplements hereto now or hereafter in effect.
SECTION 2. Guaranty of Obligations of Borrower.
-----------------------------------
(a) The Guarantor hereby unconditionally guarantees to each of the members
of the Bank Group the prompt payment (whether at stated maturity, by
acceleration or otherwise) by the Borrower of all Monthly Installments that
would be due under Section 4(a) of the Standstill Agreement if it expired on
July 1, 1996 [i.e., this is a guarantee of the fifty percent of the interest
accruing, at the LIBOR plus 1.75% per annum rate provided for in Subsection 6(a)
of the Standstill Agreement (the "Standstill Rate") on the outstanding principal
---------------
balance of the Notes, which portion of interest Borrower is to pay currently
during the time that the Standstill Agreement is in effect], whether now
existing or hereafter arising, whether or not from time to time reduced or
extinguished (except by payment thereof), whether or not recovery may be or
hereafter become barred by the statute of limitations, whether or not
discharged, stayed or otherwise affected by any bankruptcy, insolvency or other
similar law or proceeding, whether created directly with the Agent or with any
member of the Bank Group or acquired by the Agent or the Bank Group through
assignment, endorsement or otherwise, whether matured or unmatured, whether
joint or several, as and when the same becomes due and payable (whether at
maturity or earlier) in accordance with the terms of the Notes, as modified by
the Standstill Agreement, evidencing any such Monthly Installments, including
all renewals, extensions or modifications thereof (all such obligations of the
Borrower to any member of the Bank Group, including all of the foregoing, being
hereinafter collectively referred to as the "Guaranteed Obligations"); provided
---------------------- --------
that this Guaranty shall not be a guarantee of any Monthly Installments which
would first be due after the Agent's or Bank Group's declaration of a default,
that causes the Termination Date to occur prior to July 1, 1996, for reasons
other than non-payment of sums due from the Borrower to the Agent or Bank Group
under the Notes or Subsections 4(a), (b) or (c) of the Standstill Agreement;
provided further, that the amount of the Guarantor's
- ----------------
-34-
<PAGE>
obligations with respect to the Guaranteed Obligations shall be limited to the
extent and in the manner set forth in subsection (b) below; provided further,
----------------
that the Guaranteed Obligations shall not include a guaranty of interest in
excess of the amount that would accrue at the Standstill Rate.
(b) The amount of the Guarantor's obligations with respect to the
Guaranteed Obligations shall be in, but not in excess of, the maximum amount
thereof not subject to avoidance or recovery by operation of applicable law
governing bankruptcy, reorganization, arrangement, adjustment of debts, relief
of debtors, dissolution, insolvency, fraudulent transfers or conveyances or
other similar laws (including, without limitation, 11 U.S.C. (S)547, (S)548,
(S)550 and other "avoidance" provisions of Title 11 of the United States Code)
applicable at any time to the Guarantor and this Guaranty (collectively,
"Applicable Insolvency Laws"). To that end, but only in the event and to the
- ---------------------------
extent that the Guarantor's obligations with respect to the Guaranteed
Obligations or any payment made pursuant to the Guaranteed Obligations would,
but for the operation of this Section 2(b), be subject to avoidance or recovery
under Applicable Insolvency Laws, the amount of the Guarantor's obligations with
respect to the Guaranteed Obligations shall be limited to the largest amount
which, after giving effect thereto, would not, under Applicable Insolvency Laws,
render the Guarantor's obligations with respect to such Guaranteed Obligations
unenforceable or avoidable or otherwise subject to recovery under Applicable
Insolvency Laws. To the extent any payment actually made pursuant to the
Guaranteed Obligations exceeds the limitation of this Section 2(b), then the
amount of such excess shall, from and after the time of payment by Guarantor, be
reimbursed by the Bank Group upon demand by Guarantor. This Section 2(b) is
intended solely to preserve the rights of the Bank Group and Agent hereunder
against the Guarantor to the maximum extent permitted by Applicable Insolvency
Laws and neither the Borrower or any other guarantor under the Credit Agreement
or the Standstill Agreement nor any other Person or Persons (as these terms are
defined in the Credit Agreement and hereinafter used) shall have any right or
claim under this Section 2(b) that would not otherwise be available under
Applicable Insolvency Laws.
SECTION 3. Nature of Guaranty. The Guarantor agrees that this Guaranty is
------------------
a continuing, unconditional guaranty of payment and performance and not of
collection, and that its obligations under this Guaranty shall be primary,
absolute and unconditional, irrespective of, and unaffected by:
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, the Standstill Agreement or any other
Loan Document or any other agreement, document or instrument to which the
Borrower is or may become a party;
-35-
<PAGE>
(b) the absence of any action to enforce this Guaranty, the Standstill
Agreement or any other Loan Document or the waiver or consent by the Bank
Group or Agent with respect to any of the provisions of this Guaranty, the
Standstill Agreement or any other Loan Document;
(c) the existence, value or condition of, or failure to perfect its
Lien (as defined in the Credit Agreement and hereinafter used) against, any
security for or other guaranty of the Guaranteed Obligations or any action,
or the absence of any action, by the Agent or any member of the Bank Group
in respect of such security or guaranty (including, without limitation, the
release of any such security or guaranty); or
(d) any other action or circumstances which might otherwise constitute
a legal or equitable discharge or defense of a surety or guarantor;
it being agreed by the Guarantor that, subject to Section 2(b) hereof, its
obligations under the Guaranty shall not be discharged until the final payment
and performance, in full, of the Guaranteed Obligations. The Guarantor
expressly waives all rights it may now or in the future have under any
"antideficiency" or other statute (including without limitation North Carolina
General Statutes Section 26-7, et seq. or similar law), or at law or in equity,
-------
or otherwise, to compel the Agent or any member of the Bank Group to proceed in
respect of the Guaranteed Obligations against the Borrower or any other party or
against any security for or other guaranty of the payment and performance of the
Guaranteed Obligations before proceeding against, or as a condition to
proceeding against, the Guarantor. The Guarantor further expressly waives and
agrees not to assert or take advantage of any defense based upon the failure of
the Agent or any member of the Bank Group to commence an action in respect to
the Guaranteed Obligations against the Borrower, the Guarantor or any other
party or any security for the payment and performance of the Guaranteed
Obligations. The Guarantor agrees that any notice or directive given at any time
to the Agent or any member of the Bank Group which is inconsistent with the
waivers in the preceding two sentences shall be null and void and may be ignored
by the Agent or such member of the Bank Group and, in addition, may not be
pleaded or introduced as evidence in any litigation relating to this Guaranty
for the reason that such pleading or introduction would be at variance with the
written terms of this Guaranty, unless the Required Banks (as defined in the
Credit Agreement and hereinafter used) have specifically agreed otherwise in
writing. The foregoing waivers are of the essence of the transaction
contemplated by the Loan Documents and, but for this Guaranty and such waivers,
the Agent and
-36-
<PAGE>
members of the Bank Group would decline to enter into the Standstill Agreement.
