<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended June 30, 1996
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 August 12, 1996: 18,445,298.
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Hollywood Park, Inc.
Table of Contents
Part I
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<S> <C>
Item 1. Financial Information
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995............................ 1
Consolidated Statements of Operations for the
three months ended June 30, 1996 and 1995........ 2
Consolidated Statements of Operations for the six
months ended June 30, 1996 and 1995.............. 3
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995.............. 4
Notes to Consolidated Financial Statements........ 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............... 13
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Part II
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Item 1. Legal Proceedings................................. 17
Item 3. Default Upon Senior Securities.................... 18
Item 5. Other Information................................. 18
Item 6.a Exhibits.......................................... 18
Other Financial Information....................... 21
Signatures........................................ 26
</TABLE>
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Hollywood Park, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
------------ ------------
(unaudited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $30,830,000 $22,406,000
Restricted cash 10,154,000 3,126,000
Short term investments 4,053,000 6,447,000
Other receivables, net of allowance for doubtful accounts
of $960,000 in 1996 and $1,841,000 in 1995 8,906,000 8,147,000
Prepaid expenses and other assets 4,201,000 3,888,000
Deferred tax assets 2,204,000 4,888,000
Current portion of notes receivable 36,000 34,000
------------ ------------
Total current assets 60,384,000 48,936,000
Notes receivable 839,000 857,000
Property, plant and equipment, net 121,043,000 174,717,000
Lease with TRAK East, net 0 1,195,000
Goodwill, net 20,640,000 26,829,000
Long term gaming assets 13,191,000 19,063,000
Other assets 7,704,000 11,706,000
------------ ------------
$223,801,000 $283,303,000
============ ============
==========================================================================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $13,147,000 $12,518,000
Accrued lawsuit settlement 2,750,000 5,232,000
Accrued liabilities 9,646,000 13,607,000
Accrued workers' compensation 2,054,000 2,277,000
Accrued slip and fall claims 1,679,000 1,543,000
Gaming liabilities 2,791,000 3,998,000
Amounts due to horsemen for purses, stakes and awards 12,030,000 709,000
Outstanding pari-mutuel tickets 3,004,000 2,757,000
Current portion of notes payable 3,406,000 32,310,000
------------ ------------
Total current liabilities 50,507,000 74,951,000
Notes payable 256,000 15,629,000
Gaming liabilities 11,620,000 16,894,000
Deferred tax liabilities 4,770,000 10,083,000
------------ ------------
Total liabilities 67,153,000 117,557,000
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;
18,504,798 issued and outstanding 1,850,000 1,850,000
Capital in excess of par value 168,479,000 168,479,000
Accumulated deficit (13,709,000) (4,611,000)
------------ ------------
Total stockholders' equity 156,648,000 165,746,000
------------ ------------
$223,801,000 $283,303,000
============ ============
</TABLE>
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See accompanying notes to consolidated financial statements.
1
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Hollywood Park, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the three months ended June 30,
-------------------------------------
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
REVENUES:
Pari-mutuel commissions $21,989,000 $21,371,000
Lease and management fee - Sunflower 0 1,638,000
Lease - Casino 0 6,288,000
Gaming - Casino 12,962,000 0
Admissions, programs, and other racing income 5,200,000 5,799,000
Concession sales 4,463,000 5,947,000
Other income 1,813,000 1,785,000
----------- -----------
46,427,000 42,828,000
----------- -----------
EXPENSES:
Salaries, wages and employee benefits 16,013,000 12,573,000
Operations of facilities 2,096,000 2,847,000
Cost of concession sales 5,882,000 7,593,000
Professional services 2,308,000 2,542,000
Rent 419,000 409,000
Utilities 975,000 1,190,000
Marketing 2,811,000 2,121,000
Administrative 4,294,000 2,426,000
----------- -----------
34,798,000 31,701,000
----------- -----------
Income before interest, income taxes, depreciation,
amortization and write off of investment in subsidiary 11,629,000 11,127,000
Write off of investment in Sunflower 66,000 0
Depreciation and amortization 2,487,000 2,862,000
Interest expense 54,000 974,000
----------- -----------
Income before income tax expense 9,022,000 7,291,000
Income tax expense 3,773,000 2,434,000
----------- -----------
Net income $5,249,000 $4,857,000
=========== ===========
=====================================================================================================
Dividend requirements on convertible preferred stock $481,000 $481,000
Net income available to common shareholders $4,768,000 $4,376,000
Per common share:
Net income - primary $0.26 $0.24
Net income - fully diluted $0.25 $0.24
Cash dividend per common share $0.00 $0.00
Number of shares - primary 18,612,850 18,369,634
Number of shares - fully diluted 20,904,342 20,661,126
</TABLE>
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See accompanying notes to consolidated financial statements.
2
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Hollywood Park, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the six months ended June 30,
-----------------------------------
1996 1995
----------- -----------
(unaudited)
<S> <C> <C>
REVENUES:
Pari-mutuel commissions $28,707,000 $27,679,000
Lease and management fee - Sunflower 1,071,000 3,145,000
Lease - Casino 0 12,670,000
Gaming - Casino 24,803,000 0
Admissions, programs, and other racing income 8,636,000 9,272,000
Concession sales 7,637,000 10,805,000
Other income 3,426,000 3,713,000
----------- -----------
74,280,000 67,284,000
----------- -----------
EXPENSES:
Salaries, wages and employee benefits 28,614,000 20,437,000
Operations of facilities 4,404,000 5,308,000
Cost of concession sales 10,750,000 13,466,000
Professional services 4,568,000 4,520,000
Rent 701,000 678,000
Utilities 1,973,000 2,149,000
Marketing 3,684,000 2,684,000
Administrative 7,561,000 4,083,000
----------- -----------
62,255,000 53,325,000
----------- -----------
Income before interest, income taxes, depreciation,
amortization and write off of investment in subsidiary 12,025,000 13,959,000
Write off of investment in Sunflower 11,412,000 0
Depreciation and amortization 5,400,000 5,654,000
Interest expense 898,000 1,928,000
----------- -----------
Income (loss) before income tax expense (5,685,000) 6,377,000
Income tax expense 2,444,000 2,114,000
----------- -----------
Net income (loss) ($8,129,000) $ 4,263,000
=========== ===========
==========================================================================================================
Dividend requirements on convertible preferred stock $962,000 $962,000
Net income (loss) available to (allocated to) common shareholders ($9,091,000) $3,301,000
Per common share:
Net income (loss) - primary ($0.49) $0.18
Net income (loss) - fully diluted ($0.49) $0.18
Cash dividend per common share $0.00 $0.00
Number of shares - primary 18,612,850 18,369,634
Number of shares - fully diluted 20,904,342 20,661,126
</TABLE>
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See accompanying notes to consolidated financial statements.
3
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Hollywood Park, Inc.
Consolidated Statements of Operations
<TABLE>
<CAPTION>
For the six months ended June 30,
-----------------------------------
1996 1995
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(unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($8,129,000) $ 4,263,000
Adjustment to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 4,901,000 5,653,000
Changes in accounts due to deconsolidation of subsidiary
in bankruptcy:
Property, plant and equipment 58,380,000 0
Secured notes payable (28,904,000) 0
Unsecured notes payable (15,373,000) 0
Goodwill and lease with TRAK East 6,908,000 0
Unrealized loss on short term bond investing (7,000) 0
(Gain) loss on sale or disposal of property, plant and equipment (5,000) 66,000
Increase in restricted cash (7,028,000) (10,931,000)
Increase in casino lease and related interest receivable, net 0 (7,054,000)
(Increase) decrease in other receivables, net (759,000) 112,000
Decrease (increase) in prepaid expenses and other assets 3,689,000 (2,407,000)
Decrease in deferred tax assets 2,684,000 185,000
Increase in accounts payable 629,000 3,161,000
Decrease in accrued lawsuit settlement (2,482,000) 0
Decrease in gaming liabilities (1,207,000) 0
(Decrease) increase in accrued liabilities (3,961,000) 2,458,000
(Decrease) increase in accrued workers' compensation (223,000) 95,000
Increase in accrued slip and fall claims 136,000 130,000
Increase in amounts due to horsemen for purses, stakes
and awards 11,321,000 11,249,000
Increase in outstanding pari-mutuel tickets 247,000 1,239,000
(Decrease) increase in deferred tax liabilities (5,313,000) 2,553,000
----------- -----------
Net cash provided by operating activities 15,504,000 10,772,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (9,132,000) (4,233,000)
Receipts from sale of property, plant and equipment 6,000 96,000
Principal collected on notes receivable 16,000 16,000
Purchase of short term investments (11,154,000) (12,538,000)
Proceeds from short term investments 13,548,000 8,846,000
Long term gaming assets 598,000 0
----------- -----------
Net cash used in investing activities (6,118,000) (7,813,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from unsecured notes payable 0 1,681,000
Payment of unsecured notes payable 0 (3,566,000)
Payment of secured notes payable 0 (1,458,000)
Payments under capital lease obligations 0 (53,000)
Dividends paid to preferred stockholders (962,000) (962,000)
----------- -----------
Net cash used for financing activities (962,000) (4,358,000)
----------- -----------
Increase (decrease) in cash and cash equivalents 8,424,000 (1,399,000)
Cash and cash equivalents at the beginning of the period 22,406,000 37,122,000
----------- -----------
Cash and cash equivalents at the end of the period $30,830,000 $35,723,000
=========== ===========
</TABLE>
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See accompanying notes to consolidated financial statements.
4
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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, 1995. This financial
information does not include certain footnotes and financial presentations
normally presented annually, and therefore, should be read in conjunction with
the Company's 1995 Form 10-K.
The information furnished herein is unaudited; however, in the opinion of
management it reflects all recurring adjustments that are necessary to present a
fair statement of the results for the interim periods. All such adjustments are
of a normal and recurring nature. 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 horse
racing business.
The Company owns and operates the Hollywood Park race track, a premier
thoroughbred racing facility located in California, Sunflower Racing, Inc.
("Sunflower"), operating as the Woodlands, a greyhound and thoroughbred racing
facility located in Kansas, and Turf Paradise, Inc. ("Turf Paradise"), a
thoroughbred racing facility located in Arizona. On the same property as the
Hollywood Park race track, the Company owns and operates the Hollywood Park-
Casino (the "Casino").
SUNFLOWER On May 2, 1996, the Kansas Legislature adjourned without passing
legislation that would have allowed additional gaming at Sunflower, thereby
permitting Sunflower to more effectively compete with Missouri riverboat gaming.
As a result of the outcome of the Kansas Legislative session, Hollywood Park
wrote off its approximately $11,412,000 investment in Sunflower. There was no
cash involved with the write off of this investment. On May 17, 1996, Sunflower
filed for reorganization under Chapter 11 of the Bankruptcy Code. Sunflower is
operating during the reorganization, but Sunflower's operating results from
April 1, 1996, forward were not consolidated with Hollywood Park's operating
results.
ACQUISITION OF PACIFIC CASINO MANAGEMENT, INC. The Hollywood Park-Casino was
opened in July 1994 under a third party leasing arrangement with Pacific Casino
Management, Inc. ("PCM"). In 1994 under the California Gaming Registration Act,
it was the position of the California Attorney General that as a publicly traded
company, Hollywood Park was not eligible to register as an operator of a card
club, but could lease the site to a registered operator unaffiliated with the
Company. On August 3, 1995, Senate Bill ("SB") 100 was enacted into law. SB
100 does the following: (i) allows for a publicly traded racing association, or
a subsidiary thereof, (hereafter the "Racing Association") to operate a gaming
club on the premises of its race track; (ii) requires the officers, directors
and shareholders of 5.0% or more of a Racing Association (excluding
institutional investors) to be licensed by the Attorney General; (iii)
provisionally licenses a Racing Association and its officers, directors, and
5.0% shareholders to operate a gaming club on the premises of its race track
pending licenses pursuant to sub-paragraph (ii) above; (iv) allows a Racing
Association and its officers, directors and 5.0% shareholders to have an
interest in gaming activities located outside California that are not legal in
California. The provisions of SB 100 are repealed effective January 1, 1999,
unless prior thereto the California legislature enacts a comprehensive scheme
for the regulation of gaming under the jurisdiction of a gaming control
commission (see Item 5. Other Information).
Pursuant to the authority provided by SB 100, on November 17, 1995, Hollywood
Park acquired substantially all the assets, property and business of PCM, and
assumed substantially all of PCM's liabilities. Prior to the acquisition, under
a lease with the Company, PCM operated the gaming floor activities of the
Hollywood
5
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Park-Casino. Immediately following the acquisition, PCM was dissolved and the
gaming floor operations were incorporated into Hollywood Park's Gaming Division.
The purchase price of PCM's net assets was an aggregate $2,640,000, payable in
shares of Hollywood Park common stock, in three installments: (i) shares of
Hollywood Park common stock having a value of $1,600,000, or 135,164 common
shares, issued on November 17, 1995; (ii) shares of Hollywood Park common stock
having a value of $540,000 on the first anniversary of the execution of the
acquisition; and (iii) shares of Hollywood Park common stock having a value of
$500,000 on the second anniversary of the execution of the acquisition; provided
that Hollywood Park may accelerate the payments; provided further, the aggregate
number of shares to be paid under clauses (ii) and (iii) may not exceed the
number of shares issued on November 17, 1995. Shares to be issued in the
remaining two installments will be valued at the average market price of
Hollywood Park's common stock for the ten trading days immediately preceding the
payment date.
Virtually all of the approximately $21,568,000 of excess acquisition cost over
the recorded value of the net assets acquired was allocated to goodwill and will
be amortized over 40 years. The amortization of the goodwill is not deductible
for income tax purposes.
BOOMTOWN, INC. On April 23, 1996, the respective Board of Directors of
Hollywood Park and of Boomtown, Inc. ("Boomtown") approved and signed the
Agreement and Plan of Merger (the "Merger") among Hollywood Park, Inc., HP
Acquisition, Inc. and Boomtown, Inc., where by way of a merger with HP
Acquisition, Inc. (a wholly owned subsidiary of Hollywood Park) Boomtown will
become a wholly owned subsidiary of the Company. The Merger is expected to be
finalized by December 31, 1996, but in no event may it be finalized later than
June 30, 1997. The Merger will be accounted for under the purchase method of
accounting, with each issued and outstanding share of Boomtown common stock
converted into 0.625 shares of Hollywood Park common stock. Approximately
5,774,000 newly issued shares of the Company's common stock will be issued in
the Merger.
The Merger is subject to, among other things, the approval of the common
shareholders of both Hollywood Park and Boomtown, the consent of to the Merger,
and the Blue Diamond Swap (as defined below) by the holders of a majority of the
outstanding principal amount of Boomtown's outstanding bonds, and upon Hollywood
Park, its management and Board of Directors and Boomtown's management acquiring
all required regulatory approvals and gaming permits. As of the effective date
of the Merger, a total of eleven persons will serve on the Board of Directors of
the combined companies, four of whom will be former directors of Boomtown.
Dates have not been set for the Hollywood Park and Boomtown shareholder meeting.
The application process for the required regulatory approvals and gaming permits
is in progress.
Boomtown owns and operates land-based, dockside and riverboat gaming operations
in Verdi, Nevada ("Boomtown Reno"), Las Vegas, Nevada ("Boomtown Las Vegas"),
Biloxi, Mississippi ("Boomtown Biloxi"), and Harvey, Louisiana ("Boomtown New
Orleans"). Boomtown's properties offer hotel accommodations (at Boomtown Reno
and Boomtown Las Vegas only), gaming and other entertainment amenities to
primarily middle income, value oriented customers. The Boomtown properties have
an "old west" theme by incorporating western memorabilia in their interior
decor, country/western music and western dress of their employees.
Boomtown Reno has been operating for over a quarter century and is located seven
miles west of Reno on Interstate 80, the major highway connecting northern
California and Reno. Boomtown Reno is situated on 569 acres with approximately
61 acres used for current operations. Boomtown Reno's customer base is
primarily drawn from Interstate 80 traffic. Boomtown Reno offers its guests a
40,000 square foot casino, including 1,433 slot machines and 43 table games, a
122-room hotel, a 16-acre truck stop, a full-service recreational vehicle park,
a service station, a mini-mart and other related amenities. In addition,
Boomtown Reno offers a 35,000 square foot family entertainment center featuring
a dynamic motion theater, an indoor 18-hole western-themed miniature golf
course, a restaurant and a replica of an 1800's Ferris Wheel.
6
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Boomtown Las Vegas began operations in May 1994 on a 56-acre site at the
interchange of Blue Diamond Road and Interstate 15, the principal thoroughfare
connecting Southern California to Las Vegas. Boomtown Las Vegas is four miles
from the exit for Circus Circus, Excalibur, Luxor, and MGM. Boomtown Las Vegas
includes a 30,000 square foot casino with 1,100 slot machines and 28 gaming
tables, 300 hotel rooms, a full-service recreational vehicle park, two
restaurants and a replica of an old mine where customers can pan for real gold.
On August 12, 1996, Boomtown, Blue Diamond Hotel and Casino Inc. (a wholly owned
subsidiary of Boomtown, Inc.), Hollywood Park, Industry Hills Visitor
Accommodation Center ("IVAC") (the owner/lessor of Boomtown Las Vegas), Edward
P. Roski, Jr. (a general partner of IVAC), and another affiliate of Mr. Roski
entered into the Blue Diamond Swap Agreement (the " Swap Agreement") pursuant to
which the parties agreed that, upon consummation of the Merger, Boomtown and
Blue Diamond (or any subsidiary thereof as set forth in the Swap Agreement)
would exchange their entire interest in Boomtown Las Vegas (including Boomtown's
note receivable, from IVAC, in the amount of $27,300,000) in exchange for a
$5,000,000 unsecured promissory note (the "First Note") and a $3,465,000
unsecured promissory note (the "Second Note") (the "Blue Diamond Swap") and the
termination of the Boomtown Las Vegas lease. The First Note has an interest
rate equal to the prime rate plus 1.5% per annum and provides for annual
principal payments of $1,000,000 over five years. The Second Note has an
interest rate equal to the prime rate plus 0.5% per annum and provides for a
payment of all principal on the third anniversary of the closing. In accordance
with the terms of the Swap Agreement, with certain exceptions set forth in the
Swap Agreement, Boomtown and Blue Diamond will be responsible for the
liabilities of Boomtown Las Vegas prior to the Blue Diamond Swap and Mr. Roski
will be responsible for the liabilities of Boomtown Las Vegas subsequent to the
Blue Diamond Swap. The consent of the Boomtown bondholders is required for
Boomtown to consummate the Blue Diamond Swap.