SECTION 4. Demand by the Bank Group or Agent. In addition to the terms
---------------------------------
set forth in Section 3, and in no manner imposing any limitation on such terms,
if all or any portion of the then outstanding Guaranteed Obligations under the
Standstill Agreement are declared to be immediately due and payable, then the
Guarantor shall, after the notice provided for in this Section and upon demand
in writing therefor by the Agent to the Guarantor, pay all or such portion of
the outstanding Guaranteed Obligations then declared due and payable. Payment
by the Guarantor shall be made to the Agent, to be credited and applied upon the
Guaranteed Obligations, in immediately available federal funds to an account
designated by the Agent or at the address referenced herein for the giving of
notice to the Agent or at any other address that may be specified in writing
from time to time by the Agent. No demand for payment of the Guaranteed
Obligations shall be effective unless and until Borrower has failed to pay any
Monthly Installments theretofore due but unpaid within three (3) days after
notice to Guarantor that Borrower has failed to pay such Monthly Installments
when due.
SECTION 5. Waivers. In addition to the waivers contained in Section 3,
-------
the Guarantor waives, and agrees that it shall not at any time insist upon,
plead or in any manner whatever claim or take the benefit or advantage of, any
appraisal, valuation, stay, extension, one action, res judicata, marshalling of
assets or redemption laws or doctrines, or exemption, whether now or at any time
hereafter in force, which may delay, prevent or otherwise affect the performance
by the Guarantor of its obligations under, or the enforcement by the Agent or
any member of the Bank Group of this Guaranty. The Guarantor further hereby
waives diligence, presentment, demand, protest and notice of whatever kind or
nature with respect to any of the Guaranteed Obligations and waives the benefit
of all provisions of law which are or might be in conflict with the terms of
this Guaranty. The Guarantor represents, warrants and agrees that its
obligations under the Guaranty are not and shall not be subject to any
counterclaims, offsets or defenses of any kind against the Agent, any member of
the Bank Group or the Borrower whether now existing or which may arise in the
future.
SECTION 6. Benefits of Guaranty. The provisions of this Guaranty are for
--------------------
the benefit of the Agent, the members of the Bank Group and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between the Borrower and the Agent or the Bank Group, the
obligations of the Borrower under the Loan Documents. In the event all or any
part of the Guaranteed Obligations are transferred, endorsed or assigned by the
Agent or any member of the Bank Group to any Person or Persons, any reference to
the
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<PAGE>
"Agent" or "member of the Bank Group" herein shall be deemed to refer equally to
such Person or Persons.
SECTION 7. Modification of Loan Documents etc. If the Agent or the
----------------------------------
members of the Bank Group shall at any time or from time to time, with or
without the consent of, or notice to, the Guarantor:
(a) Change or extend the manner, place or terms of payment of, or
renew or alter all or any portion of, the Guaranteed Obligations;
(b) Take any action under or in respect of the Loan Documents in the
exercise of any remedy, power or privilege contained therein or available
to it at law, in equity or otherwise, or waive or refrain from exercising
any such remedies, powers or privileges;
(c) Amend or modify, in any manner whatsoever, the Loan Documents;
(d) Extend or waive the time for performance by the Guarantor, the
Borrower or any other Person of, or compliance with, any term, covenant or
agreement on its part to be performed or observed under a Loan Document
(other than this Guaranty), or waive such performance or compliance or
consent to a failure of, or departure from, such performance or compliance;
(e) Take and hold security or collateral for the payment of the
Guaranteed Obligations or sell, exchange, release, dispose of, or otherwise
deal with, any property pledged, mortgages or conveyed, or in which the
Agent or the members of the Bank Group have been granted a lien, to secure
any indebtedness or liability of the Guarantor or the Borrower to the Agent
or the members of the Bank Group;
(f) Release anyone who may be liable in any manner for the payment of
any amounts owed by the Guarantor or the Borrower to the Agent or any
member of the Bank Group;
(g) Modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of the
Guarantor or the Borrower are subordinated to the claims of the Agent or
any member of the Bank Group; or
(h) Apply any sums by whomever paid or however realized to any amounts
owing by the Guarantor or the Borrower to the Agent or member of the Bank
Group in such manner as the Agent or any member of the Bank Group shall
determine in its discretion;
-38-
<PAGE>
then neither the Agent nor any member of the Bank Group shall incur any
liability to the Guarantor as a result thereof, and no such action shall impair
or release the obligations of the Guarantor under the Guaranty.
SECTION 8. Reinstatement. The Guarantor agrees that, if any payment made
-------------
by the Borrower or any other Person applied to the Debt is at any time annulled,
set aside, rescinded, invalidated, declared to be fraudulent or preferential or
otherwise required to be refunded or repaid, or the proceeds of collateral are
required to be returned by the Agent or any member of the Bank Group to the
Borrower, its estate, trustee, receiver or any other party, including, without
limitation, the Guarantor, under any applicable law or equitable cause, then, to
the extent of such payment or repayment, the Guarantor's liability hereunder
(and any lien or collateral securing such liability) shall be and remain in full
force and effect, as fully as if such payment had never been made, and, if prior
thereto, this Guaranty shall have been canceled or surrendered (and if any lien
or collateral securing the Guarantor's liability hereunder shall have been
released or terminated by virtue of such cancellation or surrender), this
Guaranty (and such lien or collateral) shall be reinstated in full force and
effect, and such prior cancellation or surrender shall not diminish, release,
discharge,impair or otherwise affect the obligations of the Guarantor in respect
of the amount of such payment (or any lien or collateral securing such
obligation).
SECTION 9. Waiver of Subrogation and Contribution. Until the Debt is
--------------------------------------
fully paid and performed, the Guarantor hereby irrevocably waives any claims or
other rights which it may now or hereafter acquire against the Borrower that
arise from the existence or performance of the Guarantor's obligations under
this Guaranty, including, without limitation, any right of subrogation,
reimbursement, exoneration, contribution, indemnification, any right to
participate in any claim or remedy of the Agent or the members of the Bank Group
against the Borrower or any security or collateral which the Agent or any member
of the Bank Group now has or may hereafter acquire, whether or not such claim,
remedy or right arises in equity or under contract, statute or common law, by
any payment made hereunder or otherwise, including without limitation, the right
to take or receive from the Borrower, directly or indirectly, in cash or other
property or by set-off or in any other manner, payment or security on account of
such claim or other rights.