On August 12, 1996, Hollywood Park and Mr. Roski further entered into a Stock
Purchase Agreement (the "Stock Purchase Agreement") pursuant to which Hollywood
Park will concurrently with the Blue Diamond Swap and the Merger, purchase
714,386 shares of Boomtown commons stock held by Mr. Roski for a purchase price
of approximately $3,465,000 paid in the form of a Hollywood Park unsecured
promissory note having an interest rate equal to the prime rate plus one percent
per annum and providing for five equal annual principal payments after the
closing.
Boomtown Biloxi, a limited partnership majority owned and controlled by
Boomtown, occupies nine acres on Biloxi, Mississippi's back bay. Boomtown
Biloxi is located one-half mile from Interstate 110, the main highway connecting
Interstate 10 (the main thoroughfare connecting New Orleans and Mobile, Alabama)
and the Gulf of Mexico. The facility, which began operations in July 1994,
consists of a land-based facility that houses non-gaming operations and a 33,000
square foot casino constructed on a 400 x 100 foot barge permanently moored to
the land-based building. The casino offers 985 slot machines, 42 table games
and other gaming amenities including restaurants, a western dance hall/cabaret
and a 20,000 square foot family entertainment center.
Boomtown New Orleans, a limited partnership majority owned and controlled by
Boomtown, began operations in August 1994 on a 50 acre site in Harvey,
Louisiana, approximately ten miles from the French Quarter of New Orleans.
Gaming operations are conducted from a 250 foot replica of a paddle wheel
riverboat, offering 865 slot machines and 51 table games in a 30,000 square foot
casino. The land-based facility next to the riverboat dock is composed of a
western-themed 88,000 square foot entertainment center
7
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and a western saloon/dance hall. On November 5, 1996, local parish votes
regarding the continuation of gaming will be held. Boomtown New Orleans is
located in Jefferson Parish. Boomtown's management has no reason, at this time,
to believe that the voters of Jefferson Parish will vote against riverboat
gaming. If riverboat gaming is voted down, Boomtown would have to discontinue
its riverboat gaming operations in June 1999.
Boomtown is actively seeking to expand its operations into jurisdictions that
have legalized casino gaming at sites that are near interstate highways or major
thoroughfares near major population or tourist centers. Boomtown is currently
exploring a project in Switzerland County, Indiana through a joint venture with
Hilton Gaming Corporation. The gaming license application for this project will
be heard on August 19 and 20, 1996.
CRYSTAL PARK HOTEL AND CASINO Construction is well underway on the Crystal Park
Hotel and Casino ("Crystal Park"), California's first hotel/casino. Crystal
Park is expected to open in the fourth quarter 1996, with 110 gaming tables,
with no limit on the number of gaming tables that can be added, and
approximately 282 hotel rooms. 0n June 27, 1996, the Company signed a 20 year
License Agreement with Radisson Hotels International, Inc. to, among other
things, consult on operations and marketing of the hotel. Hollywood Park can
terminate the agreement with Radisson, at not cost, at the end of year three,
year five or year ten. Crystal Park will also include a gift shop, massage
center, a full service health spa with an outdoor pool, a state-of-the-art air
filtration system, lobby sports bar and lounge, 24 hour cafe and room service.
On July 14, 1995, the Company and Compton Entertainment, Inc. ("CEI") executed
an Amended and Restated Agreement Respecting Pyramid Casino (the "Crystal Park
Agreement") (subsequently changed to Crystal Park Hotel and Casino), finalizing
the terms concerning the development, ownership and operation of a card club in
the city of Compton (the "City"). CEI entered into an Amended and Restated
Disposition and Development Agreement (the "DDA") with the City to lease or
purchase land located within the City as the card club site. Under the terms of
the Crystal Park Agreement, on August 3, 1995, the Company paid CEI $2,000,000
for the real property rights and assignment of the DDA to Hollywood Park. On
August 3, 1995, the Company paid CEI an additional $500,000 to exercise the five
year right to purchase CEI's City gaming license. If at the end of the five
year term of the option to purchase the City gaming license, Hollywood Park is
not able to own and operate a card club at the Compton site, CEI can elect to
either negotiate a new lease, or acquire Hollywood Park's rights to the card
club site for a purchase price as determined by the Agreement. Upon opening the
card club, Hollywood Park will pay CEI up to an additional $2,500,000, under
certain conditions detailed in the Agreement. As required by the DDA, on August
2, 1995, Hollywood Park paid approximately $2,006,000 to the City to purchase
the convention center to house the card club operations and entered into a 50
year lease with the City for the hotel, parking, and expansion parcels at the
same site. Initial improvements made by Hollywood Park to construct, install
and equip Crystal Park will be credited against the annual base rent. No cash
rent payments are expected to be made until after the nineteenth year of the
lease, or 2014.
If Crystal Park opens under current California law, (see Item 5. Other
Information) which does not allow publicly traded companies, such as Hollywood
Park, to operate a card club (other than on the same property as the race
track), the Company will commence a 60 month lease with CEI. Under the terms of
the lease, as the landlord, Hollywood Park is building and furnishing a card
club suitable for CEI to operate. Hollywood Park will not be responsible for
any segment of the daily operations. Over the 60 month term, CEI will pay the
Company monthly rent of 2.65% of Hollywood Park's total investment in the card
club. If there is a change in California law, allowing the Company to operate
card clubs at sites other than its race track property, Hollywood Park would
operate the card club in partnership with CEI, with Hollywood Park owning 67% of
the business, which will be subject to the partnership described below.
CEI has received all the required City gaming licenses necessary for operation
of Crystal Park, and on April 1, 1996, received a Provisional Registration from
the California Attorney General.
Hollywood Park, Redwood Gaming LLC (controlled by the Edward J. DeBartolo
Family) and First Park Investments LLC (controlled by Leo Chu and Ivy Chu) have
are forming a 88%/8%/4% partnership, respectively, to build and operate (per the
terms and conditions outlined above) the Crystal Park property.
8
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OTHER CARD CLUB ACTIVITY The Company is a 50% partner with DeBartolo
Entertainment, in a 30 table Casino and Night Club to be located in Palm
Springs, California. Hollywood Park and DeBartolo Entertainment will be
landlords in a third party leasing arrangement. Any investment required for
this project would be modest and timing has not been finalized for development.
Without legislation to expand the types of gaming which could be offered at the
Palm Springs casino, this site is not expected to generate material income, due
to the full casino gaming on nearby Indian Reservations.
The Company continues to have discussions with other card clubs as to possible
business combinations of mutual interest.
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of operations
were prepared under the assumption that the acquisition of PCM had occurred on
July 1, 1994, (PCM's inception). The following pro forma adjustments were made:
the elimination of lease rent revenue due to Hollywood Park from PCM and
concession sales made to PCM at acquisition; lease rent expense recorded by PCM;
other operating expenses including consulting fees, legal and audit services and
other miscellaneous duplicate expenses; and increases for amortization of the
excess purchase price allocated to goodwill, interest expense on the unpaid rent
and income taxes.
Pro forma earnings per share reflect the 135,164 shares of Hollywood Park common
stock issued to the former PCM shareholders and an estimated 108,052 shares of
common stock due to the former PCM shareholders, based on the closing market
price of Hollywood Park's common stock on June 28, 1996.
Hollywood Park, Inc.
Unaudited Pro Forma Combined Consolidated Results of Operations
<TABLE>
<CAPTION>
For the three months ended June 30,
---------------------------------------
1996 (a) 1995
------------------ -------------------
<S> <C> <C>
Revenues:
Hollywood Park, Inc. and race tracks $31,254,000 $34,001,000
Hollywood Park, Inc. - Casino Division 15,173,000 13,099,000
------------------ -------------------
46,427,000 47,100,000
------------------ -------------------
Operating income before interest,
income taxes, depreciation,
amortization and write off of 11,629,000 8,381,000
investment in subsidiary
Net income $ 5,249,000 $ 2,033,000
================== ===================
Dividend requirements on convertible $ 481,000 $ 481,000
preferred stock
Net income available to common $ 4,768,000 $ 1,552,000
shareholders
Per common share:
Net income - primary $ 0.26 $ 0.08
Net income - fully diluted $ 0.25 $ 0.08
</TABLE>
9
<PAGE>
Hollywood Park, Inc.
Unaudited Pro Forma Combined Consolidated Results of Operations
(continued)
<TABLE>
<CAPTION>
For the six months ended June 30,
------------------------------------
1996(a) 1995
------------------ ----------------
<S> <C> <C>
Revenues:
Hollywood Park, Inc. and race tracks $ 45,334,000 $ 48,868,000
Hollywood Park, Inc. - Casino Division 28,946,000 26,165,000
74,280,000 75,033,000
------------------ ----------------
Operating income before interest,
income taxes, depreciation,
amortization and write off of 12,025,000 7,668,000
investment in subsidiary
Net loss $ (8,129,000) $ (2,101,000)
================== ================
Dividend requirements on convertible $ 962,000 $ 962,000
preferred stock
Net loss allocated to common $ (9,091,000) $ (3,063,000)
shareholders
Per common share before write off of
investment in subsidiary:
Income - primary $ 0.59 $ 0.36
Income - fully diluted $ 0.58 $ 0.36
Per common share:
Net loss - primary $ (0.49) $ (0.16)
Net loss - fully diluted $ (0.49) $ (0.16)
_____
(a) The results for these periods are actual.
</TABLE>
RESTRICTED CASH Restricted cash as of June 30, 1996, was for amounts due to
horsemen for purses, stakes and awards. The balance as of December 31, 1995,
included approximately $2,482,000 related to the Class Action lawsuits (see Item
1. Legal Proceedings) and approximately $644,000 related to amounts due to
horsemen for purses, stakes and awards. In March 1996, amounts due for the
Class Action lawsuits were placed in an escrow account according to the
settlement agreement, and therefore are no longer reflected in the Company's
accounts.
CASINO REVENUE AND PROMOTIONAL ALLOWANCES Casino gaming revenue consisted of
fees collected from patrons on a per seat or per hand played basis. Revenues in
the accompanying statements of operations exclude the retail value of food and
beverage provided to players on a complimentary basis. The estimated cost of
providing these promotional allowances during the six months ended June 30,
1996, was $1,668,000. There were no such costs for the six months ended June
30, 1995.
ESTIMATES Financial statements prepared according to generally accepted
accounting principles require the use of management estimates, including
estimates used to evaluate the recoverability of property, plant and equipment,
to determine the fair value of financial instruments, to account for the
valuation allowance for deferred tax assets, and to determine litigation related
obligations.
EARNINGS PER SHARE Primary earnings per share were computed by dividing net
income (loss) available to (allocated to) common shareholders (net income (loss)
less preferred dividend requirements) by the weighted average number of common
shares outstanding during the period, inclusive of the estimated future shares
of the Company's common stock to be issued to the former PCM shareholders.
Fully diluted per share amounts were similarly computed, but include the effect,
when dilutive, of the conversion of the convertible preferred shares and
exercise of stock options.
CASH FLOWS Cash and cash equivalents consisted of certificates of deposit and
short term investments with remaining maturities of 90 days or less.
TREASURY STOCK On July 22, 1996, the Company announced its intention to
repurchase (and retire) up to 2,000,000 shares of its common stock on the open
market or in negotiated transactions. As of the August 12, 1996, the Company had
repurchased approximately 59,500 shares at a cost of approximately $510,000.
10
<PAGE>
RECLASSIFICATIONS Certain reclassifications have been made to the 1995 balances
to be consistent with the 1996 financial statement presentation.
NOTE 2 -- SHORT TERM INVESTMENTS
Short term investments as of June 30, 1996, consisted of corporate bonds valued
at $4,053,000. The corporate bond portfolio consisted of bonds rated from Ba2
to B3 by Moody's, 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 corporate bond investments, as of June 30, 1996, had a weighted average
maturity of 1.5 years, and because the Company reasonably expects to liquidate
this investment in its normal operating cycle this investment was classified as
short term. This short term investment is held as available for sale, and was
recorded in the accompanying financial statements at fair value, determined by
the quoted market price.
For the six months ended June 30, 1996, proceeds from the sale of corporate
bonds were approximately $3,387,000, all of which was reinvested, with gross
realized gains and losses of approximately $15,000 and $8,000, respectively.
The net unrealized holding loss, as of June 30, 1996, was $7,000.
NOTE 3 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment held at June 30, 1996, and December 31, 1995,
consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 (a) 1995
--------------- --------------
<S> <C> <C>
Land and land improvements $ 29,378,000 $ 42,490,000
Buildings and building improvements 134,795,000 175,960,000
Equipment 24,968,000 36,003,000
Construction in progress 11,027,000 8,394,000
--------------- --------------
200,168,000 262,847,000
Less accumulated depreciation 79,125,000 88,130,000
--------------- --------------
$121,043,000 $174,717,000
=============== ==============
</TABLE>
_____
(a) The June 30, 1996 figures do not include Sunflower's property, plant and
equipment.
NOTE 4 -- SECURED AND UNSECURED NOTES PAYABLE
Notes payable as of June 30, 1996, and December 31, 1995, consisted of the
following:
<TABLE>
<CAPTION>
June 30, December 31,
1996 (a) 1995
--------------- --------------
<S> <C> <C>
Secured notes payable (b) $ 0 $ 28,667,000
Unsecured notes payable (b) 0 15,574,000
Secured note payable - Texaco 3,358,000 3,358,000
Unsecured note payable - Gold Cup 304,000 340,000
--------------- --------------
3,662,000 47,939,000
Less current maturities 3,406,000 32,310,000
--------------- --------------
$ 256,000 $ 15,629,000
=============== ==============
</TABLE>
_____
(a) The June 30, 1996, balances do not include Sunflower's notes payable.
(b) These notes relate to Sunflower and are non-recourse to Hollywood Park.
This table does not include the Crystal Park capital lease obligations discussed
in Note 5.
11
<PAGE>
NOTE 5 -- LONG TERM GAMING ASSETS
The Company purchased the convention center parcel at the Crystal Park site,
which is currently under renovation to house the card club, and entered into a
capital lease with the city of Compton covering the adjoining hotel, surrounding
parking lot and expansion parcel. The capital lease was valued at approximately
$13,741,000. The lease was entered into on August 3, 1995, and has a term of up
to 50 years. The annual rent payments start at $600,000 and increase every
fifth year until year 46 when they stabilize at $2,850,000. Hollywood Park will
receive a rent payment credit equal to the costs incurred to renovate the card
club and hotel. No cash rent payments are expected to be made until the
nineteenth year of the lease, or 2014.
The balance of the long term gaming assets was related to the costs incurred for
the operating lease between Hollywood Park and CEI, and will be amortized over
the five year term of the lease.
NOTE 6 -- LONG TERM GAMING LIABILITIES
Long term gaming liabilities consisted of the Company's capital lease obligation
associated with the lease of the hotel, surrounding parking lot and the
expansion parcel from the city of Compton for Crystal Park. This liability will
be reduced as the construction disbursements are made, and upon submission of
any purchase option payment.
NOTE 7 -- SUPPLEMENTAL BALANCE SHEET INFORMATION
In 1995, Statement of Financial Accounting Standards No. 121 ("SFAS 121")
Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of, was issued which established accounting standards for the
impairment of long-lived assets, certain identifiable intangibles, and goodwill
related to those assets. SFAS 121, which became effective for Hollywood Park in
the quarter ended March 31, 1996, addresses when impairment losses should be
recognized and how impairment losses should be measured. Whenever there are
recognized events or changes in circumstances that indicate the carrying amount
of an asset may not be recoverable, management reviews the asset for possible
impairment. In accordance with current accounting standards, management uses
estimated expected future net cash flows (undiscounted and excluding interest
costs, and grouped at the lowest level for which there are identifiable cash
flows that are as independent as possible of the cash flows of other asset
groups) to measure the recoverability of the asset. If the expected future net
cash flows are less than the carrying amount of the asset an impairment loss
would be recognized. An impairment loss would be measured as the amount by
which the carrying amount of the asset exceeded the fair value of the asset,
with fair value measured as the amount at which the asset could be bought or
sold in a current transaction between willing parties, other than in a forced
liquidation sale. The estimation of expected future net cash flows is
inherently uncertain and relies to a considerable extent on assumptions
regarding current and future net cash flows and market conditions, and the
availability of capital. If, in future periods, there are changes in the
estimates or assumptions incorporated into the impairment review analysis, the
changes could result in an adjustment to the carrying amount of the asset, but
at no time would previously recognized impairment losses be restored.
NOTE 8 -- DEVELOPMENT EXPENSES
Included in Administrative expenses were development costs of approximately
$349,000 for the three months ended June 30, 1996, and approximately $705,000
for the six months ended June 30, 1996. These expenses consisted primarily of
costs related to the proposed stadium, the Inglewood site master plan and card
clubs in California.
Included in Administrative expenses were development costs of approximately
$252,000 for the three months ended June 30, 1995, and approximately $401,000
for the six months ended June 30, 1995. These expenses consisted primarily of
costs related to Kansas gaming surveys, the proposed stadium and card clubs in
California.
12
<PAGE>
NOTE 9 -- ACCOUNTING FOR STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, ("SFAS 123") Accounting for
Stock-Based Compensation, requires that the Company disclose additional
information about employee stock-based compensation plans. The objective of
SFAS 123 is to estimate the fair value, based on the stock price at the grant
date, of the Company's stock options to which employees become entitled when
they have rendered the requisite service and satisfied any other conditions
necessary to earn the right to benefit from the stock options. The fair market
value of a stock option is to be estimated using an option-pricing model that
takes into account, as of the grant date, the exercise price and expected life
of the option, the current price of the underlying stock and its expected
volatility, expected dividends on the stock and the risk-free interest rate for
the expected term of the options.
The Company has calculated the pro forma financial results as required under the
implementation rule of SFAS 123 and noted that the impact on net income for the
six months ended June 30, 1996 and 1995 was immaterial.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- ------- -----------------------------------------------------------------------
OF OPERATIONS
-------------
RESULTS OF OPERATIONS
Three months ended June 30, 1996, compared to the three months ended June 30,
-----------------------------------------------------------------------------
1995
----
Except for the historical information contained herein, the matters addressed in
this Item 2 constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking statements
are subject to a variety of risks and uncertainties, including those discussed
in this Report on Form 10-Q, that could cause actual results to differ
materially from those anticipated by the Company's management. The Private
Securities Litigation Reform Act of 1995 (the "Act") provides certain "safe
harbor" provisions for forward-looking statements. All forward-looking
statements made in this Quarterly Report on Form 10-Q are made pursuant to the
Act.