SECTION 10. Representations and Warranties. To induce the Bank Group to
------------------------------
execute the Standstill Agreement, the Guarantor hereby represents and warrants
that:
-39-
<PAGE>
(a) The Guarantor has the corporate power, authority and legal right
to execute, deliver and perform this Guaranty and has taken all necessary
corporate action to authorize its execution, delivery and performance of,
this Guaranty;
(b) This Guaranty constitutes the legal, valid and binding obligation
of the Guarantor enforceable in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the enforcement of creditors' rights
generally and by the availability of equitable remedies;
(c) The execution, delivery and performance of this Guaranty will not
violate any provision of any applicable law or contractual obligation of
the Guarantor and will not result in the creation or imposition of any lien
on any of the properties or revenues of the Guarantor pursuant to any
applicable law or contractual obligation;
(d) Except for the filing of this Guaranty with the Kansas Racing
Commission, no consent or authorization of, filing with or other act by or
in respect of, any arbitrator or Governmental Authority (as defined in the
Credit Agreement and hereinafter used) and no consent of any other Person
(including, without limitation, any stockholder or creditor of the
Guarantor), is required in connection with the execution, delivery,
performance, validity or enforceability of this Guaranty, except for any
which have been obtained; and
(e) No litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of the
Guarantor, threatened by or against the Guarantor or against any of its
properties or revenues with respect to this Guaranty or any of the
transactions contemplated hereby.
SECTION 11. Remedies.
--------
(a) Upon the occurrence of any Event of Default under the Standstill
Agreement, with the consent of the Required Banks, the Agent may, at its option,
enforce against the Guarantor its obligations and liabilities hereunder and
exercise such other rights and remedies as may be available to the Agent
hereunder, under the Loan Documents or otherwise. Without limiting any other
provisions of this Guaranty, the Agent, with the consent of the Required Banks,
shall be entitled, from time to time, with or without declaring that a default
has occurred under the Standstill Agreement, to give notice and make demand in
accordance with Section 4 hereof, and, if so demanded, the
-40-
<PAGE>
Guarantor shall each time immediately pay, all of any one or more Monthly
Installments which then remain unpaid after the due date thereof.
(b) No right or remedy herein conferred upon the Agent is intended to be
exclusive of any other right or remedy contained herein or in any other Loan
Document or otherwise, and every such right or remedy contained herein and
therein or now or hereafter existing at law, or in equity, or by statute, or
otherwise shall be cumulative. The Required Banks may instruct the Agent to
pursue, or refrain from pursuing, any remedy available to the Agent at such
times and in such order as the Required Banks shall determine, and the Required
Banks' election as to such remedies shall not impair any remedies against the
Guarantor not then exercised. In addition, any election of remedies which
results in the denial or impairment of the right of the Agent to seek a
deficiency judgment against the Borrower shall not impair the Guarantor's
obligation to pay the full amount of the Guaranteed Obligations.
SECTION 12. Miscellaneous.
-------------
(a) Entire Agreement; Amendments. This Guaranty, together with those other
----------------------------
Loan Documents to which Guarantor is a party, constitute the entire agreement
between the parties with respect to the subject matter hereof and supersede all
prior agreements with respect to the subject matter hereof and may not be
amended or supplemented except by a writing signed by the Guarantor and the
Required Banks or the members of the Bank Group, as determined under the Credit
Agreement.
(b) Headings. The headings in this Guaranty are for convenience of
--------
reference only and are not part of the substance of this Guaranty.
(c) Severability. In the event that any one or more of the provisions
------------
contained in this Guaranty shall be determined to be invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision or provisions in every other respect and
the remaining provisions of this Guaranty shall not be in any way impaired.
(d) Notices. All notices and communications hereunder shall be given in
-------
the manner provided for giving notices in the Standstill Agreement and in the
case of the Guarantor, addressed to the Guarantor at the address set forth below
beside its signature.
(e) Binding Effect. This Guaranty shall bind the Guarantor and shall inure
--------------
to the benefit of the Agent and the members of the Bank Group and their
respective successors and assigns. The
-41-
<PAGE>
Guarantor may not assign this Guaranty or delegate any of its duties hereunder.
(f) Non-Waiver. The failure of the Agent or any member of the Bank Group
----------
to enforce any right or remedy hereunder, or promptly to enforce any such right
or remedy, shall not constitute a waiver thereof, nor give rise to any estoppel
against the Agent or any Bank, nor excuse the Guarantor from its obligations
hereunder. Any waiver of any such right or remedy by the Bank Group must be in
writing and signed by the Agent and the Required Banks.
(g) Termination. This Guaranty shall terminate and be of no further force
-----------
or effect on the date when the Guaranteed Obligations have been paid in full.
(h) Governing Law. This Guaranty shall be governed by and construed and
-------------
enforced in accordance with the laws of the State of Kansas, without reference
to the conflicts or choice of law principles thereof.
(i) Consent to Jurisdiction. The Guarantor hereby irrevocably consents to
-----------------------
the personal jurisdiction of the state and federal courts located in Wyandotte
County, Kansas, in any action, claim or other proceeding arising out of any
dispute in connection with this Guaranty, any rights or obligations hereunder,
or the performance of such rights and obligations. The Guarantor hereby
irrevocably consents to the service of a summons and complaint and other process
in any action, claim or proceeding brought by the Agent or any member of the
Bank Group in connection with this Guaranty, any rights or obligations
hereunder, or the performance of such rights and obligations, on behalf of
itself or its property, in the manner referenced in Section 12(d). Nothing in
this Section 12(i) shall affect the right of the Agent or any member of the Bank
Group to serve legal process in any other manner permitted by applicable law or
affect the right of the Agent or any member of the Bank Group to bring any
action or proceeding against the Guarantor or its properties in the courts of
any jurisdictions.
(j) Waiver of Jury Trial. THE AGENT, EACH MEMBER OF THE BANK GROUP AND THE
--------------------
GUARANTOR HEREBY IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL WITH
RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS GUARANTY, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.
(k) Expenses. The Guarantor agrees that it will reimburse the Agent and
--------
each member of the Bank Group for all expenses (including reasonable attorneys
fees and expenses) incurred by the Agent or such member of the Bank Group in
connection with the enforcement of this Guaranty.
-42-
<PAGE>
(l) Limitation of Liability. Neither the Agent, any member of the Bank
-----------------------
Group, nor any Affiliate (as defined in the Credit Agreement) thereof shall have
any liability with respect to, and the Guarantor hereby waives, releases and
agrees not to sue upon, any claim arising through the date of the execution of
this Guaranty for any special, indirect, punitive, exemplary or consequential
damages suffered by the Guarantor in connection with, arising out of, or in any
way related to this Guaranty and the other Loan Documents, the transactions
contemplated herein or therein, or any act, omission or event occurring in
connection herewith or therewith; provided that the limitation set forth herein
will not restrict or impair any claim which arises subsequent to the date
hereof.
IN WITNESS WHEREOF, the Guarantor has executed and delivered this Guaranty
as of the date first above written.
[CORPORATE SEAL] HOLLYWOOD PARK, INC.
By:_______________________________
Name:_____________________________
Title:____________________________
Address: Hollywood Park, Inc.