The results of operations for the three months ended June 30, 1996, included the
results of Hollywood Park operating all aspects of the Casino, including the
gaming floors, whereas, during the three months ended June 30, 1995, the Company
leased the gaming floor activities to PCM for a fixed monthly rent, and directly
operated all other aspects of the business. The results of operations for the
three months ended June 30, 1996, exclude the results of operations for
Sunflower, as this subsidiary is no longer consolidated due to Hollywood Park's
non-cash write off of its approximately $11,412,000 investment in Sunflower, and
Sunflower's May 17, 1996, filing for reorganization under Chapter 11 of the
Bankruptcy code.
Total revenues increased by $3,599,000, or 8.4%, during the three months ended
June 30, 1996, as compared to the three months ended June 30, 1995. Pari-mutuel
commissions increased by $618,000 or 2.9%, primarily due to three additional
1996 live race days at Hollywood Park. Gaming - Casino revenues of $12,962,000
were generated from the gaming floor activities, which Hollywood Park acquired
from PCM on November 17, 1995. While there are no comparable gaming floor
revenues in the 1995 results, during the three months ended June 30, 1995, the
Company recorded Lease - Casino revenue of $6,288,000, and concession sales to
the former lessee of approximately $548,000. Admissions, programs and other
racing income declined by $599,000, or 10.3%, with $409,000 of the decline
related to the exclusion of Sunflower's 1996 operating results. Concession
sales decreased by $1,484,000, or 25.0%, with $777,000 of the decline a result
of the exclusion of Sunflower's 1996 results, with the remainder primarily due
to the 1995 financial results including sales to the former Casino lessee, PCM,
(as mentioned earlier) with no such revenues in the 1996 results.
Total operating expenses, inclusive of Casino gaming floor operating expenses
(with no corresponding gaming floor operating expenses in the 1995 results) and
with the 1996 financial results exclusive of
13
<PAGE>
Sunflower's operating expenses, increased by $3,097,000, or 9.8%, for the three
months ended June 30, 1996, as compared to the three months ended June 30, 1995.
Salaries, wages and employee benefits increased by $3,440,000, or 27.3%,
primarily because of wages and benefits associated with the gaming floor staff
(hired November 17, 1995). Operations of facilities costs decreased by $751,000,
or 26.4%, primarily due to the exclusion of Sunflower's expenses in the 1996
results. Cost of concession sales decreased by $1,711,000, or 22.5%, with
$640,000 of the decrease related to the exclusion of Sunflower's 1996 operating
expenses, with the remainder due to cost saving measures implemented at the
Hollywood Park race track and Casino. Professional services decreased by
$234,000, or 9.2%, primarily due to the exclusion of Sunflower's results and
efforts at Turf Paradise and Hollywood Park to reduce racing related costs.
Utilities decreased by $215,000, or 18.1%, primarily due to the exclusion of
Sunflower's 1996 results. Marketing costs increased by $690,000, or 32.5%,
mainly due to Casino marketing costs. Administrative expenses increased by
$1,868,000, or 77.0%, primarily due to costs associated with the operation of
the gaming floors, including the city of Inglewood monthly gaming license fee.
Depreciation and amortization decreased by $375,000, or 13.1%, primarily due to
the exclusion of Sunflower's 1996 expenses, netted against the amortization of
the goodwill associated with the PCM acquisition. Interest expense decreased by
$920,000, or 94.5%, due entirely to the exclusion of Sunflower's 1996 interest
expense.
Income tax expense increased by $1,339,000, or 55.0%, due to higher pre-tax
income in 1996, and an anticipated slightly higher effective tax rate in 1996.
Six months ended June 30, 1996, compared to the six months ended June 30, 1995
------------------------------------------------------------------------------
The results of operations for the six months ended June 30, 1996, included the
results of Hollywood Park operating all aspects of the Casino, including the
gaming floors whereas, during the six months ended June 30, 1995, the Company
leased the gaming floor activities to PCM for a fixed monthly rent, and directly
operated all other aspects of the business. The results of operations for the
six months ended June 30, 1996, excluded the second quarter results of
operations for Sunflower, as this subsidiary is no longer consolidated due to
Hollywood Park's non-cash write off of its approximately $11,412,000 investment
in Sunflower, and Sunflower's May 17, 1996, filing for reorganization under
Chapter 11 of the Bankruptcy Code. Sunflower's results of operations are
included in the financial statements for the six months ended June 30, 1995.
Total revenues increased by $6,996,000, or 10.4%, during the six months ended
June 30, 1996, as compared to the six months ended June 30, 1995. Pari-mutuel
commissions increased by $1,028,000, or 3.7%, primarily due to three additional
1996 live race days at Hollywood Park. Gaming - Casino revenues of $24,803,000
were generated from the gaming floor activities, which Hollywood Park acquired
from PCM on November 17, 1995. While there are no comparable gaming floor
revenues in the 1995 results, during the six months ended June 30, 1995, the
Company recorded Lease - Casino revenue of $12,670,000, and concession sales to
the former lessee of approximately $1,766,000. Lease and management fee -
Sunflower, decreased by $2,074,000, or 65.9%, with $1,638,000 of the decrease
attributable to the exclusion of Sunflower's second quarter 1996 results and the
remainder of the decline was due to the continued competition from riverboat
gaming on the nearby Missouri River. Admissions, programs and other racing
income declined by $636,000 or 6.9%, with $409,000 of the decline related to the
exclusion of Sunflower's second quarter 1996 results, with the balance primarily
due to a 4.9% decrease in on-track attendance at Hollywood Park. Concession
sales decreased by $3,168,000, or 29.3%, with $1,051,000 of the decline due to
(i) the exclusion of Sunflower's second quarter 1996 results and riverboat
gaming competition in Missouri, and (ii) the fact that the 1995 results included
sales to PCM, the former gaming floor lessee (as mentioned earlier), with no
such sales in the 1996 results. Other income decreased by $287,000, or 7.7%,
primarily due to the cancellation of the initial Forum Parking Agreement, and a
decrease in interest income earned on excess cash reserves. A new Forum Parking
Agreement was executed on October 24, 1995, covering the one year from October
1, 1995, through September 30, 1996, providing for a minimum annual rent of
$1,200,000, compared to $1,800,000 under the prior Forum Parking Agreement. The
one year term of the new Forum Parking Agreement, which is substantially
shorter than the twelve year term of the prior Forum Parking Agreement, is
intended to provide flexibility regarding the proposed stadium development and
to gain other cross marketing benefits.
14
<PAGE>
Total operating expenses, inclusive of Casino gaming floor expenses (with no
corresponding gaming floor operating expenses in the 1995 results) and with the
1996 financial results exclusive of Sunflower's second quarter 1996 operating
expenses, increased by $8,930,000, or 16.7%, for the six months ended June 30,
1996, as compared to the six months ended June 30, 1995. Salaries, wages and
employee benefits increased by $8,177,000, or 40.0%, primarily because of wages
and benefits associated with the gaming floor staff (hired November 17, 1995).
Operations of facilities costs decreased by $904,000, or 17.0%, with $533,000 of
the decline attributable to the exclusion of Sunflower's second quarter 1996
results, and with the balance primarily due to reduction in property taxes at
Hollywood Park. Cost of concession sales decreased by $2,716,000, or 20.2%,
principally due to staff reductions at the Casino and the exclusion of
Sunflower's second quarter 1996 results. Marketing costs increased by
$1,000,000, or 37.3%, primarily due to Casino marketing costs. Administrative
costs increased by $3,478,000, or 85.2%, due primarily to costs associated with
the operation of the gaming floors, including the city of Inglewood monthly
gaming license fee.
Depreciation and amortization decreased by $254,000, or 4.5%, due primarily to
the exclusion of Sunflower's second quarter 1996 results, netted against the
amortization of the goodwill associated with the PCM acquisition. Interest
expense decreased by $1,030,000, or 53.4%, due to the exclusion of Sunflower's
second quarter 1996 results.
Income tax expense increased by $330,000, or 15.6%, due to higher pre-tax income
in 1996, and an anticipated slightly higher effective tax rate in 1996.
LIQUIDITY AND CAPITAL RESOURCES
Hollywood Park's principal source of liquidity at June 30, 1996, was cash and
cash equivalents of approximately $30,830,000 which reflected an increase of
$8,424,000 from December 31, 1995. The increase was primarily a result of a
seasonally strong second quarter, maturity of short term investments, and the
release of the Company's workers' compensation self insurance deposit, netted
against Crystal Park construction disbursements and the convertible preferred
dividend payments. Cash and cash equivalents decreased by $1,399,000 during the
six months ended June 30, 1995, primarily due to debt service payments on
secured and unsecured loan facilities, netted against increases in accounts
payable and accrued liabilities.
HOLLYWOOD PARK As a condition of the April 23, 1996, Merger Agreement with
Boomtown, Hollywood Park must secure adequate funding to repurchase Boomtown's
First Mortgage notes (if required to be redeemed) and at least $60,000,000 to
fund various gaming projects; the Company has appointed Bank of America to act
as lead bank in securing a credit agreement in excess of $165,000,000.
During the six months ended June 30, 1996, Hollywood Park did not draw any funds
under its credit facilities with Bank of America National Trust and Savings
Association ("Bank of America"), except for the issuance of a standby letter of
credit on May 1, 1996, mentioned below. On April 14, 1995, the Company executed
an unsecured loan facility of up to $75,000,000 with Bank of America (the
"Business Loan Agreement"). The loan facility consists of a $60,000,000 line of
credit (the "Line of Credit") and a $15,000,000 revolver (the "Revolver").
The Line of Credit is an interest only, revolving facility, under which the
Company may borrow, pay and reborrow principal amounts without penalty. On or
before September 1, 1996, per Amendment Two (as defined below) 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 bears interest at the option of the
Company at Bank of America's prime rate plus 0.25% or the offshore rate plus
2.0%, and the Company may further elect an agreed upon fixed rate.
The Revolver, inclusive of a within line facility for standby letters of credit
of up to a maximum of $5,000,000, is available during the two years ending May
1, 1997, during which the Company can borrow, pay and reborrow principal amounts
without penalty. The Revolver bears interest at the option of the Company at
15
<PAGE>
Bank of America's prime rate or the offshore rate plus 1.75%, and the Company
may further elect an agreed upon fixed rate.
On May 1, 1996, Hollywood Park issued a standby letter of credit in the amount
of $2,617,000, as security for its self insurance workers' compensation program
with the state of California.
On July 1, 1996, Hollywood Park and Bank of America executed Amendment Two to
the Business Loan Agreement, which among other things, extended the date for
drawing down on the line of credit from July 1, 1996, to September 1, 1996. On
April 30, 1996, Hollywood Park and Bank of America executed Amendment One to the
Business Loan Agreement, which among other things, extended the date for drawing
down on the Line of Credit from May 1, 1996, to July 1, 1996, and adjusted the
tangible net worth covenant requirement for December 31, 1996.
As of March 31, 1996, Hollywood Park did not meet the quick assets to current
liabilities bank covenant contained in the Business Loan Agreement, and as of
December 31, 1995, did not meet the tangible net worth and quick ratio covenants
in the Business Loan Agreement. On May 10, 1996, Bank of America waived
compliance with the quick ratio covenant, through June 29, 1996, and on March
20, 1996, the Bank waived compliance with both covenants. As of June 30, 1996,
the Company was in compliance with all financial covenants.
Capital expenditures of $9,132,000, for the six months ended June 30, 1996, were
primarily related to construction of Crystal Park. With Hollywood Park
increasing its ownership interest in Crystal Park to 88% from 40%, the Company
will be responsible for the corresponding greater amount of the construction
costs.
Dividends of $962,000 were paid on the convertible preferred stock during the
six months ended June 30, 1996. Such dividends were made in payments of
approximately $481,000 (representing $17.50 per convertible preferred share) on
May 15, 1996, and February 15, 1996. On July 1, 1996, the Company declared its
regular preferred quarterly dividend of $481,000, payable on August 15, 1996.
As of January 1, 1996, shares of the convertible preferred stock can be redeemed
at the option of the Company, though at no time will the convertible preferred
stock be redeemed for cash. The Company may exercise this option, only if,
among other requirements, for 20 trading days, within any period of 30
consecutive trading days, the closing price of the Company's common stock
exceeds $15.00, subject to adjustments in certain circumstances. The conversion
price is equal to 83.33 common shares for each convertible preferred share. The
Company anticipates converting the convertible preferred stock into common stock
at the earliest possible date.
In 1995, the Company began investing in corporate bonds, with approximately
$4,053,000 invested as of June 30, 1996, with Moody's ratings of Ba2 to B3 and
Standard and Poors ratings 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. The corporate bond investments, as of June 30,
1996, had a weighted average maturity of 1.5 years, and because the Company
reasonably expects to liquidate this investment in its normal operating cycle
this investment was classified as short term. This short term investment is
held as available for sale, and was recorded in the accompanying financial
statements at fair value, determined by the quoted market price.
SUNFLOWER On March 24, 1994, an Amended and Restated Credit and Security
Agreement (the "Senior Credit") was executed between Sunflower and five banks
(the "Banks") in connection with the Company's acquisition of Sunflower. The
Senior Credit has been amended three times, most recently in October 1995 by the
Standstill Agreement (discussed below). The Senior Credit was non-recourse to
Hollywood Park, except for the Company's guarantee of the interest payments
required under the Standstill Agreement. The guarantee was terminated, without
any payments by the Company, by reason of the termination of the Standstill
Agreement. As of June 30, 1996, the Senior Credit had an outstanding balance of
$28,667,000.
16
<PAGE>
In December 1994, Sunflower executed a promissory note to Hollywood Park,
allowing for the advancement of up to $3,000,000, for the payment of its Senior
Credit obligations. In 1995, Hollywood Park advanced $2,500,000 to Sunflower,
which along with accrued interest is subordinated to the Senior Credit
obligations.
In October 1995, Sunflower and the Banks executed a Standstill Agreement, which
among other things, provided for the extension of the Senior Credit maturity.
The Standstill Agreement provided 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. The Standstill
Agreement terminated on May 2, 1996, because the Kansas Legislature concluded
its 1996 session without passing legislation that would have permitted slot
machines or other casino gaming at Kansas race tracks, including Sunflower. On
May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the
Bankruptcy Code.
GENERAL Hollywood Park is continually evaluating future growth opportunities in
the gaming, sports and entertainment industries. 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
for the foreseeable future (in any event for at least the next 12 months).
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- ------- -----------------
As previously reported by the Company, and described in the Company's Annual
Report on Form 10-K for 1994, six purported class actions (the "Class Actions")
were filed beginning in September 1994, 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. On September 15, 1995, a related
- ------------------------------------------
stockholder derivative action, entitled Barney v. Hubbard, et al. (the
-------------------------
"Derivative Action"), was filed in the California Superior Court for the County
of San Diego (the "State Court").
The Company and other defendants each denied any liability or wrongdoing and
asserted various defenses. The District Court ordered the parties to engage in
non-binding mediation in an effort to settle all related claims. As previously
reported, as a result of the court ordered mediation, the parties reached an
agreement-in-principle to settle all claims raised in the Class and Derivative
Actions. The Company entered into the settlements in order to avoid the
expense, uncertainty and distraction of further litigation.
On November 6 and 13, 1995, respectively, the parties executed definitive
settlement agreements in the Derivative and Class Actions. Those agreements
provided for the release and dismissal of all claims raised or which might have
been raised in the Class and Derivative actions, subject to approval by each of
the respective courts. In settlement of the Class Actions, a settlement fund in
the principal amount of $5,800,000 has been created for the benefit of the
alleged class with contributions from the Company and the insurance carrier for
its directors and officers. After giving consideration to the amounts to be
received by the Company in settlement of the Derivative Action, the Company's
net settlement payment in the Class Actions was less than $2,500,000. Under
settlement of the Derivative Action, the Company will receive a $2,000,000
payment from the insurance carrier which the Company will use to pay plaintiff's
attorneys fees and expenses and partially to defray the Company's payment in the
settlement of the Class Actions. The Derivative Action settlement also includes
provisions enhancing the Company's financial controls and modifying certain
terms of its acquisition of Sunflower.
On February 26, 1996, the District Court approved the settlement of the Class
Actions and entered a judgment dismissing the Class Actions in their entirety.
On May 6, 1996, the State Court approved the settlement of the Derivative Action
and entered a judgment dismissing the Derivative Action in its entirety. On or
about July 2,
17
<PAGE>
1996, a notice of appeal was filed in connection with the Derivative Action
judgment. The Company intends to oppose the purported appeal.
The Company also executed a separate settlement as to all purported claims
against the Company and its officers and directors by the former controlling
stockholder of Turf Paradise (the "Walkers") in connection with the Company's
acquisition of Turf Paradise. Under the terms of the consummation of the
settlement of the Class and Derivative Actions, the Walkers were excluded from
participating in the Class Actions settlement fund, agreed to release all of
their potential threatened claims, and are to receive a payment in the principal
amount of $2,750,000.
The accrued lawsuit settlement recorded in the accompanying financial statements
as of June 30, 1996, of $2,750,000 represents the settlement with the Walkers.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
- ------- ------------------------------
On May 17, 1996, Sunflower filed for reorganization under chapter 11 of the
Bankruptcy Code. As of May 17, 1996, the outstanding balance of Sunflower's
Senior Credit was $28,667,000. The Senior Credit is non-recourse to the parent
company, Hollywood Park, Inc.
On May 2, 1996, the Kansas Legislature concluded its 1996 legislative session
without adoption of legislation permitting slot machines or other casino gaming
at Kansas race tracks. This resulted in the termination of the Standstill
Agreements (see Liquidity and Capital Resources) as of May 2, 1996.
ITEM 5. OTHER INFORMATION
- ------- -----------------
As of June 30, 1996, there were several bills pending in the California State
Legislature that could have an effect on the Company. SB 1887 is a
comprehensive card gaming regulatory bill which would, among other things: (i)
establish a gaming commission to comprehensively regulate card club gaming in
California; (ii) remove the sunset clause in SB 100 (see Note 1, Acquisition of
PCM); (iii) allow the Company to operate Crystal Park in addition to the
Hollywood Park-Casino; (iv) establish an annual regulatory fee to be paid by all
card clubs in California, and (v) place a moratorium on the passage of local
ordinances authorizing new card clubs until January 1, 2001. There can be no
assurance that SB 1887 will be enacted this year or that it will be enacted in
its present form. The Company is supporting SB 1887 in its present form.
SB 2000 and Assembly Bill ("AB") 3205, both seek to reduce the state tax on
pari-mutuel wagers made in California and to distribute the savings: (i) to the
horsemen by way of purses and (ii) to the race track's by allowing them to
retain higher pari-mutuel commissions. Again, it is too soon to determine
whether either of these bills will be enacted this year, and if so, to what
extent the tax will be reduced. The Company supports both SB 2000 and AB 3205.
ITEM 6.a EXHIBITS
- -------- --------
Exhibit
Number Description of Exhibit
- ------- ----------------------
2.1 Agreement and Plan of Reorganization, by and among Hollywood Park,
Inc., and Pacific Casino Management, Inc., dated November 17, 1995, is
hereby incorporated by reference to the Company's Current Report on
Form 8-K, filed November 30, 1995, and to the Company's Current Report
on Form 8-K/A, filed January 25, 1996.
2.2 Agreement and Plan of Merger, by and among Hollywood Park, Inc., HP
Acquisition, Inc. and Boomtown, Inc., dated April 23, 1996, is hereby
incorporated by reference to the Company's Current Report of Form 8-K,
filed May 3, 1996.
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.
18
<PAGE>
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 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.
10.5 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 10.4) is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for quarter ended June 30, 1994.
10.6 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.
10.7 Amendment of Oil and Gas Lease dated January 10, 1995, by and among
Hollywood Park, Inc., 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.
10.8 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.
10.9 Amendment No. One, dated April 30, 1996, by and between Hollywood
Park, Inc. and Bank of America National Trust and Savings Association,
to the Business Loan Agreement dated April 14, 1995, is hereby
incorporated by reference to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996.
10.10 Amendment No. Two, dated July 1, 1996, by and between Hollywood Park,
Inc., and Bank of America National Trust and Savings Association, to
the Business Loan Agreement dated April, 14, 1995.
10.11 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.
10.12 Amended and Restated Agreement Respecting Pyramid Casino dated July
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
September 30, 1995.
10.13 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., is hereby incorporated by reference
to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
19
<PAGE>
10.14 Guaranty, dated July 31, 1995, by Hollywood Park, Inc. in favor of the
Community Redevelopment Agency of the City of Compton, is hereby
incorporated by reference to the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1995.
10.15 Lease, by and between HP Compton, Inc. and Compton Entertainment,
Inc., dated August 3, 1995, is hereby incorporated by reference to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.
10.16 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., is hereby incorporated by reference to the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1995.
10.17 License Agreement, dated June 27, 1996, by and between HP Compton,
Inc. and Radisson Hotels International, Inc.
10.18 Blue Diamond Swap Agreement, dated August 12, 1996, by and among
Boomtown, Inc., Blue Diamond Hotel and Casino, Inc., Hollywood Park,
Inc., Edward P. Roski, Jr., Industry Hills Visitor Accommodation
Center, and Majestic Realty, Co.
10.19 Stock Purchase Agreement, dated August 12, 1996, by and between
Hollywood Park, Inc. and Edward P. Roski, Jr.
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 SR
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
A Current Report on Form 8-K was filed on May 3, 1996, to report the
April 23, 1996, execution of the Agreement and Plan of Merger relating
to the strategic combination of Hollywood Park, Inc. and Boomtown,
Inc.
20
<PAGE>
HOLLYWOOD PARK, INC.
Racing Data
<TABLE>
<CAPTION>
HOLLYWOOD PARK RACE TRACK
1996 1995
------------------------------ ------------------------------
<S> <C> <C>
LIVE RACING DATES:
Spring/Summer meeting ("S/S") April 26 through July 22 April 28 through July 24
Autumn meeting ("A") Nov. 11 through Dec. 22 Nov. 15 through Dec. 24
LIVE RACE DAYS INCLUDING CHARITY DAYS (a):
Spring/Summer meeting 67 67
Autumn meeting 36 30
-------- --------
103 97
======== ========
LIVE RACE DAYS BY QUARTER:
First quarter 0 0
Second quarter (S/S) 51 48
Third quarter (S/S) 16 19
Fourth quarter (A) 36 30
-------- --------
103 97
======== ========
<CAPTION>
SIMULCAST RACE days by quarter 1996: 1Q 2Q 3Q 4Q TOTAL
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Santa Anita thoroughbred 66 16 0 4 86
Del Mar thoroughbred 0 0 43 0 43
Fairplex Pomona thoroughbred 0 0 18 0 18
Oak Tree from Santa Anita thoroughbred 0 0 0 27 27
Los Alamitos Harness - night races 51 4 0 0 55
Los Alamitos Quarter Horse - night races 0 45 52 48 145
Cal Expo Harness - night races 0 35 9 0 44
Bay Meadows - northern California (b) 40 0 23 26 89
Golden Gate Fields - northern California (b) 5 59 0 35 99
Fairs - northern California (b) 0 15 53 10 78
-------- -------- -------- -------- --------
TOTAL 162 174 198 150 684
======== ======== ======== ======== ========
<CAPTION>
SIMULCAST RACE DAYS BY QUARTER 1995: 1Q 2Q 3Q 4Q TOTAL
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Santa Anita thoroughbred 65 19 0 5 86
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 5 41
Los Alamitos Quarter Horse - night races 0 45 54 53 152
Cal Expo Harness - night races 1 36 11 16 64
Bay Meadows - northern California (b) 19 11 28 45 103
Golden Gate Fields - northern California (b) 44 55 0 15 114
Fairs - northern California (b) 0 16 60 12 88
-------- -------- -------- -------- --------
TOTAL 165 182 213 185 745
======== ======== ======== ======== ========
</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.
TURF PARADISE
Turf Paradise has one continuous live thoroughbred race meet that starts in
September and runs through May. During 1996 Turf Paradise raced live for the
period January 1 through May 7 and resumes live racing on September 28 and will
run through December 31. Turf Paradise operates as a simulcast facility for
Arizona's
21
<PAGE>
Prescott Downs during the period May 24 through September 2. In 1995, Turf
Paradise raced live from January 1 through May 22, operated as a simulcast
facility for the period May 26 through September 4, and resumed live racing on
September 30 running through December 31. Along with 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 typically accepts simulcast
signals during live racing on Fridays, Saturdays and Sundays, and operates 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 DARK DAY SIMULCASTING -
DAYS SIMULCASTING PRESCOTT
---------------------- ----------------------- ---------------------
1996 1995 1996 1995 1996 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
First quarter 71 67 20 23 0 0
Second quarter 27 37 24 14 33 30
Third quarter 3 1 18 18 56 56
Fourth quarter 66 66 24 25 0 0
--------- --------- --------- --------- --------- ---------
167 171 86 80 89 86
========= ========= ========= ========= ========= =========
</TABLE>
22
<PAGE>
Hollywood Park, Inc.
Calculation of Earnings Per Share
<TABLE>
<CAPTION>
For the three months ended June 30,
--------------------------------------------------------
Primary Assuming full dilution (a)
------------------------- --------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Average number of common shares outstanding 18,612,850 18,369,634 18,612,850 18,369,634
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291,492 2,291,492
---------- ---------- ---------- ----------
Total shares 18,612,850 18,369,634 20,904,342 20,661,126
========== ========== ========== ==========
Net income $5,249,000 $4,857,000 $5,249,000 $4,857,000
Less dividend requirements on convertible preferred shares 481,000 481,000 0 0
---------- ---------- ---------- ----------
Net income available to common shareholders $4,768,000 $4,376,000 $5,249,000 $4,857,000
========== ========== ========== ==========
Net income per share $0.26 $0.24 $0.25 $0.24
========== ========== ========== ==========
</TABLE>
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------------------------------
Primary Assuming full dilution (a)
-------------------------- ---------------------------
1996 1995 1996 1995
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Average number of common shares outstanding 18,612,850 18,369,634 18,612,850 18,369,634
Average common shares due to assumed conversion
of convertible preferred shares 0 0 2,291,492 2,291,492
---------- ---------- ----------- ----------
Total shares 18,612,850 18,369,634 20,904,342 20,661,126
========== ========== =========== ==========
Net income (loss) ($8,129,000) $4,263,000 ($8,129,000) $4,263,000
Less dividend requirements on convertible preferred shares 962,000 962,000 0 0
----------- ---------- ----------- ----------
Net income (loss) available to (allocated to) common shareholders ($9,091,000) $3,301,000 ($8,129,000) $4,263,000
=========== ========== =========== ==========
Net income (loss) per share ($0.49) $0.18 ($0.39) $0.21
=========== ========== =========== ==========
</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.
23
<PAGE>
Hollywood Park, Inc.
Selected Financial Data by Operational Site
<TABLE>
<CAPTION>
For the six months ended For the three months ended
June 30, June 30,
------------------------- --------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
(unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Hollywood Park, Inc. and Race Track $33,736,000 $33,328,000 $28,035,000 $27,542,000
Sunflower Racing, Inc. 1,782,000 5,473,000 0 2,835,000
Turf Paradise, Inc. 9,816,000 10,067,000 3,219,000 3,624,000
Hollywood Park, Inc. - Casino Division 28,946,000 18,416,000 15,173,000 8,827,000
----------- ----------- ----------- -----------
74,280,000 67,284,000 46,427,000 42,828,000
----------- ----------- ----------- -----------
EXPENSES:
Hollywood Park, Inc. and Race Track 28,857,000 28,214,000 19,522,000 19,697,000
Sunflower Racing, Inc. 1,703,000 4,602,000 0 2,337,000
Turf Paradise, Inc. 6,822,000 7,678,000 2,700,000 3,148,000
Hollywood Park, Inc. - Casino Division 24,873,000 12,831,000 12,576,000 6,519,000
----------- ----------- ----------- -----------
62,255,000 53,325,000 34,798,000 31,701,000
----------- ----------- ----------- -----------
INCOME BEFORE INTEREST, INCOME TAXES, DEPRECIATION,
AMORTIZATION AND WRITE OFF OF INVESTMENT IN SUBSIDIARY:
Hollywood Park, Inc. and Race Track 4,879,000 5,114,000 8,513,000 7,845,000
Sunflower Racing, Inc. 79,000 871,000 0 498,000
Turf Paradise, Inc. 2,994,000 2,389,000 519,000 476,000
Hollywood Park, Inc. - Casino Division 4,073,000 5,585,000 2,597,000 2,308,000
----------- ----------- ----------- -----------
12,025,000 13,959,000 11,629,000 11,127,000
----------- ----------- ----------- -----------
WRITE OFF OF INVESTMENT IN SUBSIDIARY:
Write off of investment in Sunflower Racing, Inc. 11,412,000 0 66,000 0
DEPRECIATION AND AMORTIZATION:
Hollywood Park, Inc. and Race Track 2,843,000 2,719,000 1,450,000 1,368,000
Sunflower Racing, Inc. 536,000 1,237,000 0 616,000
Turf Paradise, Inc. 610,000 698,000 301,000 369,000
Hollywood Park, Inc. - Casino Division 1,411,000 1,000,000 736,000 509,000
----------- ----------- ----------- -----------
5,400,000 5,654,000 2,487,000 2,862,000
----------- ----------- ----------- -----------
INTEREST EXPENSE:
Hollywood Park, Inc. and Race Track 117,000 98,000 54,000 49,000
Sunflower Racing, Inc. 781,000 1,810,000 0 922,000
Turf Paradise, Inc. 0 20,000 0 3,000
----------- ----------- ----------- -----------
898,000 1,928,000 54,000 974,000
----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE:
Hollywood Park, Inc. and Race Track 1,919,000 2,297,000 7,009,000 6,428,000
Write off of Investment in Sunflower Racing, Inc. (11,412,000) 0 (66,000) 0
Sunflower Racing, Inc. (1,238,000) (2,176,000) 0 (1,040,000)
Turf Paradise, Inc. 2,384,000 1,671,000 218,000 104,000
Hollywood Park, Inc. - Casino Division 2,662,000 4,585,000 1,861,000 1,799,000
----------- ----------- ----------- -----------
(5,685,000) 6,377,000 9,022,000 7,291,000
Income tax expense 2,444,000 2,114,000 3,773,000 2,434,000
----------- ----------- ----------- -----------
Net income (loss) ($8,129,000) $4,263,000 $5,249,000 $4,857,000
=========== =========== =========== ===========
Dividend requirements on convertible preferred stock $962,000 $962,000 $481,000 $481,000
----------- ----------- ----------- -----------
Net income (loss) available to (allocated to) common shareholders ($9,091,000) $3,301,000 $4,768,000 $4,376,000
=========== =========== =========== ===========
Per common share:
Net income (loss) - primary ($0.49) $0.18 $0.26 $0.24
Net income (loss) - fully diluted ($0.49) $0.18 $0.25 $0.24
Number of shares - primary 18,612,850 18,369,634 18,612,850 18,369,634
Number of shares - fully diluted 20,904,342 20,661,126 20,904,342 20,661,126
</TABLE>
24
<PAGE>
Hollywood Park, Inc.
Pari-mutuel Wagering Data
<TABLE>
<CAPTION>
For the six months ended For the three months ended
June 30, June 30,
------------------------------ ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
HOLLYWOOD PARK
--------------
Pari-mutuel handle:
On-track $90,716,000 $94,351,000 $90,716,000 $94,351,000
Off-track - shared handle wagering 277,802,000 229,650,000 277,802,000 229,650,000
Simulcast 191,516,000 194,042,000 105,358,000 111,636,000
------------ ------------ ------------ ------------
Total $560,034,000 $518,043,000 $473,876,000 $435,637,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $5,860,000 $5,985,000 $5,860,000 $5,985,000
Off-track - shared handle wagering 8,105,000 7,436,000 8,105,000 7,436,000
Off-track - independent handle 1,214,000 1,076,000 1,214,000 1,076,000
Simulcast 6,022,000 5,794,000 4,353,000 4,192,000
------------ ------------ ------------ ------------
Total $21,201,000 $20,291,000 $19,532,000 $18,689,000
============ ============ ============ ============
TURF PARADISE
-------------
Pari-mutuel handle:
On-track $16,193,000 $18,268,000 $4,421,000 $6,291,000
Off-track - shared handle wagering 69,189,000 46,492,000 20,224,000 15,979,000
Simulcast 31,203,000 29,124,000 13,272,000 12,284,000
------------ ------------ ------------ ------------
Total $116,585,000 $93,884,000 $37,917,000 $34,554,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $1,926,000 $2,483,000 $539,000 $1,131,000
Off-track - shared handle wagering 2,958,000 2,956,000 857,000 1,303,000
Off-track - independent handle 103,000 507,000 49,000 139,000
Simulcast 2,519,000 1,442,000 1,012,000 109,000
------------ ------------ ------------ ------------
Total $7,506,000 $7,388,000 $2,457,000 $2,682,000
============ ============ ============ ============
COMBINED
--------
Pari-mutuel handle:
On-track $106,909,000 $112,619,000 $95,137,000 $100,642,000
Off-track - shared handle wagering 346,991,000 276,142,000 298,026,000 245,629,000
Simulcast 222,719,000 223,166,000 118,630,000 123,920,000
------------ ------------ ------------ ------------
Total $676,619,000 $611,927,000 $511,793,000 $470,191,000
============ ============ ============ ============
Pari-mutuel commissions:
On-track $7,786,000 $8,468,000 $6,399,000 $7,116,000
Off-track - shared handle wagering 11,063,000 10,392,000 8,962,000 8,739,000
Off-track - independent handle 1,317,000 1,583,000 1,263,000 1,215,000
Simulcast 8,541,000 7,236,000 5,365,000 4,301,000
------------ ------------ ------------ ------------
Total $28,707,000 $27,679,000 $21,989,000 $21,371,000
============ ============ ============ ============
</TABLE>
25
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HOLLYWOOD PARK, INC.
(Registrant)
By: /s/ R.D. Hubbard
--------------------------- Dated: August 13, 1996
R.D. Hubbard
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
By: /s/ G. Michael Finnigan
---------------------------- Dated: August 13, 1996
G. Michael Finnigan
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
26
<PAGE>
HOLLYWOOD PARK, INC.
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Page
- ------- ----------- ----
<S> <C> <C>
10.10 Amendment No. Two, dated July 1, 1996, by 1
and between Hollywood Park, Inc. and Bank
of America National Trust and Savings
Association, to the Business Loan
Agreement dated April 14, 1995.
10.17 License Agreement, dated June 27, 1996, 3
by and between HP Compton, Inc. and
Radisson Hotels International, Inc.
10.18 Blue Diamond Swap Agreement, dated August 36
12, 1996, by and among Boomtown, Inc.,
Blue Diamond Hotel and Casino, Inc.,
Hollywood Park, Inc., Edward P. Roski,
Jr., Industry Hills Visitor Accommodation
Center, and Majestic Realty, Co.
10.19 Stock Purchase Agreement, dated August 50
12, 1996, by and between Hollywood Park,
Inc. and Edward P. Roski, Jr.
27.1 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 10.10
TO HOLLYWOOD PARK'S
JUNE 30, 1996, FORM 10-Q
AMENDMENT NO. TWO TO BUSINESS LOAN AGREEMENT
This Amendment No. Two (the "Amendment") dated as of July 1, 1996, is
between Bank of America National Trust and Savings Association (the "Bank") and
Hollywood Park, Inc. (the "Borrower").
RECITALS
--------
A. The Bank and the Borrower entered into a certain Business Loan
Agreement dated as of April 14, 1995, as modified by an amendment dated as of
April 30, 1996 (as amended, the "Agreement").
B. The Bank and the Borrower desire to further amend the Agreement.
AGREEMENT
---------
1. Definitions. Capitalized terms used but not defined in this Amendment
-----------
shall have the meaning given to them in the Agreement.
2. Amendments. The Agreement is hereby amended as follows:
----------
2.1 In Paragraph 2.2, the date "July 1, 1996" is amended to read
"September 1, 1996."
2.2 Subparagraph 2.4(b) is amended and restated in its entirety to
read as follows:
"(b) The Borrower will repay the principal amount outstanding on
the Expiration Date Facility No. 2 in eighty-four successive equal
monthly installments starting October 1, 1996. On September 1, 2003,
the Borrower will repay the remaining principal balance plus any
interest then due."
3. Representations and Warranties. When the Borrower signs this
------------------------------
Amendment, the Borrower represents and warrants to the Bank that: (a) there is
no event which is, or with notice or lapse of time or both would be, a default
under the Agreement, except that
-1-
<PAGE>
the Borrower has notified the Bank that it may not be in compliance with the
provisions of Paragraph 7.4 A. of the Agreement, as of June 30, 1996, (b) the
representations and warranties in the Agreement are true as of the date of this
Amendment as if made on the date of this Amendment, (c) this Amendment is within
the Borrower's powers, has been duly authorized, and does not conflict with any
of the Borrower's organizational papers, and (d) this Amendment does not
conflict with any law, agreement, or obligation by which the Borrower is bound.
4. Effect of Amendment. Except as provided in this Amendment, all of the
-------------------
terms and conditions of the Agreement shall remain in full force and effect.