Attention: G. Michael Finnigan
1050 South Prairie Avenue
Inglewood, CA 90301
Fax Number 310-673-2582
EXHIBIT D
---------
TRAK EAST
INDUCEMENT CERTIFICATE
----------------------
The undersigned, to induce FIRST UNION NATIONAL BANK OF FLORIDA ("FUNB"),
----
BANK ONE LEXINGTON, N.A. ("B-One"), BANK MIDWEST, N.A. ("B-MW"), INTRUST BANK,
----- ----
N.A. ("INTRUST"), FCLT LOANS, L.P., a Texas limited partnership ("FCLT") (FUNB,
------- ----
B-One, B-MW, INTRUST and FCLT sometimes being collectively referred to herein as
the "Bank Group" and FUNB, as agent for itself and the other members of the Bank
----------
Group, sometimes being referred to herein as the "Agent") to enter into, with
-----
each other and SUNFLOWER RACING, INC., a Kansas corporation ("Sunflower"), a
---------
certain Standstill Agreement dated _____________________, 1995 (the "Standstill
----------
Agreement"), does hereby approve and consent to the Standstill Agreement and
- ---------
acknowledge, represent and agree to and with Bank Group that:
(a) Notwithstanding the execution of the Standstill Agreement and of the
other documents executed pursuant thereto, the undersigned's covenants and
agreements for the benefit of the Bank Group in any of the "Loan Documents" (as
--------------
that term is
-43-
<PAGE>
defined in the Standstill Agreement and hereinafter used), including without
limitation under that certain Consent Collateral Assignment of Lease and
Management Agreement dated March 23, 1994 (the "Consent"), as modified hereby,
-------
by the Standstill Agreement, remain in full force and effect and that the Agent
and the above-listed present members of the Bank Group are the parties entitled
to enforce the provisions of such covenants and agreements as parties thereto or
the respective successors in interest of a party thereto.
(b) The undersigned is entitled to the payment and performance of certain
debt and obligations of Sunflower, of SR Food & Beverage Company, a Kansas
corporation ("SRFB") or both, including, without limitation, under and by virtue
----
of that certain Agreement and Restatement of Lease and Management Agreement
dated September 14, 1989, and any amendments, modifications, addenda, renewals,
extensions or substitutes therefor (such agreement and any others, whether oral
or in writing, similar or dissimilar, directly or indirectly with Sunflower or
SRFB, or their respective predecessors or successors in interest, which relate
to the operation of the "Woodlands" or the subject matter of the Loan Documents
is referred to herein collectively as the "Subordinated Obligations"). The
------------------------
undersigned's rights to payment and performance of said debt and obligations
created or evidenced by the Subordinated Obligations, whether presently existing
or hereafter arising, by or from Sunflower, SRFB, both or their respective
predecessors or successors, has previously been, or hereby is, expressly made
subordinate to the debts and obligations of Sunflower and SRFB to the Agent and
the Bank Group, including without limitation the "Debt" (as that term is defined
----
in the Standstill Agreement and hereinafter used). The undersigned's rights in
the property described on Exhibit A to the Standstill Agreement and the
improvements thereon are, or hereby are, subordinated to the rights therein, and
to the liens thereon, of the Agent and the Bank Group which are evidenced,
created or secured by the Loan Documents. Notwithstanding anything to the
contrary in the Consent, hereafter the Agent and Bank Group shall be entitled to
the same notices and rights to cure with respect to the failure of Sunflower,
SRFB or both to make payments to the undersigned as Agent and Bank Group are
entitled to under the Consent with respect to non-payment defaults by Sunflower,
SRFB or both; provided that if Agent or the Bank Group has greater rights
(whether to notice or opportunity to cure) with respect to a payment default
than a non-payment default under any of the Loan Documents or any doctrine or
statute, then, at the discretion of Agent and the Bank Group, the greater rights
shall apply to any such payment default.
(c) The undersigned has not heretofore and, so long as any of the Debt is
unsatisfied, shall not assign(ed), pledge(d) or otherwise transfer(red) the
Subordinated Obligations or any
-44-
<PAGE>
interest therein or indicia thereof to any other person or entity.
(d) Until the Debt is satisfied in full, the undersigned waives any and all
rights to declare any default or to exercise any rights or remedies due or
attributable to or arising out of any lack of payment or performance of the
Subordinated Obligations, including without limitation, the right to revoke
Sunflower's authority to draw on accounts of the undersigned, except after first
giving Agent and Bank Group notice and right to cure as is provided in the
Consent and subparagraph (b) hereof.
(e) The undersigned acknowledges that either it has no claim, cause of
action, or rights, against, or, acting for itself and for its successors,
assigns, members, directors, officers, agents and employees, hereby releases,
acquits and forever discharges, FUNB (both as a member of the Bank Group and as
Agent), B-One, B-MW, INTRUST, FCLT and their respective stockholders, directors,
officers, representatives, agents, employees, attorneys, predecessors in
interest (including, without limitation, Texas Commerce Bank National
Association, First City National Bank of Houston, First Union National Bank of
North Carolina, Kansas State Bank & Trust Company, Home State Bank and the
Federal Deposit Insurance Corporation), successors and assigns with respect to
any and all actions, causes of action, claims, counterclaims, cross claims,
debts, demands, executions, garnishments, judgments, lawsuits, proceedings, and
suits of every kind and character, previously or now existing, whether known or
unknown, and relating in any manner whatsoever to, or arising in any manner
whatsoever from, the dealings or negotiations, of any of such persons or
entities being released hereby, with the undersigned, Sunflower, SRFB, Hollywood
Park, Inc. and R.D. Hubbard and any of the other persons on behalf of whom the
undersigned is making this covenant through the date of this Inducement
Certificate, including, without limitation, those dealings or negotiations which
are evidenced by or relate to the Debt or the Loan Documents.
(f) The undersigned waives the benefit of any "antideficiency", res
judicata, marshalling of assets or one action legislation, doctrine or other
rule of law which might otherwise bar any recovery against any property which
constitutes "Collateral" (as that term is defined in the Standstill Agreement
----------
and hereinafter used) because of Bank Group's election of remedies, including
but not limited to an exercise of power of sale under any mortgage, deed of
trust, assignment or other security agreement. The undersigned agrees that
notwithstanding any foreclosure of any lien created or evidenced by any of the
Loan Documents with respect to any or all of any real or personal property
constituting all or any portion of the Collateral, which secures the Debt,
whether by the exercise of the power of sale
-45-
<PAGE>
contained therein, by an action for judicial foreclosure, by an acceptance of a
deed or bill of sale in lieu of foreclosure, or by any other means, the
undersigned shall remain bound under its respective obligations to the Bank
Group, in accordance with the Loan Documents to which the undersigned is a
party.
(g) The undersigned is a legal entity, duly created and validly existing
and in good standing under the laws of the State of Kansas and has full power
and authority to enter into this document on behalf of itself and to take all of
the actions referred to herein, the execution and performance of the terms
hereof have been duly authorized by any and all necessary administrative,
judicial or other action, and will not violate any provision of law or of any
articles of incorporation, bylaws or judicial or administrative ruling or decree
and, with the exception of the approval of the terms hereof by the Kansas Racing
Commission, which the undersigned represents it has obtained, no other consent
or approval of, or filing with, any public authority, regulatory agency or other
person or entity whatsoever is required as a condition to the validity of the
obligations of the undersigned hereunder.