This Amendment is executed as of the date stated at the beginning of this
Amendment.
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ Sheryl Bond
---------------------------
Sheryl Bond, Vice President
HOLLYWOOD PARK, INC.
By: /s/ R.D. Hubbard
---------------------------
R.D. Hubbard, Chairman of the
Board and Chief Executive Officer
By: /s/ G. Michael Finnigan
---------------------------
G. Michael Finnigan,
Executive Vice President and
Chief Financial Officer
-2-
<PAGE>
EXHIBIT 10.17
TO HOLLYWOOD PARK, INC.'S
JUNE 30, 1996, FORM 10-Q
LICENSE AGREEMENT
-----------------
License Agreement effective as of June 27 , 1996, RADISSON HOTELS
------------------ --
INTERNATIONAL, INC., a Delaware corporation, 12755 State Highway 55,
Minneapolis, Minnesota 55441 ("Licensor") and HP/COMPTON, INC.,
-----------------
a Delaware corporation, 1050 South Prairie Avenue, Inglewood, CA 90301
- ----------------------------------------------------------------------
("Licensee").
1. Radisson System. Licensor and its affiliates (collectively "Radisson")
---------------
own and license a system of various types of Radisson hotels employing a
proprietary and distinctive system ("System") described in this Agreement and in
the Operating Manual, and identified by certain trademarks (the "Marks," listed
in Exhibit A). The System and Marks are subject to change periodically by
Licensor. The System and Marks as they now exist or may be changed in the future
are collectively referred to as the "Distinguishing Characteristics." Licensee
is authorized to use the Distinguishing Characteristics strictly in accordance
with this Agreement and the Operating Manual.
2. The Hotel. The "Hotel" includes the real property and all improvements
---------
located at 111 East Artesia Boulevard, Compton, California 90221. The
-----------------------------------------------------
improvements include all buildings, facilities, appurtenances, improvements,
landscaping, furniture, furnishings, fixtures, equipment and signs and all
entry, exit and parking areas. Licensee represents that it has fee title or
leasehold title for the above described site and the Hotel, without any
restrictions that would interfere with the performance of this Agreement. The
Hotel is a[(n)*] Hotel class Radisson Hotel containing 245 guest rooms. Licensee
----- ---
shall designate the Hotel as the "Radisson Crystal Park Hotel & Casino or other
------------------------------------
name authorized in writing by Licensor.
3. Grant and Term of License. Licensor grants Licensee and Licensee accepts
-------------------------
a non-exclusive License subject to the provisions of this Agreement to operate
the Hotel using the System and identified by one of the Marks (the "License").
The License commences on the date on which the Hotel opens for business as a
Radisson Hotel. The Hotel shall open for business as a Radisson Hotel no later
than January 31,1997. The License and this Agreement expire on December 31, of
----------------
the year in which the 20th anniversary of the opening occurs. The License
includes the right to operate the Hotel at the above described location using
the System and the name "Radisson" in the name of the Hotel; to use the
Distinguishing Characteristics to identify the services offered by Licensee at
the Hotel, and to promote and advertise the Hotel, only in the form and manner
set forth in the Operating Manual or as otherwise authorized by Licensor.
4. Development. Licensee shall design, and build, rebuild or renovate, the
-----------
Hotel in accordance with the Project Rider attached to this Agreement as Exhibit
B. Licensee acknowledges (i) that other System licensees operate under different
forms of agreement and that the rights and duties of the parties to those
agreements may vary materially from those provided hereunder, and (ii) complete
uniformity under various market circumstances may not always be possible or
desirable and that Licensor reserves the right at its discretion to vary System
standards for various hotels based upon local conditions, law or other
circumstances, without obligation to Licensee.
- ----------
* Bracketed copy indicates strike-through.
3
<PAGE>
a. Licensor acknowledges receipt of an initial, non-refundable License
Fee of $36,750. If the number of guest room units of the Hotel is increased,
-------
Licensee shall pay an additional fee of $150 for each rentable guest room unit
in the expansion before Licensee opens the additional units to the public.
b. For any period in which Licensee claims, holds or exercises any
rights under this License, Licensee shall pay (without invoice) to Licensor on
or before the 15th day of each following month a Continuing Franchise Fee in an
amount equal to 4% of Licensee's gross room revenue ("Gross Room Sales")
exclusive of sales tax and room tax and as gross room revenue is determined in
accordance with the "Uniform System of Accounts for Hotels" (Hotel Association
of New York City, Inc., Eighth Revised Edition, 1986) as revised periodically
(the "Uniform System").
c. For any period in which Licensee claims, holds or exercises any
rights under this License, Licensee shall pay (without invoice) to the Radisson
Marketing Association ("RMA") on or before the 15th day of each following month,
an amount equal to 3 1/2% of Licensee's Gross Room Sales (the "RMA Fee").
Licensor shall collect, manage and disburse RMA fee collections on behalf of
RMA, account for RMA funds in separate books of account, and furnish Licensee,
upon request, an annual statement of receipts and disbursements of RMA funds.
d. /1/Licensee will not cause Gross Room Sales to be reduced in order
to increase business or revenues from activities other than those which are
part of the Hotel.
e. Amounts due under this Agreement which are not paid when due shall
bear interest at the lesser of 1 1/2% per month or the maximum contract rate of
interest permitted by applicable law. Licensor may also assess a late payment
fee of up to $100 for each month/2/ [an amount*] due under this Agreement
remains delinquent to reimburse Licensor for Licensor's collection expenses,
provided however, if legal action is necessary Licensee may have to pay
additional amounts pursuant to the last subparagraph of Paragraph 12. Licensor
is relieved of any obligation to Licensee under Paragraph 6 of this Agreement
during any period that an amount due from Licensee remains delinquent/3/
6. Licensor's Services. Licensor shall:
-------------------
a. Consult with Licensee periodically on operating and marketing
issues concerning the Hotel.
b. Have the right to inspect the Hotel/4/ periodically/5/ to
determine whether the Licensee is operating and maintaining the Hotel in
compliance with this Agreement and the Operating Manual. After such inspection,
Licensor will provide Licensee a written Quality Performance Review of the
Hotel. Periodic inspections shall be for the sole purpose of protecting
Licensor's interest in the Distinguishing Characteristics and shall in no way be
/1/ Subject to Paragraph 1 of the Addendum attached hereto and made a part
hereof,
/2/ any amounts
/3/ after written notice to Licensee and passage of fifteen (15) days without
receipt of payment by Licensor, provided that so long as Licensee timely
pays all undisputed amounts, such fifteen (15) day period shall be extended
with respect to any delinquent amount as to which Licensee gives to
Licensor written notice of a good faith dispute within such fifteen (15)
days period, through resolution of the dispute.
/4/ (provided that inspection of guest rooms shall be limited to those which are
not occupied by registered guests)
/5/ on reasonable notice,
- ----------
* Bracketed copy indicates strike-through.
4
<PAGE>
construed as the assumption of any duty to control day-to-day operation and
maintenance of the Hotel.
c. Provide Licensee access to the Radisson Reservation System.
d. Include the Hotel in the next and subsequent printings of
Licensor's appropriate national and regional directories and other appropriate
promotional material selected by Licensor, and in appropriate national or
regional group advertising and promotion of Radisson Hotels.
e. Solicit for the Hotel group meeting, convention, incentive, and
travel agency business through Licensor's National Sales system, where
applicable.
f. At Licensee's request, assist Licensee with its grand opening
ceremony for the Hotel and provide consultation on public relations for the
Hotel.
g. Provide orientation training at a comparable System hotel in System
procedures for the Hotel's general manager, assistant manager (if any), director
of sales and front office manager. Licensee shall pay the wages, travel, lodging
(not to exceed 50% of the "rack rate" of the designated hotel), food, and
incidental expenses for trainees.
h. Offer periodic general meetings and training in specialized fields,
at a System hotel or Licensor's headquarters. Licensee shall pay wages, travel,
lodging ([a*]/1/ 50% of the then-prevailing rack rate), food and incidental
expenses for trainees. Licensor may assess reasonable fees to recover its costs
of such meetings and training.
i. Loan to Licensee and revise periodically a System Operating Manual
covering: operating policies; architectural and construction standards; public
relations, marketing and advertising policies and standards; promotional
programs; "Yes I Can!" meetings and other matters. Licensee acknowledges that
Licensor may change System standards, specifications, and procedures and
Licensee agrees to implement any such modifications, revisions and additions
prescribed periodically by Licensor/2/
j. Aid the RMA in performing marketing, training and reservation
services in accordance with RMA's marketing plan.
k. At Licensee's request/3/ and to the extent available, furnish:
(1) Technical consulting advice in regard to: (i) front office, food
and beverage, housekeeping, telephone and other operational department
supervisory and control services; (ii) maintenance and engineering services;
(iii) accounting and claim services; (iv) personnel and labor relation services;
(v) advertising, marketing and consulting projects; and (vi) security and safety
matters. Licensee agrees to pay Licensor its then-current charges for such
services and its related travel and living expenses, for services provided at
the Hotel. Any procedures or practices recommended through such consultation
shall be subject to Licensee's approval. Licensor, in furnishing such services,
shall not have the right to or be deemed to be in exercise, control or
supervision of Licensee.
/1/ not to exceed
/2/ provided that such modifications, revisions and/or additions are also
required of and enforced with respect to similarly situated System hotels
of the class of Hotel.
/3/ at its discretion
- ----------
* Bracketed copy indicates strike-through.
5
<PAGE>
(2) Programs for purchase on a pooled or group basis of various
operating supplies, equipment, signage, furniture and furnishings,
at prices and on terms established periodically by Licensor.
7. Licensee's Duties. In all matters relating to the management and operation
-----------------
of the Hotel, Licensee as an independent contractor is solely responsible for
the manner and means by which the Hotel is operated and for achieving the
various end results required by this Agreement and the Operating Manual.
Licensee shall have the sole duty and right to employ, supervise and discharge
Licensee's employees at the Hotel. Licensee shall operate the Hotel to achieve
conformity with System standards of quality and uniformity, and to do so
Licensee shall:
a. Operate the Hotel as a System Hotel, and use the Distinguishing
Characteristics only as prescribed by the Operating Manual. Licensee shall use
no other name or trademark in connection with the operation of the Hotel and
related facilities without Licensor's consent. Licensee shall discontinue any
use of any Distinguishing Characteristic which does not comply with Licensor's
requirements upon notice from Licensor.
b. Equip, furnish, operate and maintain the Hotel and related
facilities appropriate to the class of the Hotel set forth in Paragraph 2 in
accordance with this License Agreement and the Operating Manual, in conformity
with the high service, moral and ethical standards of the System, and in
compliance with the requirements of governmental authorities. Licensee shall
maintain and conduct its business in accordance with sound business and
financial practice. Licensee shall hire, discharge and set the conditions of
employment for employees at the Hotel.
c. Participate in all System advertising and marketing programs and
otherwise comply with Licensor's requirements and specifications as to services
and products to be used or offered at the Hotel, including compliance with the
requirements and specifications of the marketing programs adopted for System
hotels, including payment of all assessments adopted by the RMA related to such
programs. Such programs are subject to change by Licensor. A partial list of
programs currently in effect include those listed on Exhibit C.
d. Permit inspection of the Hotel by Licensor's representatives at
any reasonable time and provide such representatives with free room and board at
the Hotel during such inspection. If the Hotel fails any two consecutive Quality
Performance Review inspections, Licensee shall pay Licensor's travel, lodging,
meal and professional costs associated with the following inspection.
e. Pay all amounts due to Licensor or its affiliates within ten days
after invoice.
f. Advertise and promote the Hotel and related facilities on a local
or regional basis, including the use of the Radisson "800" number, solely and
strictly in accordance with standards and specifications set periodically by
Licensor, using only materials and programs authorized by Licensor or RMA.
6
<PAGE>
g. Refer guests and customers, whenever possible, only to other
System hotels, and use every reasonable means to encourage use of System
hotels by the traveling public; display all brochures, promotional and other
material provided with respect to System hotels and allow advertising and
promotion only of System hotels on the Hotel premises.
h. Use the Radisson Reservation System on the terms set forth in the
Operating Manual and honor and give first priority on available rooms to
confirmed reservations referred to the Hotel through the Radisson Reservation
System.
i. Purchase and install Licensor's specified property management
system ("HARMONY") on or before January 1, 1999. For the purposes of this
Agreement, HARMONY shall be defined as the Licensor specified computer software
generally referred to as a hotel front office system as well as the Radisson
Reservation System interface and all necessary and appropriate computer
hardware, network connectivity, cabling and training in order to successfully
operate HARMONY. Prior to installing HARMONY, Licensee will purchase and use a
printer and other necessary data processing and telecommunications devices
specified by Licensor and compatible with the Radisson Reservation System.
j. Honor those credit cards designated periodically in the Operating
Manual, and enter into all necessary credit card arrangements.
k. Feature in guest rooms and public areas of the Hotel, on articles
specified in the Operating Manual, including the brochure rack, and in
advertising and promotional material, the name "Radisson" and one or more of the
Distinguishing Characteristics, strictly in accordance with the Operating Manual
as to color, form and content. Licensee shall provide a guest amenity package
prescribed by Licensor in each guest room.
l. Erect, install and maintain Radisson signage in complete working
order on the exterior of the Hotel. All such signs shall include the name
"Radisson" and other Distinguishing Characteristics as prescribed in the
Operating Manual. Licensee shall obtain Licensor's prior authorization for the
plans and specifications for exterior signs.
m. Participate in the SMART program of joint marketing as a member
of a "SMART Group" which consists of other System hotels having common
geographic, class or business orientation interests, in strict accordance with
the Operating Manual.
Upon opening for business as a Radisson Hotel and thereafter for any period
in which Licensee claims, holds or exercises any rights under this License,
Licensee shall pay to the RMA a SMART program assessment determined periodically
by Licensor or RMA, which is currently $0.50 per occupied guest room per night.
Such assessments are due (without invoice) and payable in the same manner as RMA
fees under Paragraph 5c, on or before the 15th day of each following month and
shall be collected, managed and disbursed by Licensor on behalf of RMA and
Licensee's SMART Group. Before opening for business as a Radisson Hotel,
Licensee may participate in its SMART Group upon payment of a lump sum, prorated
assessment, as established for the Hotel by Licensor or RMA.
7
<PAGE>
n. Identify itself as a licensed independently owned and operated
entity with respect to the ownership and operation of the Hotel on all purchase
orders, invoices and other dealings with suppliers and persons other than
guests, to make clear that Licensee is an independent entity and Licensor has no
liability for Licensee's debts or conduct.
o. Operate the Hotel continuously throughout the term of this
Agreement, either directly or through a management company authorized by
Licensor./1/
p. Employ as general manager/2/ (and other key employees designated
by Licensor) only persons who have completed successfully Licensor's orientation
training program, at a place designated by Licensor./3/ Licensee shall employ as
general manager of the Hotel only such person(s) as Licensor approves. The
Hotel's general manager shall attend periodic meetings designated by Licensor.
Licensee shall pay an RMA assessment equal to the Hotel's pro rata share of the
cost of meals, guest speakers and trainers, media presentations and similar
items in connection with such meetings.
q. Make no major structural change or changes in the appearance of
the Hotel without Licensor's consent; rehabilitate the Hotel periodically in
accordance with the Operating Manual and periodically modernize and upgrade the
Hotel to conform with standards applicable generally to similar hotels in the
System./4/
r. Maintain the Hotel in a clean, safe, attractive and orderly
condition, and provide efficient, courteous and high-quality service to guests
and visitors in accordance with standards, specifications and procedures set
forth in the Operating Manual, including high quality food and beverage service
in accordance with the Operating Manual.
s. Participate in "Yes I Can!," or other similar employee
motivational training programs, and pay Licensor's standard program charge and
expenses assessed to System hotels.
t. Participate in the Radisson Corporate Scrip program and accept
scrip (room certificates) in payment for rooms, subject to the requirements of
the Operating Manual.
u. Promptly deliver to Licensor a copy of any notice of default
received from any mortgagee, trustee under any deed of trust, or ground lessor
with respect to the Hotel and, upon request of Licensor, provide additional
information with respect to such alleged default or any action or proceeding in
connection therewith.
v. Comply with all provisions of the Operating Manual as it exists
from time to time. If Licensor gives Licensee notice of deficiencies in a
Quality Performance Review or other notice of non-compliance with the
requirements of the Operating Manual or the License Agreement, Licensee promptly
shall take steps necessary to correct any deficiencies or non-compliance.
w. Licensee acknowledges that the information contained in the
Operating Manual is confidential and proprietary. Licensee will keep its copy of
the Operating Manual current and up to date with contents as prescribed by
Licensor. During and after the term of this Agreement, Licensee shall refrain
absolutely from disclosing to a third party or using, except to operate the
/1/ Licensor hereby approves Compton Entertainment, Inc. as management company
for the Hotel.
/2/ of the Hotel
/3/ Licensor's right to reasonably approve certain key employees of the Hotel
shall not apply to any employees of the Crystal Park Casino.
/4/ Licensor's right to reasonably withhold consent to major structural change
or changes in the appearance of the Hotel or to require rehabilitation to
the Hotel shall not apply to the Crystal Park Casino.
8
<PAGE>
Hotel, any confidential or proprietary information, or trade secret owned or
disclosed to Licensee by Licensor in any form, including the contents of the
Operating Manual (past or current). Licensee shall return to Licensor or
incinerate superseded pages from the Operating Manual and related software and
return the entire Operating Manual to Licensor promptly upon termination or
expiration of this Agreement, or a transfer (as defined in Paragraph 10).
x. Licensee shall use at, and for the Hotel, and for reservations
offered by and from the Hotel to other hotels, only the Radisson Reservation
System.
y. Participate only in third party reservation systems available
through Licensor and pay all charges made in connection therewith.
z. Operate the Radisson PMS (when installed) in accordance with the
standards and procedures established by Licensor in the Standards of Service and
Operation manual.
aa. Display the Radisson License Agreement Plaque behind the front
desk in the registration area.
bb. Licensee shall post notice to Hotel employees on the employee
bulletin board, identifying the correct name of the employer of the employees
and clearly stating that neither Radisson Hotels International, Inc. nor
Radisson Hotel Corporation is the employer. Such notice shall remain posted for
the information of the employees during the entire term of this License
Agreement.
cc. Licensee shall not offer Hotel rooms or suites for sale or lease
as condominium or time share units without the prior written consent of Licensor
in its sole discretion.
dd. Have operational at the Hotel by no later than/2/ [January 1,
1997,*] a reprogrammable card key locking system on all guest room doors that
has the ability to be reprogrammed with each new guest. The locking system can
be either mechanical or electronic, preferably electronic.
8. Operating Reports; Accounting Standards. Licensee shall record
all sales and revenues and maintain records as required by the Operating Manual.
Licensee shall submit to Licensor by the 15th of each succeeding month a
statement and operating report/3/ in form and content designated periodically by
Licensor, showing amounts due to Licensor under Paragraph 5 and 7(m) for the
preceding month(s) and room revenues, occupancy data and average room rates. The
report shall be certified by either the Controller or Chief Financial Officer of
Licensee. Licensee shall supply to Licensor electronic access to Licensor
designated data stored in the Radisson PMS (when installed), including but not
limited to statistical information, revenues, guest history and reservations
information/4/
Licensee shall prepare on a current basis financial records as
required by the Operating Manual which fully and accurately reflect all aspects
of the operation of the Hotel. Such records shall be kept under the Uniform
System (defined in Paragraph 5) and shall be preserved for not less than three
years. Such records shall include books of account, tax returns, governmental
reports, register tapes, daily reports and complete monthly and annual financial
statements.
/1/ and except for information required to be disclosed by process of law and
information which is already a matter of public knowledge by virtue of
disclosure not attributable to Licensee,
/2/ the date of opening the Hotel as a Radisson
/3/ (not including the operations of the Crystal Park Casino),
/4/ for the Hotel.
- ----------
* Bracketed copy indicates strike-through.
9
<PAGE>
Licensee shall deliver to Licensor as soon as available, but not later
than 90 days after the end of Licensee's fiscal year, copies of Licensee's
annual financial statements, certified at Licensee's cost by a Certified Public
Accountant. Licensor will accept the certification of Licensee's Chief Financial
Officer if certification by a Certified Public Accountant is not obtained by
Licensee in the ordinary course. During the term of this Agreement and for 3
years afterward, Licensor or its designees may inspect, copy and audit such
records and any other information required to be kept pursuant to this License
Agreement (including records of any tenant, management company or concessionaire
of Licensee) during normal business hours where the records are kept. If an
audit discloses a deficiency in any payments due hereunder, Licensee shall
immediately pay the deficiency. If the deficiency is willful or exceeds 5% of
the correct/1/ amount, Licensee shall also immediately reimburse Licensor's
entire cost of the audit, including travel, lodging, meals, reasonable
professional fees, salaries and other expenses of the auditing personnel.
Licensee will submit to Licensor as soon as available but not later than
105 days after the end of Licensee's fiscal year, a statement of Licensee's
Gross Room Sales, occupancy and average room rates for such year, certified as
correct by Licensee's Chief Financial Officer.
9. Insurance and Indemnification. Licensee shall secure and maintain a
-----------------------------
commercial general liability insurance policy providing coverage for personal
injury and bodily injury, property damage, products liability, liquor liability,
contractual liability and comprehensive automobile liability, with a combined
single limit of not less than $15,000,000 per occurrence, or better, or in such
other amounts or coverage as Licensor periodically may require./2/ Licensee
will name Licensor and Radisson Hotel Corporation in said policy or policies as
additional insureds, and such policy or policies shall stipulate that Licensor
shall receive 30-day written notice of cancellation or material change of the
policy. Licensee also shall secure and maintain:
a. worker's compensation insurance as prescribed by applicable law,
and employer's liability coverage with a limit of not less than $1,000,000 each
accident or disease;
b. dram shop insurance, naming Licensor and Radisson Hotel
Corporation as additional insureds with limits of not less than $10,000,000 per
occurrence;
c. fire insurance with extended coverage in replacement cost
endorsements covering the Hotel and the improvements thereon for not less than
80% of the full replacement value; and
d. insurance required under any lease, mortgage or deed of trust
covering the Hotel.
Licensee shall mail original certificates of insurance and evidence of
policy renewals 30 days before expiration to Licensor, Attention: Business
Systems Department. All policies shall be written by insurance companies having
a Best Rating of A-5 or better.
Licensee shall have all policies of insurance provide that the
insurance company will have no right of subrogation against either party hereto
or their respective agents or employees. Licensee assumes all risks in
connection with the adequacy of any insurance or self-insurance program, waives
any claim against Licensor for any liability, costs or expenses arising out of
any claim not adequately insured or self insured, in part or in full, of any
nature whatsoever.
/1/ aggregate twelve (12) month
/2/ For the purpose of required insurance coverage and the indemnification
provision contained in this Paragraph 9 only, the define term "Hotel" shall
include the Crystal Park Casino operated by Compton Entertainment, Inc. or
its successor.
10
<PAGE>
Since Licensee is solely responsible for the day to day operation of
the Hotel, Licensee assumes sole and complete responsibility for and will
indemnify and hold harmless Licensor and its affiliates from all fines,
penalties, taxes,/4/ expenses, claims, causes of action, demands, losses or
damages originating in or about the Hotel or in connection with the development
or operation of the Hotel, any occurrence at the Hotel, for any act, omission or
obligation of anyone associated with Licensee or at the Hotel and for all
liability and expenses with respect to mechanic's lien claims for material or
labor in connection with the Hotel; and Licensee will reimburse Licensor and its
affiliates for any payments, including reasonable attorney's fees or expenses,
by reason of the above or by reason of attorneys' fees or expenses for pursuing
the right to indemnification granted herein. Licensee will also defend Licensor
against the same except Licensor, using its own counsel, by notice to Licensee
may control any matter in which Licensor is named or directly affected/2/. All
such indemnifications survive termination or expiration of this License
Agreement. The indemnification provided in this Paragraph does not apply to/3/
the direct consequences of Licensor's/4/ active negligence or willful
misconduct, so long as claims or demands are not asserted on the basis of
theories of vicarious liability, including but not limited to agency, apparent
agency or employment or claim of negligent failure to compel Licensee's
compliance with the provisions of the Operating Manual or this License
Agreement.
10. Transfer.
--------
a. For purposes of this Agreement, a "transfer" is any change in
ownership or control of Licensee's interest in (i) this Agreement or (ii)
the Hotel or, if Licensee is an entity rather than a natural person, any
change in ownership or control of Licensee, in any of the foregoing
instances whether in whole or in part, by any means or device, directly or
indirectly, including by pledge, delegation, will or management agreement,
voluntarily, involuntarily or by operation of law. For purposes of this
Agreement a transfer shall not include/5/ any transfer in which the owner(s)
of the controlling interest in Licensee ("Holders") transfer or assign part
or all of Licensee (if not a natural person), the License Agreement or the
Hotel to a corporation in which the Holders own 51% or more of the voting
stock, or a partnership in which Holder(s) are general partners, so long as
the Holder(s) remain fully liable for all of Licensee's financial and other
obligations as provided in this Agreement, and provide management for the
Hotel acceptable to Licensor.
(1) Licensor has entered into this Agreement in specific reliance
upon the personal experience, skills and managerial and financial
qualifications of Licensee (or if Licensee is an entity, Licensee's
principals) as being essential to the satisfactory conduct of the business
licensed hereunder. Consequently, Licensee (and, if Licensee is an entity,
its shareholders or owners) shall [not*] make or permit a transfer to
another person or entity (the "transferee"), [unless Licensee (or its
owner(s)) first tenders to Licensor the right of first refusal in accordance
with Paragraph 10(e) to acquire such interest, and if Licensor fails to
exercise such right,*] only with the prior written consent of Licensor and
upon payment of the transfer fee. At Licensor's absolute discretion,
Licensor may require the transferee to enter into the form of agreement then
being issued to new licensees (with the initial fee due thereunder waived).
/1/ (except income, gross receipts, sales or other similar taxes attributable to
the fees paid by the Hotel to Licensor),
/2/ , provided however, that Licensor will not exercise its right of control nor
require reimbursement of its non-internal attorney fees (if any) in such
cases, so long as Licensee is vigorously defending, is not in default under
the License Agreement and provided that Licensor has approved Licensee's
retained counsel.
/3/ liability imposed as a result of Licensee's strict compliance with the
requirements of the Operating Manual or Licensor, nor to
/4/ , Radisson Hotel Corporation's or their corporate employees
/5/ any transfer described in Paragraph 6 of the Addendum attached hereto and
made a part hereof, nor
- ----------
* Bracketed copy indicates strike-through.
11
<PAGE>
(2) Licensor will not unreasonably withhold its consent to a
transfer if the proposed transfer is of all of Licensee's interest herein
and substantially all of the business operated pursuant to this Agreement
and if the proposed transferee in Licensor's opinion is qualified to
supervise personally (or otherwise furnishes satisfactory assurance of) the
continued operation of the Hotel in compliance with this Agreement, and
possesses sufficient net worth and sources of capital which meet Licensor's
standards for the business conducted hereunder. Upon Licensee's insolvency
or the filing of any petition by or against Licensee under any provisions
of any bankruptcy or insolvency law, if Licensee's legal representative,
successor, receiver or trustee desires to assume or succeed to Licensee's
interest in this Agreement or the business conducted hereunder, that person
shall first apply for Licensor's consent and satisfy the other requirements
of this Agreement as in the case of any other proposed transfer.
(3) Licensee shall apply for Licensor's consent to a transfer by
submitting Licensor's form of application, fully completed, signed by
Licensee and by the proposed transferee, and accompanied by a complete copy
of the proposed purchase or other transfer agreement signed by the parties
thereto, and payment of the transfer fee.
b. If the transferee is or includes any person or entity other than
Licensee's spouse or child or an entity which is controlled by Licensee (or
Licensee's spouse, child or principals), Licensee shall pay to Licensor as
a transfer fee a sum equal to 50% of the total initial license fee paid by
Licensee pursuant to paragraph 5a. If Licensor declines to consent to a
proposed transfer, or releases the Hotel under Paragraph 10(e) [or
exercises its right of first refusal*] it shall return to Licensee the
transfer fee, less any expenditures or disbursements made by Licensor in
direct connection with evaluating the proposed transfer. The transfer fee
is not refundable in whole or in part under any circumstances except as
expressly stated in this Agreement.
c. Licensor may condition its consent to any proposed transfer upon
the following: (i) all amounts owed by Licensee to Licensor or its
affiliates or to Licensee's suppliers or lessor(s) or upon which Licensor
(or its affiliates) has any contingent liability shall be paid in full;
(ii) Licensee shall complete at Licensee's expense such reasonable
refurbishing, modernization, repair or renovation of the Hotel facility,
fixtures, furnishings, equipment, motor vehicles, signage or grounds as
Licensor may designate to bring the Hotel into reasonable conformity with
then existing System standards; and (iii) Licensee's execution and delivery
of Licensor's form of mutual general release (excluding incurred or accrued
liabilities of Licensee and post-termination obligations of Licensee
hereunder.)
d. The transferee must attend and successfully complete Licensor's
orientation training program. If the transferee is an entity, a designated
general manager acceptable to Licensor, and each successor thereto, and
other key employees designated by Licensor, must so complete training.
e. If Licensee proposes to make a transfer (except a transfer solely
to a partnership entity controlled by Licensee's principals or to
Licensee's spouse or child or a corporation all of whose stock or other
securities are owned by Licensee, its principals or the spouse(s) or
children of Licensee's principals) in response to a bona fide offer from a
third party, [Licensee shall first offer*]
- ----------
* Bracketed copy indicates strike-through.
12
<PAGE>
the transfer to Licensor as provided herein. Licensee shall apply for
consent to the proposed transfer as required by Paragraph 10(a)(3).
Licensor has 30 days from its receipt of the completed application to
[accept the offer by notice to Licensee. The acceptance shall be on the
same price and terms stated in the third party offer except that Licensor
may confer with Licensee and the proposed transferee and negotiate the
terms of the proposed transfer without thereby impairing the right of first
refusal, and Licensor may substitute cash in the fair market value of non-
cash consideration offered by the third party. If Licensor fails to accept
the offer within the 30-day period and has*] consent[ed*] to the transfer[,
Licensee may for 60 days after such period effect the transfer described in
the application delivered to Licensor; but Licensee shall make no other or
subsequent transfer without first offering the same to Licensor in
accordance with this Paragraph.*] Within the 30-day period, [in lieu of
accepting the offer,*] Licensor may instead give Licensee notice of its
election to cancel this Agreement and release the Hotel from the License
granted hereunder and enable Licensee to effect the transfer of the Hotel
but not the License, free of any further obligation to Licensor apart from
Paragraphs 7(w), 9 and the de-identification obligations of Paragraph 12
hereof and payment of all sums incurred or owing to Licensor. Cancellation
will be effective on closing of the transfer without penalty or damages
related to early termination. Failure to elect cancellation within the 30-
day period shall be deemed consent, subject to compliance with Paragraphs
10(c)(i) and (iii) and 10(d) hereof.
f. Licensee shall keep Licensor fully informed at all times of the
identities and percentage interest of each direct or indirect owner, legal
and beneficial, of a 5% or greater equity interest in Licensee.
g. Licensor may effect a transfer of Licensor's interest in the
License Agreement by notice to Licensee./1/
h. Publicly-traded securities of Licensee that have been previously
registered under federal securities laws may be transferred without
Licensor's consent if (i) the transferor owns less than 25% of such
securities before the transfer, (ii) the transferee will own less than 25%
of such securities after transfer, and (iii) the transfer is exempt from
registration under federal securities laws. Licensee must apply for
Licensor's consent before making a public offering or private placement of
any debt or equity securities in Licensee, and Licensee will pay Licensor,
upon application for consent, a non-refundable fee/2/ [of*] $10,000.
Licensee, the underwriters and all participants in the registration must
fully indemnify Licensor with respect to the registration; make clear in any
offering material that Licensor is not participating in or endorsing the
offering, and use Radisson's name or Distinguishing Characteristics only as
directed by Licensor.
11. Third Party Operators. The engagement of third party operators of the
---------------------
Hotel's restaurants, cocktail lounges or other supplementary departments/3/
whether through leases, management agreements or otherwise, shall be subject to
Licensor's prior written approval. In addition, whether by inclusion of
appropriate provisions in applicable documents or otherwise, Licensee shall
require all third party operators of the referenced operations and retail shops
and other facilities open to the public to operate and maintain them in the same
manner as Licensee would be required if Licensee were operating them directly.
/1/ See Page 11a at (i)
/2/ See Page 11a at (ii)
/3/ See Page 11a at (iii)
- ----------
* Bracketed copy indicates strike-through.
13
<PAGE>
12. Default. The following events constitute a default and good cause for
-------
Licensor to terminate the License and this Agreement:
a. Licensee becomes insolvent, or is adjudicated bankrupt, or
files a voluntary petition or pleading under the Federal Bankruptcy Code
or under any other state or federal bankruptcy or insolvency laws, or an
involuntary petition is filed with respect to Licensee under the Code or
any such laws, or a permanent or temporary conservator, receiver or
trustee for the Hotel or all or substantially all of Licensee's property
is appointed by any court, or Licensee makes an assignment for the benefit
of creditors or makes a written statement to the effect that Licensee is
unable to pay its debts as they become due, or a levy, execution, or
attachment is issued against all or part of the Hotel and/1/ is not
released,/2/ stayed or satisfied within/3/ [15*] days, or a final judgment
against Licensee remains unsatisfied for/3/ [30*] days or longer without
being discharged, vacated, reversed or stayed.
b. Except as provided in Paragraph 13, Licensee ceases to operate
the Hotel, ceases to operate the Hotel as part of the System, defaults
under any lease or sublease of the Hotel, or loses possession or the right
to possession of all or a significant part of the Hotel through sale or
otherwise.
c. A transfer occurs [or is attempted*] in violation of Paragraph 10
hereof.
d. Licensee or an officer, director, partner or principal
shareholder of Licensee is convicted of a felony or other crime of moral
turpitude likely to adversely affect or reflect upon the Hotel or the
parties or to impair the goodwill associated with the Distinguishing
Characteristics.
e. Licensee breaches or fails to comply with this License Agreement
or the requirements of the Operating Manual, and Licensee fails to cure
such breach or non-compliance within 30 days after notice from Licensor
specifying the breach.
Upon termination or expiration of this Agreement, Licensee immediately
shall cease all use of the System and the Distinguishing Characteristics.
Licensee shall make physical changes to the Hotel to remove the Distinguishing
Characteristics and to preclude a likelihood of confusion by the public as to
the status or affiliation of the Hotel, including removal of all signs
containing the word "Radisson" or any Radisson logo or mark. Licensee authorizes
Licensor to enter the premises of the Hotel to make such changes, at Licensee's
expense, if Licensee fails to complete the changes within 30 days after
termination or expiration.
Upon termination (but not expiration) of this Agreement/4/ Licensee will
immediately pay Licensor upon receipt of a statement or statements from Licensor
an amount equal to all actual and consequential damages to Licensor resulting
from such premature termination of this Agreement./5/
/1/ any of the above described events
/2/ discharged,
/3/ sixty (60)
/4/ for a default specified in subparagraphs a., b., c. or e. (but not d.) of
this Section 12,
/5/ For purposes of determining the foregoing, only such damages as are the
natural and proximate consequences, and not the remote consequences, of the
termination of the License Agreement shall be considered and, specifically
there shall not be included damages (if any) to Licensor relating to, or
arising out of loss of business opportunity (including, without limitation,
any loss of market position within a geographic territory); loss of future
profits (except the then present value of foregone franchise fees); or
(except for claims related to slander or libel) injury to its financial or
business reputation.
- ----------
* Bracketed copy indicates strike-through.
14
<PAGE>
In addition to any other remedies Licensor may have, upon any of the events
of default by Licensee as set forth in (a) through (e) above, Licensor may, upon
fourteen (14) days written notice to Licensee, suspend the services of the
reservation system of the RMA until the default is cured by Licensee.
15
<PAGE>
Licensee/1/ will pay all costs, expenses and reasonable attorneys' fees
incurred by/2/ Licensor in enforcing the terms and conditions of this Agreement.
13. Condemnation or Casualty. If the Hotel or a substantial part
------------------------
thereof is taken by eminent domain, Licensee ceases to operate the Hotel, and
Licensee is otherwise in good standing under the License, Licensee may transfer
the License to a new hotel at a location selected by Licensee (subject to the
consent of Licensor) for the remainder of the term of this Agreement. Licensor
will respond to Licensee's application for such new location within six months
of the taking, and the new hotel, constructed in accordance with Licensor's
then-current specifications, must open for business within two years of the
closing.