(h) Nothing contained in the Standstill Agreement shall be a waiver of any
rights or remedies the Bank Group may otherwise have under the Loan Documents or
affect the relative priorities of interests of the undersigned and the Bank
Group or Agent in any collateral for indebtedness owed by Sunflower to any of
them.
(i) If, from time to time, the Agent, Bank Group or the "Required Banks"
--------------
(as defined in the "Credit Agreement", as that term is defined in the Standstill
----------------
Agreement), acting in its sole discretion, hereafter agrees in writing to extend
the "Termination Date" (as that term is defined in the Standstill Agreement and
----------------
hereinafter used) to a date(s) beyond the date set forth in the Standstill
Agreement, to waive performance of any provision of the Standstill Agreement or
the other Loan Documents or to refrain from declaring a default under the
Standstill Agreement and other Loan Documents, the provisions hereof shall apply
and bind the undersigned and its respective successors and assigns with respect
to such extension(s), waiver(s) or forbearance as if such document(s), waiver(s)
or forbearance were expressly referred to herein, unless, prior to executing
such document(s), Bank Group shall have received, by certified or registered
mail sent to the address specified for notices to be sent to the Bank Group in
the Standstill Agreement, written notice to the contrary from the undersigned,
in which case solely this paragraph shall not apply solely as to the sender of
such notice, and its respective successors or assigns, with respect to any such
extension(s), waiver(s) or forbearance agreed to by Bank Group after receipt of
such notice.
-46-
<PAGE>
IN WITNESS WHEREOF, the undersigned has executed this instrument as of the
_________ day of ________________, 1995.
THE RACING ASSOCIATION OF
KANSAS EAST, A KANSAS NOT-
FOR-PROFIT CORPORATION
BY:______________________
NAME:____________________
TITLE:___________________
EXHIBIT E
---------
SRF&B
INDUCEMENT CERTIFICATE
----------------------
The undersigned, to induce FIRST UNION NATIONAL BANK OF FLORIDA ("FUNB"),
----
BANK ONE LEXINGTON, N.A. ("B-One"), BANK MIDWEST, N.A. ("B-MW"), INTRUST BANK,
----- ----
N.A. ("INTRUST"), FCLT LOANS, L.P., a Texas limited partnership ("FCLT") (FUNB,
------- ----
B-One, B-MW, INTRUST and FCLT sometimes being collectively referred to herein as
the "Bank Group" and FUNB, as agent for itself and the other members of the Bank
----------
Group, sometimes being referred to herein as the "Agent") to enter into, with
-----
each other and SUNFLOWER RACING, INC., a Kansas corporation ("Sunflower"), a
---------
certain Standstill Agreement dated _____________________, 1995 (the "Standstill
----------
Agreement"), does hereby approve and consent to the Standstill Agreement and
- ---------
acknowledge, represent and agree to and with Bank Group that:
(a) Notwithstanding the execution of the Standstill Agreement and of the
other documents executed pursuant thereto, the undersigned's covenants and
agreements for the benefit of the Bank Group in any of the "Loan Documents" (as
--------------
that term is defined in the Standstill Agreement and hereinafter used),
including without limitation under those certain documents listed on Schedule E-
1 attached hereto, remain in full force and effect and that the present members
of the Bank Group are the parties entitled to enforce the provisions of such
covenants and agreements as parties thereto or the respective successors in
interest of a party thereto. Without limiting the generality of the foregoing,
the undersigned acknowledges that notwithstanding the execution of the
Standstill Agreement, the undersigned is absolutely liable for the "Debt" (as
----
that term is defined in the Standstill Agreement and hereinafter used).
(b) Until the Debt is satisfied in full, if the undersigned receives any
sum from or for Sunflower, other than in the ordinary course of business, the
undersigned shall be deemed to hold all such sums in trust for benefit of the
Bank Group and shall promptly deliver the same to Agent to apply on the Debt.
-47-
<PAGE>
The undersigned represents and warrants that, except for granting the Agent and
Bank Group a security interest in any sums due to the undersigned from Sunflower
and except for payments made to third parties in the ordinary course of business
(but subject to Subsection (c) hereof with respect to the persons and entities
defined therein as Hollywood Park, Hubbard and TRAK East), the undersigned has
not, and will not, assign(ed), pledge(d), grant(ed) a security interest in, or
otherwise transfer(ed) any interest in any sum due to the undersigned from
Sunflower.
(c) Until the Debt is satisfied in full, the undersigned will not, directly
or indirectly, make any payments, or transfer any property, to or for the
benefit of any of Hollywood Park, Inc. ("Hollywood Park"), The Racing
--------------
Association of Kansas East ("TRAK East"), R.D. Hubbard ("Hubbard") or Sunflower,
--------- -------
except for: (i) any payments to TRAK East which are required to be made by
Kansas law or a written agreement between the undersigned, Sunflower and TRAK
East (provided that the latter cannot exceed amounts due and payable under the
September 14, 1989 Agreement and Restatement of Lease and Management Agreement
to which Sunflower, TRAK East and the undersigned are parties, as modified by
the Loan Documents); (ii) any payments made to Sunflower in the ordinary course
of business; and (iii) any reimbursements (except to the extent, if any, that
reimbursements of any such advances would have been subordinated under the Loan
Documents to which Hollywood Park is a party) to Hollywood Park for amounts
actually theretofore advanced by Hollywood Park to pay indebtedness of Sunflower
or the undersigned to third parties (other than Bruce Rimbo, entities in which
Hollywood Park, directly or indirectly, has an ownership interest) incurred for
services or goods theretofore actually received by Sunflower or the undersigned.
(d) The undersigned acknowledges that either it has no claim, cause of
action, or rights, against, or acting for itself and for its respective
successors, assigns, shareholders, members, directors, officers, agents and
employees, hereby releases, acquits and forever discharges, FUNB (both as a
member of the Bank Group and as Agent), B-One, B-MW, INTRUST, FCLT and their
respective stockholders, directors, officers, representatives, agents,
employees, attorneys, predecessors in interest (including, without limitation,
Texas Commerce Bank National Association, First City National Bank of Houston,
First Union National Bank of North Carolina, Kansas State Bank & Trust Company,
Home State Bank and the Federal Deposit Insurance Corporation), successors and
assigns with respect to any and all actions, causes of action, claims,
counterclaims, cross claims, debts, demands, executions, garnishments,
judgments, lawsuits, proceedings, and suits of every kind and character,
previously or now existing, whether known or unknown, and relating in any manner
whatsoever to, or arising in any manner whatsoever from, the dealings or
negotiations, of any of such persons or entities
-48-
<PAGE>
being released hereby, with the undersigned, Sunflower, Hollywood Park, TRAK
East and Hubbard, and any of the other persons on behalf of whom the undersigned
is making this covenant (as enumerated above in this Subsection (d)) through the
date of this Inducement Certificate, including, without limitation, those
dealings or negotiations which are evidenced by or relate to the Debt or the
Loan Documents.
(e) The undersigned waives the benefit of any "antideficiency", res
judicata, marshalling of assets or one action legislation, doctrine or other
rule of law which might otherwise bar any recovery against any property which
constitutes "Collateral" (as that term is defined in the Standstill Agreement
----------
and hereinafter used) because of Bank Group's election of remedies, including
but not limited to an exercise of power of sale under any mortgage, deed of
trust, assignment or other security agreement. The undersigned agrees that until
the Debt is satisfied in full, any mortgage, collateral assignment, pledge,
lien, security interest or other encumbrance which the undersigned now or
hereafter holds on or in any item of the Collateral shall be subordinate to any
mortgage, collateral, assignment, pledge, lien, security interest or other
encumbrance which any of the Agent or members of the Bank Group may now or
hereafter have thereon or therein, whether perfected or not. The undersigned
agrees to execute and deliver to Agent or Bank Group, from time to time, within
fifteen (15) days of when requested to do so by Agent or a member of the Bank
Group, by notice to the undersigned at the address set forth below, such forms
of subordination or amendment as Agent or Bank Group may request to document
said subordination. The undersigned agrees that notwithstanding any foreclosure
of any lien created or evidenced by any of the Loan Documents with respect to
any or all of any real or personal property constituting all or any portion of
the Collateral, which secures the Debt, whether by the exercise of the power of
sale contained therein, by an action for judicial foreclosure, by an acceptance
of a deed or bill of sale in lieu of foreclosure, or by any other means, the
undersigned shall remain bound under its respective obligations to the Bank
Group, in accordance with the Loan Documents to which the undersigned is a
party.
(f) The undersigned is a legal entity, duly created and validly existing
and in good standing under the laws of the State of Kansas and has full power
and authority to enter into this document, on behalf of itself and to take all
of the actions referred to herein, the execution and performance of the terms
hereof have been duly authorized by any and all necessary administrative,
judicial or other action, and will not violate any provision of law or of any
articles of incorporation, bylaws or judicial or administrative ruling or decree
and, with the exception of the filing hereof with the Kansas Racing Commission,
no other consent or approval of, or filing with, any public
-49-
<PAGE>
authority, regulatory agency or other person or entity whatsoever is required as
a condition to the validity of the obligations of the undersigned hereunder.
(g) Nothing contained in the Standstill Agreement shall be a waiver of any
rights or remedies the Bank Group may otherwise have under the Loan Documents or
affect the relative priorities of interests of the undersigned and the Bank
Group or Agent in any collateral for indebtedness owed by Sunflower to any of
them.
(h) If, from time to time, the Agent, the Bank Group or the "Required
--------
Banks" (as defined in the "Credit Agreement", as that term is defined in the
- ----- ----------------
Standstill Agreement), acting in its sole discretion, hereafter agrees in
writing to extend the "Termination Date" (as that term is defined in the
----------------
Standstill Agreement and hereinafter used) to a date(s) beyond the date set
forth in the Standstill Agreement, to waive performance of any provision of the
Standstill Agreement or the other Loan Documents or to refrain from declaring a
default under the Standstill Agreement and other Loan Documents, the provisions
hereof shall apply and bind the undersigned and its respective successors and
assigns with respect to such extension(s), waiver(s) or forbearance as if such
document(s), waiver(s) or forbearance were expressly referred to herein, unless,
prior to executing such document(s), Bank Group shall have received, by
certified or registered mail sent to the address specified for notices to be
sent to the Bank Group in the Standstill Agreement, written notice to the
contrary from the undersigned, in which case solely this paragraph shall not
apply solely as to the sender of such notice, and its respective successors or
assigns, with respect to any such extension(s), waiver(s) or forbearance agreed
to by Bank Group after receipt of such notice.
IN WITNESS WHEREOF, the undersigned has executed this instrument in one or
more counterparts as of the _________ day of ________________, 1995.
SR FOOD & BEVERAGE, COMPANY,
A KANSAS CORPORATION
BY:______________________
NAME:____________________
TITLE:___________________
EXHIBIT F
---------
HOLLYWOOD PARK
INDUCEMENT CERTIFICATE
----------------------
The undersigned, to induce FIRST UNION NATIONAL BANK OF FLORIDA ("FUNB"),
----
BANK ONE LEXINGTON, N.A. ("B-One"), BANK
-----
-50-
<PAGE>
MIDWEST, N.A. ("B-MW"), INTRUST BANK, N.A. ("INTRUST"), FCLT LOANS, L.P., a
---- -------
Texas limited partnership ("FCLT") (FUNB, B-One, B-MW, INTRUST and FCLT
----
sometimes being collectively referred to herein as the "Bank Group" and FUNB, as
----------
agent for itself and the other members of the Bank Group, sometimes being
referred to herein as the "Agent") to enter into, with each other and SUNFLOWER
-----
RACING, INC., a Kansas corporation ("Sunflower"), a certain Standstill Agreement
---------
dated _____________________, 1995 (the "Standstill Agreement"), does hereby
--------------------
approve and consent to the Standstill Agreement and acknowledge, represent and
agree to and with Bank Group that:
(a) Notwithstanding the execution of the Standstill Agreement and of the
other documents executed pursuant thereto, the undersigned's covenants and
agreements for the benefit of the Bank Group in any of the "Loan Documents" (as
--------------
that term is defined in the Standstill Agreement and hereinafter used) to which
the undersigned is a party, including without limitation under those certain
documents listed on Schedule F-1 attached hereto, remain in full force and
effect and that the present members of the Bank Group are the parties entitled
to enforce the provisions of such covenants and agreements as parties thereto or
the respective successors in interest of a party thereto.
(b) The undersigned presently holds and owns solely for its own account
debt of Sunflower (the "Subordinated Debt") which is subordinated to the "Debt"
----------------- ----
(as that term is defined in the Standstill Agreement and hereinafter used)
pursuant to the subordination provisions of the Loan Documents to which the
undersigned is a party or successor in interest to a party ("the Documents") and
---------
certifies that there have been no payments, directly or indirectly, in violation
of the subordination provisions of the Documents. The undersigned hereby
reaffirms all of its obligations and agreements under the Documents.
(c) The undersigned has not heretofore and, so long as any of the Debt is
unsatisfied, shall not assign(ed), pledge(d) or otherwise transfer(red) the
Subordinated Debt or any interest therein or indicia thereof to any other person
or entity.
(d) Until the Debt is satisfied in full, the undersigned waives any and all
rights to declare any default or to exercise any rights or remedies due or
attributable to or arising out of any lack of payment or performance of the
Subordinated Debt.
(e) Until the Debt is satisfied in full, if the undersigned receives any
sum from or for Sunflower or SR Food & Beverage Company ("SRFB"), the
----
undersigned shall be deemed to hold all such sums in trust for benefit of the
Bank Group and shall promptly deliver the same to Agent to apply on the Debt;
provided that, except to the extent, if any, that reimbursement of any such
advances would have been subordinated under the Documents
-51-
<PAGE>
without reference to the Standstill Agreement or this Inducement Certificate,
this subparagraph (e) will not apply to any sum received from Sunflower or SRFB
as reimbursement for amounts actually theretofore advanced by the undersigned to
pay indebtedness of Sunflower or SRFB to third parties (other than Bruce Rimbo
or entities in which the undersigned, directly or indirectly, has an ownership
interest) incurred for services or goods theretofore actually received by
Sunflower or SRFB.