If the Hotel is damaged or destroyed by fire or other casualty,
Licensee will promptly repair the damage (in accordance with Licensor's then-
current standards). If the casualty requires closing the Hotel, Licensee shall,
within 45 days of such closing, provide Licensor with written notice of
Licensee's election to either (i) repair the damage and reopen the Hotel, or
(ii) terminate the License Agreement without liability for damages related to
premature termination. If Licensee elects to terminate, all fees and other
amounts due or incurred through the cessation of operation shall be paid at the
time notice of the election is given, and Licensee shall comply with all other
post termination obligations. If, within 2 years of Licensee's election to
terminate pursuant to (ii) above, Licensee decides to [relocate*] or repair and
reopen the Hotel, this License Agreement shall be deemed to have been terminated
for default, with consequent liability of Licensee to Licensor for consequential
damages, unless Licensor and Licensee mutually agree to the reinstatement of
this License Agreement. If Licensee elects to repair and reopen pursuant to (i)
above, Licensee will, within six months after closing commence reconstruction of
the Hotel upon the premises or a new location selected by Licensee subject to
Licensor's consent. In either event, the renovation or reconstruction is subject
to the consent of Licensor as to design and construction standards in accordance
with Licensor's standard Project Rider and the Hotel must reopen for business
within two years after closing.
Closing of the Hotel due to condemnation or casualty does not extend
the term of the License.
14. Rights to the System. Licensee acknowledges and will not contest
--------------------
Licensor's right, title and interest to the Distinguishing Characteristics or
the goodwill derived from them. Licensee disclaims any right or interest in the
Distinguishing Characteristics beyond the qualified License granted herein. All
present and future Distinguishing Characteristics, improvements and additions to
or associated with the System by Licensor or others, shall be Licensor's
property and inure to its benefit, and Licensee shall not use or permit others
to use any of the same without Licensor's written consent. Licensee shall not
use the name "Radisson" or another element of the Distinguishing Characteristics
in or as its corporate or trade name, but shall file appropriate notices
required under an applicable fictitious or assumed name law.
Licensor has the sole right to manage and resolve disputes with third
parties concerning the System and the Distinguishing Characteristics. Licensee
will not advertise or permit the advertising of any other hotel that is not part
of the System on the Hotel premises and agrees not to promote, without the
consent of Licensor, the Hotel in conjunction with other non-System hotels or
motels in which Licensee or its affiliates have any interest.
/1/ The non-prevailing party
/2/ the prevailing party
- ----------
* Bracketed copy indicates strike-through.
16
<PAGE>
15. Relationship of Parties; Interference with Others. Licensor retains
--------------------------------------------------
the right to regulate Licensee's conduct only to the extent necessary to protect
Licensor's interest in the Distinguishing Characteristics through promotion of
standardization, uniformity of service, and public goodwill for the benefit of
both contracting parties. The power to regulate the day-to-day operation of the
Hotel, including daily maintenance, safety concerns, working conditions and
personnel matters are vested solely and exclusively in Licensee. Licensee is an
independent contractor. Neither party is the agent, legal representative,
partner, subsidiary, joint venturer or employee of the other. Neither party
shall obligate the other or represent any right to do so. This Agreement does
not reflect or create a fiduciary relationship or a relationship of special
trust and confidence. Licensor's consent, authorization or approval of any
matter hereunder is a permission only and not a representation, warranty or
assurance. Approvals, consents and authorizations by Licensor will not be
unreasonably withheld or delayed unless specifically stated otherwise, but will
not be effective unless in writing and duly executed on behalf of Licensor,
unless specifically stated otherwise.
[Licensee shall not solicit or employ any person who is employed by
Licensor or another System licensee.*] Neither party will interfere with
contractual relations of the other.
16. Miscellaneous Provisions. Paragraph headings are for convenience and
------------------------
do not limit or qualify the terms of this Agreement. Terms used in any number or
gender include any other number or gender where appropriate./1/
This License Agreement and other documents pertaining to the Hotel
executed concurrently herewith collectively constitute the entire agreement
between the parties and supersede all prior representations, agreements or
understandings with respect to the Hotel. Failure to require strict performance
or to exercise any right or remedy contained herein will not preclude any future
requirement of strict performance or the exercise of such right or remedy or any
other right or remedy. Any right or remedy contained herein is cumulative to
other rights or remedies available pursuant to this Agreement, at law or in
equity. No change in this License Agreement will be valid unless signed in
writing by both parties.
Notices to be effective must be in writing, signed, and either delivered
personally, sent by overnight express, courier, telecopier, other expedited mail
service or by certified mail, postage prepaid, addressed to the appropriate
party at its address first stated above or to such other address as either party
may from time to time designate in writing to the other. Notices are effective
when delivered personally or telecopied, or two business days after being sent
by other means authorized above.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first stated above.
LICENSOR: LICENSEE:
RADISSON HOTELS INTERNATIONAL, INC. ------------------------------------
------------------------------------
By: /s/ T. Peter Blyth By: /s/ G. Michael Finnigan
---------------------------- -------------------------------
Print Name: T. Peter Blyth Print Name: G. Michael Finnigan
-------------------- ------------------------
Its: President-Development Division Its: President, Sports and
------------------------------ Entertainment, CFO
------------------------------
/1/ The laws of the state of California shall govern this Agreement.
- ----------
* Bracketed copy indicates strike-through.
17
<PAGE>
EXHIBIT A
TO
LICENSE AGREEMENT
Licensor hereby grants to Licensee and Licensee hereby accepts a non-
exclusive license, subject to the terms and conditions of this License
Agreement, to use the following trademarks and service marks as appropriate for
Licensee's Hotel:
1. RADISSON
2. RADISSON & DESIGN
3. Flaming "R"
4. Flaming "R" with Circle
5. The Radisson Inn
6. Radisson Adventure
7. Radisson Plaza
8. Radisson Plaza Club
9. Radisson Assured Tour
10. Yes I Can!
11. Radisson Hotels Worldwide
12. Radisson Hotels International
13. Worldwide World Class
14. The Radisson Suite Hotels
15. Radisson Adventure Weekend
16. Radisson 800
17. Napolizza
18. Catering to Success
19. Bolero's
20. We Cover the World
21. A Welcome Change
22. Why Get a Room, When You Can Get a Radisson
23. SMART
24. The Big Name in Small Meetings
25. Worldwide Hospitality Program Corporate Savings Executive Comfort and
Design
26. Shades of Summer
27. When You've Seen One Radisson, You've Seen One
28. BARS
29. Look to Book
30. Look to Book & Design
31. This Must Be The Place
32. Harmony
LICENSOR: LICENSEE:
RADISSON HOTELS INTERNATIONAL, INC. HP/COMPTON, INC.
------------------------------------
------------------------------------
By: /s/ T. Peter Blyth By: /s/ G. Michael Finnigan
---------------------------- -------------------------------
Print Name: T. Peter Blyth Print Name: G. Michael Finnigan
-------------------- ------------------------
Its: President-Development Division Its: President, Sports and
------------------------------ Entertainment, CFO
------------------------------
18
<PAGE>
EXHIBIT B
PROJECT RIDER TO
LICENSE AGREEMENT
1. General. Licensee shall design and build, renovate, rebuild or
-------
substantially alter the Hotel, (the "Project") in accordance with Licensor's
requirements as set forth in the License Agreement, this Rider and any Exhibits
or Addenda thereto, the Operating Manual, approved Plans and other System
information issued by Licensor in the ordinary course of business ("Licensor's
Requirements").
2. Cooperation. Licensee will cooperate with Licensor in the exchange of all
-----------
information regarding the Project and will ensure the cooperation of others
under its direction or control. [At Licensor's request, Licensee and such others
engaged by Licensee on the Project as Licensor may reasonably request, will
attend a Project meeting at Licensor's offices in Minneapolis, Minnesota.*]
[3. Design and Construction Services. The engagement of the architect,
--------------------------------
engineer, contractor and other design and construction professionals by Licensee
for the Project after the execution of this Rider is subject to Licensor's
approval. Prior to their engagement, Licensee shall furnish Licensor with
information in such detail as will enable Licensor to evaluate their
qualifications and capabilities. If Licensor does not object to their
engagement within thirty (30) days of the receipt of that information, or such
other information as Licensor may reasonably request, their engagement shall be
deemed approved.*]
4. Approval of Plans. Before starting the Project, Licensee shall submit
-----------------
proposed preliminary and final plans, specifications, scheme boards and drawings
for the Project, including proposed equipment, furnishings, facilities,
landscaping, and signs with such detail and containing such information as
Licensor may reasonably request (the "Plans"), for Licensor's consent. Licensee
shall not begin the Project unless and until Licensor gives its consent to the
Plans. Thereafter, Licensee shall make no/1/ change to the Plans without
Licensor's consent. Licensee shall cause the Hotel to be constructed or
renovated/2/ according to the Plans as consented to by Licensor.
5. Scheduling. Licensee shall begin the Project on or before/3/ [ ,
----------
19 *,] by excavation for footings in the case of new construction or major
reconstruction, or initiation of removal of prior fixtures, equipment and decor
in the case of rehabilitation. Once the Project has begun, Licensee shall
diligently pursue the Project to completion (subject to delay due to unforeseen
causes beyond Licensee's control, but not to exceed the limit set forth below).
Irrespective of any intervening delays, Licensee shall bring the Project to
completion with the Hotel furnished, equipped and otherwise ready to open for
business in accordance with the License Agreement not later than January 31,
----------
1997.
- ----
6. Inspection; Cooperation. Licensor shall have access to the Hotel and the
-----------------------
Project at all reasonable times/4/ to determine whether the Project is
proceeding on schedule and in accordance with the approved Plans and for any
other purpose reasonably related to the exercise of its rights and obligations.
Licensee shall cooperate fully, and require others involved in the Project to
cooperate fully, with Licensor in the exercise of Licensor's rights and
obligations hereunder.
7. Acquisition of Equipment, Furnishings and Supplies. Licensee shall acquire
--------------------------------------------------
and install all fixtures, equipment, furnishings, furniture, signs and related
equipment, supplies, landscaping, and other items
/1/ material
/2/ substantially
/3/ the date of execution of the License Agreement,
/4/ and on reasonable notice to Licensee
- ----------
* Bracketed copy indicates strike-through.
19
<PAGE>
required by the Plans, the License Agreement and the Operating Manual, and such
other equipment, furnishings and supplies as may be necessary in order to
prepare the Hotel to open for business in accordance with the License Agreement.
8. Opening the Hotel; Prior Consent. Licensee shall not open the Hotel for
--------------------------------
business as a System Hotel unless: (a) Licensor has accepted in writing (i)
completion of the Project or, if applicable, all pre-opening requirements of any
Exhibit attached hereto, in accordance with the Plans, and (ii) the installation
of all equipment, furniture, furnishings, signs and related equipment, supplies,
landscaping, and other items as required by paragraph 7: (b) Licensee executes
and delivers to Licensor the License Agreement and related documents; and (c)
Licensee pays all amounts due Licensor and its affiliates. Licensee shall give
Licensor written notice that, in Licensee's opinion, Licensee has complied with
all of the terms and conditions of the License Agreement, the Operating Manual
and the Plans, and the Hotel is ready to open for business as a System hotel.
Licensor shall [use its best efforts*] within 15 days after receipt of such
notice to inspect the Hotel and to determine whether to [issue this License
Agreement, or if the License Agreement has previously been issued, to*]
authorize opening the Hotel for business as a System hotel[, but Licensor shall
not be liable for delays or loss occasioned by Licensor's inability to complete
its investigation and to make such determination within said 15 days.*]/1/
9. Cost of Project. Licensee shall bear the entire cost of the Project,
---------------
including the Plans, professional fees, licenses and permits, equipment,
furniture, furnishings and supplies.
10. Limitation on Licensor Liability. Licensee acknowledges that Licensor's
--------------------------------
right to inspect, review and approve the Project and the Plans are exercised
primarily to determine their compliance with Licensor's Requirements relating to
operational considerations and aesthetic aspects of the Project such as
architectural and interior design, landscaping, color schemes, sizes, finishes
and materials. Notwithstanding the right of Licensor to consent to or authorize
the Plans, the architect, engineer, contractor and other design and construction
professionals and to inspect and accept the construction or renovation work at
the Hotel, Licensor's review and consent or approval of all or any part of the
Project is a permission only, and not an assurance, representation or warranty
of the qualifications, capabilities, suitability, adequacy, legality or
performance of any persons, design, item, or system, even though the Plans and
Licensor's inspections and consent may relate to architectural, engineering,
safety, code compliance or other matters. Licensor is not responsible for
reviewing nor shall its review or consent to any plan or design be deemed
approval of any plan or design from the standpoint of structural safety or
conformance with building or other codes. Licensor shall have no liability or
obligation to Licensee, the architect, engineer, contractor, subcontractors,
suppliers or third parties with respect to construction or renovation of the
Hotel, Licensor's rights being reserved and exercised solely for the purpose of
assuring itself of Licensee's compliance with the terms and conditions of this
License Agreement insofar as they relate to conformity to System standards.
Dated: June 27, 1996
----- ----------------
LICENSOR: LICENSEE:
RADISSON HOTELS INTERNATIONAL, INC. HP/COMPTON, INC.
------------------------------------
------------------------------------
By: /s/ T. Peter Blyth By: /s/ G. Michael Finnigan
---------------------------- -------------------------------
Print Name: T. Peter Blyth Print Name: G. Michael Finnigan
-------------------- ------------------------
/1/ Failure of Licensor to complete its investigation within said fifteen (15)
days shall be deemed approval of all that portion of the Project as to which
Licensor has not notified Licensee of deficiencies.
- ----------
* Bracketed copy indicates strike-through.
20
<PAGE>
Its: President-Development Division Its: President, Sports and
------------------------------ Entertainment, CFO
------------------------------
21
<PAGE>
EXHIBIT C
Frequent Flyer Program
Worldwide Hospitality Program (WHP)
Yes I Can Meetings
SMART regional marketing
Book Another Radisson Today (BART)
CARLSON VOYAGEUR
Esprit Employee Magazine
Radisson Adventure Package Plans
Travel Agent No Show Card
Domestic Voucher Program
Shades of Summer
Bed and Breakfast Breakaways
Look to Book Travel Agent Program
"Winning Edge" Sales Training Program
"Yes I Can!" Training Program
Business Class
Family Magic
(i) If such transfer is to a transferee who does not continue to operate the
System under the name "Radisson" and in a manner comparable to the way the
System was operate prior to such transfer, License may terminate this
License Agreement upon ninety (90) days written notice given not later than
the expiration of one (1) year after the date of such transfer, without
payment to Licensor or its transferee of any penalty or damages related to
breach on account of such termination, on compliance with the other
conditions set forth at Addendum Paragraph 4.
(ii) equal to the lesser of Licensor's directly related professional costs for
review of the offering or placement, or
22
<PAGE>
(iii) by entities other than Compton Entertainment, Inc.
11a
EXHIBIT 1 TO PROJECT RIDER
FOR
RADISSON CRYSTAL PARK HOTEL & CASINO
COMPTON, CALIFORNIA
1. The following product improvements must be completed before the Hotel opens
as a "Radisson" or comes on-line with the Radisson Reservation System:
(a) Obtain a signage survey, submit signage Plans and Specifications in
accordance with the terms of the License Agreement, the Standards of
Advertising Graphics Manual and the Operating Manual, for Licensor's
approval and execute a purchase order (with copy to Licensor) for said
signage. Licensee shall also provide temporary exterior signage and all
interior signage in accordance with the terms of the License Agreement, the
Standards of Advertising Graphics Manual and the Operating Manual.
Permanent exterior signage shall be installed not later than ninety (90)
days after execution of the License Agreement;
(b) Purchase and install Harmony, as specified in Paragraph 7.i. of the License
Agreement or install a printer compatible with the Radisson Reservation
System; purchase and install a brochure rack in accordance with Licensor's
specifications; purchase start-up supplies and assure the completion of all
initial orientation and "on-line" check list items.
Purchase of start-up supplies will require Licensee to provide Licensor, in
advance, with a check for $4,550
(c) Furnish Licensor with all necessary certificates of insurance as provided
by the License Agreement and Operating Manual;
(d) Purchase and install all necessary "Radisson" amenities required by the
Operating Manual;
2. Before the Hotel opens as a "Radisson") or comes on-line with the Radisson
Reservation System, License shall also complete the renovation project
currently in process, in accordance with the architectural plans which
Licensor reviewed and approved on or about May 29, 1996. Interior design
plans and the specifications for furniture, fixtures and equipment shall be
submitted to Licensor for approval prior to purchase or installation of the
same, and Licensee shall complete the renovation in accordance with
Licensor's approvals, with the following additions:
23
<PAGE>
(a) Guestrooms:
----------
(1) Provide activity table suitable for room service;
(2) Provide floor lamp to be used in conjunction with activity table;
(3) Replace entry light with more decorative light;
(4) Provide artwork on bathroom wall in place of artwork above bed;
(5) Provide base switches on all lamps;
(6) Utilize carpet with color which will conceal cigarette burns; and
(b) Guest Bath:
----------
(1) Provide marble threshold at bathroom entry:
(2) Install towel shelf on tub wall opposite controls and a towel bar at
vanity;
(3) Provide a piece of artwork above toilet;
(4) Change light lens above vanity to an eggcrate type;
(5) Reduce height of vanity apron by at least 4", preferably 8".
This Product Improvement Plan does not intend to address issues related to the
Americans with Disabilities Act. It is the responsibility of ownership and
management to contact the appropriate professionals for their review and
recommendations and take all actions necessary to ensure that the property is in
compliance with the Americans with Disabilities Act.
ADDENDUM TO LICENSE AGREEMENT
FOR
RADISSON CRYSTAL PARK HOTEL & CASINO
COMPTON, CALIFORNIA
This Addendum to the License Agreement between Radisson Hotels
International, Inc. ("Licensor") and HP/Compton, Inc. ("Licensee") is dated and
effective June 27, 1996.
1. Notwithstanding anything in the foregoing License Agreement to the
contrary, Licensee, as a promotional offer, or otherwise, shall have the right
to grant discounted or complimentary room rates to patrons of the Crystal Park
Casino, provided that Licensee shall include the "Casino Room Night Rate", as
hereafter defined, in Licensee's reports of Gross Room Sales to Licensor.
During Agreement Year 1 (defined as any partial calendar month and the first
twelve (12) calendar months after opening as a "Radisson"), the Casino Room
Night Rate shall be the greater of the sum of $25.00 per room night or the
discounted room rate paid for each
24
<PAGE>
such discounted or complimentary room night. During subsequent Agreement Years
(defined as the successive twelve (12) month calendar periods following
Agreement Year 1), the minimum rate of $25.00 will increase at the rate of five
percent (5%) per Agreement Year beginning on the first day of each subsequent
Agreement Year following Agreement Year 1, and the Casino Room Night Rate for
each such Agreement Year will be the greater of the discounted room rate paid or
the then applicable minimum rate, for each such discounted or complimentary room
night.