(f) The undersigned acknowledges that it has no claim, cause of action, or,
rights, against, and acting for itself and for its respective successors,
assigns, shareholders, members, directors, officers, agents and employees,
hereby releases, acquits and forever discharges, FUNB (both as a member of the
Bank Group and as Agent), B-One, B-MW, INTRUST, FCLT and their respective
stockholders, directors, officers, representatives, agents, employees,
attorneys, predecessors in interest (including, without limitation, Texas
Commerce Bank National Association, First City National Bank of Houston, First
Union National Bank of North Carolina, Kansas State Bank & Trust Company, Home
State Bank and the Federal Deposit Insurance Corporation), successors and
assigns with respect to any and all actions, causes of action, claims,
counterclaims, cross claims, debts, demands, executions, garnishments,
judgments, lawsuits, proceedings, and suits of every kind and character,
previously or now existing, whether known or unknown, and relating in any manner
whatsoever to, or arising in any manner whatsoever from, the dealings or
negotiations of any of such persons or entities being released hereby, with the
undersigned, Sunflower, SRFB or R.D. Hubbard and any of the other persons on
behalf of whom the undersigned is making this covenant through the date of this
Inducement Certificate which are evidenced by or relate to the Debt or the Loan
Documents.
(g) The undersigned waives the benefit of any "antideficiency", res
judicata, marshalling of assets or one action legislation, doctrine or other
rule of law which might otherwise bar any recovery against any property which
constitutes "Collateral" (as that term is defined in the Standstill Agreement
----------
and hereinafter used) because of Bank Group's election of remedies, including
but not limited to an exercise of power of sale under any mortgage, deed of
trust, assignment or other security agreement. The undersigned agrees that
until the Debt is satisfied in full, any mortgage, collateral assignment,
pledge, lien, security interest or other encumbrance which the undersigned now
or hereafter holds on or in any item of the Collateral shall be subordinate to
any mortgage, collateral, assignment, pledge, lien, security interest or other
encumbrance which any of the Agent or members of the Bank Group may now or
hereafter have thereon or therein, whether perfected or not. The undersigned
agrees to execute and deliver to Agent or Bank Group, from time to time, within
fifteen (15) days of when requested to
-52-
<PAGE>
do so by Agent or a member of the Bank Group, by notice to the undersigned at
the address set forth below, such forms of subordination or amendment as Agent
or Bank Group may request to document said subordination. The undersigned agrees
that notwithstanding any foreclosure of any lien created or evidenced by any of
the Loan Documents with respect to any or all of any real or personal property
constituting all or any portion of the Collateral, which secures the Debt,
whether by the exercise of the power of sale contained therein, by an action for
judicial foreclosure, by an acceptance of a deed or bill of sale in lieu of
foreclosure, or by any other means, the undersigned shall remain bound under its
respective obligations to the Bank Group, in accordance with the Loan Documents
to which the undersigned is a party.
(h) The undersigned is a legal entity, duly created and validly existing
and in good standing under the laws of the State of Delaware and has full power
and authority to enter into this document on behalf of itself and to take all of
the actions referred to herein, the execution and performance of the terms
hereof have been duly authorized by any and all necessary administrative,
judicial or other action, and will not violate any provision of law or of any
articles of incorporation, bylaws or judicial or administrative ruling or decree
and no other consent or approval of any public authority, regulatory agency or
other person or entity whatsoever is required as a condition to the validity of
the obligations of such respective person or entity except those which have been
obtained.
(i) Nothing contained in the Standstill Agreement shall be a waiver of any
rights or remedies the Bank Group may otherwise have under the Loan Documents or
affect the relative priorities of interests of the undersigned and the Bank
Group or Agent in any collateral for indebtedness owed by Sunflower to any of
them.
(j) If, from time to time, the Agent, the Bank Group or the "Required
--------
Banks" (as defined in the "Credit Agreement", as that term is defined in the
----------------
Standstill Agreement), acting in its sole discretion, hereafter agrees in
writing to extend the "Termination Date" (as that term is defined in the
----------------
Standstill Agreement and hereinafter used) to a date(s) beyond the date set
forth in the Standstill Agreement, to waive performance of any provision of the
Standstill Agreement or the other Loan Documents or to refrain from declaring a
default under the Standstill Agreement and other Loan Documents, the provisions
hereof shall apply and bind the undersigned and its respective successors and
assigns with respect to such extension(s), waiver(s) or forbearance as if such
document(s), waiver(s) or forbearance were expressly referred to herein, unless,
prior to executing such document(s), Bank Group shall have received, by
certified or registered mail sent to the address specified for notices to be
sent to the Bank Group in the Standstill Agreement, written
-53-
<PAGE>
notice to the contrary from the undersigned, in which case solely this paragraph
shall not apply solely as to the sender of such notice, and its respective
successors or assigns, with respect to any such extension(s), waiver(s) or
forbearance agreed to by Bank Group after receipt of such notice.
(k) This Inducement Certificate is executed by the undersigned in reliance
upon the acknowledgements and agreements of the Bank Group and Agent set forth
in Subsection 13(c) of the Standstill Agreement.
IN WITNESS WHEREOF, the undersigned has executed this instrument in one or
more counterparts as of the _________ day of ________________, 1995.
HOLLYWOOD PARK, INC.,
A DELAWARE CORPORATION
BY:______________________
NAME:____________________
TITLE:___________________
EXHIBIT G
---------
HUBBARD
INDUCEMENT CERTIFICATE
----------------------
The undersigned, to induce FIRST UNION NATIONAL BANK OF FLORIDA ("FUNB"),
----
BANK ONE LEXINGTON, N.A. ("B-One"), BANK MIDWEST, N.A. ("B-MW"), INTRUST BANK,
----- ----
N.A. ("INTRUST"), FCLT LOANS, L.P., a Texas limited partnership ("FCLT") (FUNB,
------- ----
B-One, B-MW, INTRUST and FCLT sometimes being collectively referred to herein as
the "Bank Group" and FUNB, as agent for itself and the other members of the Bank
----------
Group, sometimes being referred to herein as the "Agent") to enter into, with
-----
each other and SUNFLOWER RACING, INC., a Kansas corporation ("Sunflower"), a
---------
certain Standstill Agreement dated _____________________, 1995 (the "Standstill
Agreement"), does hereby approve and consent to the execution and delivery of
the Standstill Agreement by the parties thereto, and acknowledges, represents
and agrees to and with Bank Group that:
(a) Notwithstanding the execution of the Standstill Agreement and of the
other documents executed pursuant thereto, , the undersigned's covenants and
agreements for the benefit of the Bank Group in the Subordination and Amendment
Agreement dated as of March 23, 1994 and the Certificate of R.D. Hubbard dated
as of March 23, 1994 (collectively, the "Subordination Agreement"), remain in
-----------------------
full force and effect and that the present members of the Bank Group are the
parties entitled to enforce the provisions
-54-
<PAGE>
of such covenants and agreements as parties thereto or the respective successors
in interest of a party thereto.
(b) The undersigned presently holds and owns solely for his own account
debt of Sunflower which is subordinated to the "Debt" (as that term is defined
----
in the Standstill Agreement and hereinafter used), pursuant to the provisions of
the Subordination Agreement (and which is defined therein as the "Subordinated
------------
Indebtedness") and certifies that there have been no payments, directly or
- ------------
indirectly, in violation of the subordination provisions of the Subordination
Agreement. The undersigned hereby reaffirms all of his obligations and
agreements under the Subordination Agreement.
(c) The undersigned has not heretofore and, so long as any of the Debt is
unsatisfied, shall not assign(ed), pledge(d) or otherwise transfer(red) the
Subordinated Indebtedness or any interest therein or indicia thereof to any
other person or entity.
(d) In addition to the undersigned's obligations under the Subordination
Agreement, the undersigned agrees from and after the date hereof that the term
Subordinated Indebtedness, both hereunder and in the Subordination Agreement,
shall include all sums now or hereafter due and owing to the undersigned from
Sunflower, SR Food & Beverage Company ("SRFB") or both, and that until the Debt
----
is satisfied in full, if the undersigned receives any sum from or for Sunflower
or SRFB, the undersigned shall be deemed to hold all such sums in trust for
benefit of the Bank Group and shall promptly deliver the same to Agent to apply
on the Debt; provided that this Subsection (d) shall not apply to those
reimbursements referred to in Subsection 10(i)(iv) of the Standstill Agreement.
(e) The undersigned acknowledges that either he has no claim, cause of
action, or rights, against, or acting for himself and for his respective heirs,
executors, personal representatives, beneficiaries, trustees, successors,
assigns, agents and employees, hereby releases, acquits and forever discharges,
FUNB (both as a member of the Bank Group and as Agent), B-One, B-MW, INTRUST,
FCLT and their respective stockholders, directors, officers, representatives,
agents, employees, attorneys, predecessors in interest (including, without
limitation, Texas Commerce Bank National Association, First City National Bank
of Houston, First Union National Bank of North Carolina, Kansas State Bank &
Trust Company, Home State Bank and the Federal Deposit Insurance Corporation),
successors and assigns with respect to any and all actions, causes of action,
claims, counterclaims, cross claims, debts, demands, executions, garnishments,
judgments, lawsuits, proceedings, and suits of every kind and character,
previously or now existing, whether known or unknown, and relating in any manner
whatsoever
-55-
<PAGE>
to, or arising in any manner whatsoever from, the dealings or negotiations, of
any of such persons or entities being released hereby, with the undersigned,
Sunflower, SRFB or Hollywood Park, Inc. and any of the other persons on behalf
of whom the undersigned is making this covenant through the date of this
Inducement Certificate, which are evidenced by or relate to the Debt or the Loan
Documents (including, without limitation, this Inducement Certificate and the
Subordination Agreement).
(f) The undersigned waives the benefit of any "antideficiency", res
judicata, marshalling of assets or one action legislation, doctrine or other
rule of law which might otherwise bar any recovery against any property which
constitutes "Collateral" (as that term is defined in the Standstill Agreement
----------
and hereinafter used) because of Bank Group's election of remedies, including
but not limited to an exercise of power of sale under any mortgage, deed of
trust, assignment or other security agreement. The undersigned agrees that
notwithstanding any foreclosure of any lien created or evidenced by any of the
Loan Documents with respect to any or all of any real or personal property
constituting all or any portion of the Collateral, which secures the Debt,
whether by the exercise of the power of sale contained therein, by an action for
judicial foreclosure, by an acceptance of a deed or bill of sale in lieu of
foreclosure, or by any other means, the undersigned shall remain bound under his
respective obligations to the Bank Group and Agent, in accordance with the
Subordination Agreement.
(g) The undersigned is an individual of legal age with full power and
authority to enter into this document, on behalf of himself and to take all of
the actions referred to herein, the execution and performance of the terms
hereof have been duly authorized by any and all necessary administrative,
judicial or other action, and will not violate any provision of law or of any
judicial or administrative ruling or decree and no other consent or approval of
any public authority, regulatory agency or other person or entity whatsoever is
required as a condition to the validity of his obligations hereunder.
(h) Nothing contained in the Standstill Agreement shall be a waiver of any
rights or remedies the Bank Group may otherwise have under the Loan Documents or
affect the relative priorities of interests of the undersigned and the Bank
Group or Agent in any collateral for indebtedness owed by Sunflower to any of
them.
(i) If, from time to time, the Agent, the Bank Group or the "Required
--------
Banks" (as defined in the Credit Agreement, as defined in the Standstill
- -----
Agreement), acting in its sole discretion, hereafter agrees in writing to extend
the "Termination Date" (as that term is defined in the Standstill Agreement and
----------------
hereinafter used) to a date(s) beyond the date set forth in the Standstill
Agreement, to waive performance of any provision of the
-56-
<PAGE>
Standstill Agreement or the other Loan Documents or to refrain from declaring a
default under the Standstill Agreement and other Loan Documents, the provisions
hereof shall apply and bind the undersigned and his respective heirs, legal
representatives, successors and assigns with respect to such extension(s),
waiver(s) or forbearance as if such document(s), waiver(s) or forbearance were
expressly referred to herein, unless, prior to executing such document(s), Bank
Group shall have received, by certified or registered mail sent to the address
specified for notices to be sent to the Bank Group in the Standstill Agreement,
written notice to the contrary from the undersigned, in which case solely this
paragraph shall not apply solely as to the sender of such notice, and his
respective heirs, successors, or assigns, with respect to any such extension(s),
waiver(s) or forbearance agreed to by Bank Group after receipt of such notice.
(j) The provisions of this document shall become effective only in the
event the Standstill Agreement has been executed and delivered by all parties
thereto and has become effective in accordance with its terms.
(k) This Inducement Certificate is executed by the undersigned in reliance
upon the acknowledgements and agreements of the Bank Group and Agent set forth
in Subsection 13(c) of the Standstill Agreement.
IN WITNESS WHEREOF, the undersigned has executed this instrument in one or
more counterparts as of the _________ day of ________________, 1995.
R. D. HUBBARD
-57-
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<PAGE>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 20,789,000
<SECURITIES> 6,210,000
<RECEIVABLES> 23,396,000
<ALLOWANCES> 215,000
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0
28,000
<OTHER-SE> 162,577,000
<TOTAL-LIABILITY-AND-EQUITY> 247,011,000
<SALES> 15,539,000
<TOTAL-REVENUES> 93,879,000
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<INCOME-TAX> 358,000
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