2. Licensor agrees to reimburse or cause the RMA to reimburse Licensee for
Qualified Advertising expenses incurred during Agreement Year 1 in an amount not
to exceed fifty thousand dollars ($50,000), to the extent that Licensee complies
with the requirements of the RMA Local Qualified Advertising Reimbursement
Program (the "Program") in effect at the time the expenditures are made. A copy
of the current Program is attached hereto as Exhibit D and made a part hereof.
Such reimbursement shall be given in the form of a credit memo applied to
Licensee's account payable to Licensor, only after:
(a) The full 3.50% RMA Fee has been paid as and when due; and
(b) Licensor has examined and approved the advertising and proof of
payment therefore which Licensee submits in accordance with Program
requirements.
Any entitlement to reimbursement of the RMA Fee will be suspended if Licensee
fails to comply with the provisions hereof, is in default of the License
Agreement, or if a condition exists which would be a default if notice were
given.
3. Notwithstanding the provisions of Exhibit D to the contrary:
(a) The actual initial cost of first purchase and installation of exterior
Hotel signage will qualify for the reimbursement granted in Paragraph
2 of this Addendum, upon completion of installation in accordance with
Plans and Specifications approved by Licensor. Licensee shall submit
to Licensor either (i) documentary proof of payment in cash for
purchase and installation of such permanent exterior signage, with
copies of the purchase and installation agreement, or (ii) a copy of a
lease for such permanent exterior signage, together with copies of the
canceled checks evidencing payment pursuant to the lease; and
(b) The actual initial cost to Licensee for first production and printing
of the Rack Brochure, Meeting Brochure and similar marketing
collateral paper goods for the Radisson Crystal Park Hotel & Casino
which prominently references or displays
25
<PAGE>
the Radisson 800# in compliance with Licensor's specifications and
Licensor's prior written approval shall also qualify for the
reimbursement granted in Paragraph 2 of this Addendum on submission of
proof of payment.
4. Notwithstanding any provision of the foregoing License Agreement or of the
Operating Manual to the contrary, so long as HP/Compton, Inc. or an entity
referred to in Paragraph 6 of this Addendum is the Licensee, Licensee shall have
the right to:
(a) refer the traveling public guests and customers of the Hotel or the
Crystal Park Casino to other hotel/casino operations owned or operated
by Licensee or Compton Entertainment, Inc. ("CEI") which are not
affiliated with another franchise system; and
(b) display in the lobby and guestrooms of the Hotel (but not in the
Radisson Brochure Rack) a hotel brochure which lists all of the
hotel/casino operations in which Licensee or any entity referred to in
Paragraph 6 of this Addendum holds an equity interest;
(c) conduct marketing promotions and advertising campaigns which cross
promote the Hotel and its casino operations with other hotel/casino
operations owned or operated by Licensee or CEI which are not
affiliated with another franchise system; and
(d) display in the lobby a separate brochure rack containing brochures
describing other hotel/casino operations owned or operated by Licensee
or CEI which are not affiliated with another franchise system.
Any advertising or marketing materials referenced above which include the
Hotel or any of the Licensor's Marks shall comply with Licensor's standards of
advertising graphics with respect thereto. Licensee acknowledges and agrees that
no advertising or marketing materials referenced above shall in any event be
eligible for the Qualified Advertising Reimbursement established at Paragraph 2
of this Addendum.
5. Notwithstanding the provisions of the foregoing License Agreement, Licensee
shall have three (3) options to terminate this License Agreement, without
payment of a termination fee or damages related to early termination
("Termination Windows"). Such Termination Windows shall commence on the last
day of Agreement Years three (3), five (5) and ten (10) and shall each continue
for sixty (60) days. The License Agreement may be terminated by Licensee in
conjunction with any such Termination Window upon compliance with the following
conditions:
26
<PAGE>
(a) Not less than sixty (60) days prior written notice to Licensor setting
forth the termination date, received within a Termination Window;
(b) Payment by Licensee of all obligations incurred or accrued under the
License Agreement through the effective date of termination; and
(c) Compliance with Licensor's other reasonable requirements related to
termination, such as cessation of the use of the Radisson(R) name, logo
or any Radisson Mark in connection with the operation of the Hotel or any
advertising and directory listings in any manner; removal of exterior and
interior signage; cessation of use of operating supplies and amenities
which bear the Radisson Name, logo or Marks; reaffirmance of the survival
of Paragraph 9 of the License Agreement and reasonable restrictions
regarding publication of notice of the termination to the media.
Licensee and Licensor shall enter into a Termination Agreement which
addresses Licensee's payment obligations and Licensor's reasonable requirements
related to termination as set forth in (b) and (c) above.
6. Notwithstanding anything in the foregoing License Agreement to the
contrary, the Licensee and the shareholders or other equity owners of the
Licensee may make the following transfers upon notification to, but without the
consent of, or payment of a transfer fee to, Licensor:
(a) A transfer by Licensee of the Hotel and of Licensee's rights and
obligations under this Agreement to a limited liability company composed
of Licensee, DeBartolo Entertainment and Leo Chu (or an entity formed by
him to hold his ownership interest in such limited liability company)
(the"LLC");
(b) A transfer by a member of the LLC of its or his interest in the LLC to
any other member of the LLC;
(c) A transfer of a five percent (5%) or less equity interest in Licensee or
in the LLC to any person;
(d) A transfer of an equity interest in Licensee or the LLC to CEI;
(e) A transfer of the Hotel and of Licensee's rights and obligations under
this Agreement to CEI pursuant to the exercise by CEI of an option to
purchase the Hotel.
As of the effective date of any approved transfer of the Hotel and of
Licensee's rights and obligations under this Agreement (including any
27
<PAGE>
transfers approved in this Paragraph 5), the term "Licensee" whenever used in
this License Agreement shall thereafter include and refer to such transferee.
7. Licensor has approved CEI as the management company for the Hotel and
acknowledges that Licensee intends to have CEI manage all operations of the
Hotel and of the Crystal Park Casino. Accordingly, Licensor agrees that all
responsibilities of Licensee hereunder may be discharged and performed by CEI or
CEI's officers and employees as agents of Licensee, including but not limited to
the delivery and certification by CEI's officers of financial statements and
operating reports for the Hotel. Notwithstanding the foregoing, Licensee shall
assure that Licensor's operating standards, policies and procedures falling
within CEI's scope of authority and within its control will be maintained in
compliance with the standards set forth in the terms and provisions of the
License Agreement, and Licensee will not withhold or delay any approval or
consent which must be given or authorized by Licensee in order to enable CEI to
fulfill such obligations.
8. Notwithstanding anything in the License Agreement to the contrary, if
Licensor establishes or implements restrictions or requirements upon the System
or upon Licensee's operations at the Hotel which Licensee can prove, to
Licensor's reasonable satisfaction, will jeopardize the gaming license for the
Crystal Park Casino, Licensor will cooperate in good faith with Licensee to
limit or waive such restrictions or requirements so as to rectify the problem,
if permitted by law. If such course of action is not permitted by applicable
law, Licensee shall have the right to terminate the License Agreement, without
payment of a termination fee or damages related to early termination, upon sixty
(60) days prior written notice and compliance with the provisions of Paragraph 5
(b) and (c) of this Addendum.
RADISSON HOTELS INTERNATIONAL, INC. HP/COMPTON, INC.
------------------------------------
------------------------------------
By: /s/ T. Peter Blyth By: /s/ G. Michael Finnigan
---------------------------- -------------------------------
Print Name: T. Peter Blyth Print Name: G. Michael Finnigan
-------------------- ------------------------
Its: President-Development Division Its: President, Sports and
------------------------------ Entertainment, CFO
------------------------------
28
<PAGE>
RADISSON HOTEL CORPORATION Submitted By
ADVERTISING EXPENDITURE REPORT From Radisson
For Month/Year of
----------------
For Corp. Use
<TABLE>
<CAPTION>
Promotion DESCRIPTION OF PROMOTION MEDIA DATES AMOUNT OF EXPENDITURE
Number (subject, size, offering (Name of the Newspaper, Magazine, Station) of placement (Attach invoice)
Attach tearsheet, scrip, photo, videotape,
cassette
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
1
- --------------------------------------------------------------------------------------------------------------------------------
2
- --------------------------------------------------------------------------------------------------------------------------------
3
- --------------------------------------------------------------------------------------------------------------------------------
4
- --------------------------------------------------------------------------------------------------------------------------------
5
- --------------------------------------------------------------------------------------------------------------------------------
6
- --------------------------------------------------------------------------------------------------------------------------------
Total $
</TABLE>
29
<PAGE>
(For corporate use only)
TOTAL APPROVED FOR AD CREDIT TOTAL$
INSTRUCTIONS FOR ATTACHING DOCUMENTATION
1) Attach a copy of the invoice for each eligible promotion.
2) Attach a copy of each promotion. Number each promotion in the lower right-
hand corner of the invoice copy, as well as tearsheets, etc., to correspond
to the numbers above (ie: Promotion 1, Promotion 2, etc.). In the case of
broadcast promotions include a copy of the Invoice, Affidavit of
performance, and a cassette or a script of the commercial. For outdoor
advertising, submit photo of the outdoor paint and/or poster billboard.
3) If multiple expenses are on the invoice, circle the specific amount that
applies to the promotion.
4) Attach this cover report to all documentation and submit to Radisson Hotel
Corporation.
30
<PAGE>
RADISSON HOTEL CORPORATION
ADVERTISING EXPENDITURE REPORT
INSTRUCTIONS FOR ATTACHING DOCUMENTATION
1. Please fill in hotel name and complete name of person submitting report. A
memo will then be sent to this person detailing total credit the hotel will
receive, along with explicit reasons some expenditures were not approved.
2. Attach a copy of the invoice for each eligible promotion. If multiple
expenses are on the invoice, circle the specific amount that applies to the
promotion. We must have a copy of an invoice not a pre-pay statement,
purchase order or proposal. If an invoice was not received, please submit a
copy of your canceled check with a copy of the proposal.
3. Attach a copy of each promotion. Number each promotion in the lower right-
hand corner of the invoice copy, as well as tearsheets, etc., to correspond
to the numbers as listed on the Advertising Expenditure Report (i.e.:
Promotion 1, Promotion 2, etc.). In the case of broadcast promotions
include a copy of the invoice, Affidavit of Performance, and a cassette or
a script of the commercial. For outdoor advertising, submit photo of the
outdoor paint and/or poster billboard. Billboard and airport diorama photos
need only to be sent once and we will keep them on file.
4. REMEMBER: WE MUST HAVE A ACTUAL TEARSHEET FOR EACH AD PLACED EVEN IF THE
--------------
SAME AD HAS RUN ON MULTIPLE DATES. Please do not cut the ad out; rather,
send the whole tearsheet so we can verify date and publication.
5. REMEMBER: ALL ADVERTISING MUST BE IN THE PROPER RADISSON FORMAT AND
------
INCLUDE THE 800# TO BE ELIGIBLE FOR ADVERTISING REIMBURSEMENT.
6. Trade out barter is reimbursed at 30% of the tradeout retail value.
7. If a submission has not been approved because of a missing invoice or
tearsheet, please resubmit tearsheet and/or copy of invoice along with copy
of original expenditure report detailing reason not previously approved.
31
<PAGE>
8. Attach this cover report to all documentation and submit to: Radisson Hotel
Corporation, Attention: Alice Anderson, Director Marketing Resources,
Carlson Parkway, P.O. Box 59159, Minneapolis, MN 55459-8204.
9. If you have any questions concerning the submission of your Advertising
Expenditure Report please call Alice at 612-540-5503 or Karen Odenthal at
612-449-3343.
LOCAL QUALIFIED ADVERTISING
---------------------------
REIMBURSEMENT
-------------
In some instances, RMA may permit hotels temporary local control of a portion of
the RMA fee. This is done in the form of a "reimbursement" to the hotel upon
submittal of an "Advertising Expenditure Report" form. Such reimbursement will
be given in the form of a credit memo applied to your receivable account, only
after: a) the full 3.50% RMA fee has been paid as and when due, and b) the
Director-Marketing Resources has examined and approved the advertising and proof
of payment which you submit in accordance with Program requirements. A copy of
the form and instructions for submittal are attached.
THE "REIMBURSEMENT" REFERRED TO IN YOUR LICENSE AGREEMENT FOR "QUALIFIED
ADVERTISING" CREDIT APPLIES ONLY TO LOCAL, REGIONAL AND NATIONAL CONSUMER ROOMS
ADVERTISING, WHICH INCLUDES MEETINGS/GROUP, AND TRAVEL AGENT ADVERTISING THAT
INCORPORATES PROPER USE OF THE RADISSON NAME, LOGO, AND THE RADISSON 800 NUMBER.
THE ADVERTISING MUST BE IN A FORMAT ESTABLISHED BY THE RADISSON MARKETING
COMMUNICATIONS AND SERVICES DEPARTMENT.
Acceptable media includes newspapers, magazines, in-flight publications, radio,
TV, outdoor/airport diorama display and direct mail. (In essence, reimbursement
is given for the same type of advertising and promotional programs that are
normally supported by RMA.) The following is a chart that further clarifies
what is and is not eligible for reimbursement:
Examples of Advertising that IS ELIGIBLE
for Reimbursement
- ---------------------------------------
. Production & space charges associated with
eligible advertising which is in the approved
--------
Radisson format for local, regional and
national publications
. Adventure Weekend radio or print ads
. Travel Agent, Wholesaler & Meeting Ads
. General rooms advertising
. Direct mail to travel agents/meeting
planners/corporate travel planners
(includes production, labels)
Examples of Advertising that IS NOT ELIGIBLE
for Reimbursement
- --------------------------------------------
. Food and beverage advertising
. Adventure Rack Cards (Includes Business Class)
. Brochures
. Directories (OAG, Hotel & Travel Index, OHG, OMFG, etc.)
. In-room table tents, guest room directories
. Telephone yellow pages
. Premiums (key tags, balloons, mugs and other gifts).
. SMART advertising fees, etc.
. Agency Retainers/Commissions
32
<PAGE>
Examples of Advertising that IS ELIGIBLE
for Reimbursement
- ----------------------------------------
. Co-op advertising with other Radisson hotels.
Only your portion of cost allowed.
All SMART advertising EXCLUDED.
. Outdoor paint and poster billboards
. AAA Tour Book advertising
. Airport advertising display/diorama
. Sports-arena signage
. Voyageur" Magazine ads
. Guest Informant, "Travelhost," "Where" ads
. Preview" ads
. Electronic Media/CRS (eligible after 4/1/93)
Apollo/Spectrum
Apollo/Headlines
Sabre/Jaguar
Select Plus (AMEX)
Examples of Advertising that IS NOT ELIGIBLE
for Reimbursement
- --------------------------------------------
. Stationary, post cards
. Sales supplies/support collateral
. Co-op advertising with competitive hotels
. Airport courtesy phones -- direct line/phone board display
. Audio visual/slide presentations
. Van/cabs/trucks/buses/park benches/banners
. In-house video
. Any advertising with another 800# included
. Postage (for direct mail, etc.)
. Telemarketing
. Fax blasts
. Bulk purchase of awards points
. Collateral fulfillment costs
. Research/survey services
. Maps
. On Hold" message/music
. Posters
. Highway Exit Traveller Service Information Signage
Failure to comply with the Program Requirements for any item may result in
disqualification for reimbursement of the advertising expense for that item.
The final determination of what constitutes Qualified Advertising and whether
the Program's requirements have been met shall be in the RMA's sole discretion.
Qualified advertising that is placed on a tradeout (barter) arrangement will be
reimbursed at 30% of the tradeout retail value. We do not want to jeopardize
our barter relationships. Hotels paying full cash on publications where barter
is available will receive reimbursement only for the dollars they would have
paid if barter had been utilized. The full cash reimbursement will not be
given.
If you have any questions concerning the eligibility of proposed advertising or
whether barter is available, contact the Director-Marketing Resources, as
described below. Proposed copy for promotions, advertising or broadcast should
be submitted for pre-approval if not clearly contained in the examples of
advertising eligible for reimbursement.
The "Advertising Expenditure Report" and its attachments when properly prepared,
includes attachments: copy of paid invoices, ad tear sheets, script, cassette or
video for broadcast commercials with copy of the Affidavit of Performance, and
promotion collateral for direct mail. The Advertising Expenditure Report, its
attachments, and other evidence which may be required by licensor shall be
submitted to:
Alice Anderson
Director - Marketing Resources
RADISSON HOTELS INTERNATIONAL, INC.
Carlson Parkway, P.O. Box 59159
Minneapolis, MN 55459-8204
(612) 540-5503
33
<PAGE>
The "Advertising Expenditure Report," together with all supporting documentation
for each item of advertising for which reimbursement is being sought, must be
submitted each month as it becomes available but in any event within ninety (90)
days of the date the first invoice is received for that item or within ninety
(90) days of the end of the Agreement Year (as defined in the License Agreement)
in which the advertising first ran -- whichever is earlier.
The maximum qualified advertising reimbursement allowance ("Reimbursement
Allowance") for any Agreement Year is determined by the Gross Room Sales at the
Hotel during that Agreement Year times the applicable percentage of Maximum
Available Qualified Advertising Reimbursement.
If you do not submit evidence of Qualified Advertising in an amount at least
equal to the Reimbursement Allowance for any Agreement Year in that Agreement
Year (or within 90 days of the first invoice date for the item, if the
advertising is placed during the Agreement Year but evidence is submitted after
the end of the Agreement Year), any balance of Reimbursement Allowance for that
Agreement Year will be deemed waived. It may not be carried over to subsequent
---
years.
If you submit evidence of Qualified Advertising in an amount greater than the
Reimbursement Allowance for any Agreement Year ("Excess Advertising") and a
Reimbursement Allowance is or becomes available in the following Agreement Year,
(a) credit memo(s) will be issued for the amount of Excess Advertising, up to
the Reimbursement Allowance available.
RADISSON 800 NUMBERS
--------------------
Attached are examples showing how you will correctly display the appropriate
-----------
Radisson 800 number.
There are three numbers to choose from when you advertise. To ensure the
effectiveness of these numbers, make absolutely sure that each of these three
numbers are displayed in the correct advertising and in the format illustrated.
1. The 800-333-3333 number is for advertising to the general public that
includes consumers, meeting planners, wholesale tour groups, and Official
Airline Guide (OAG) ads. Within reason, show this 800 number everywhere
you can... brochures, vans, softball jerseys, confirmations, letterhead,
billboards, giveaway gift items, etc. After all, our primary goal is to
make the phone ring.
2. The 800-777-7800 number should be used when advertising to travel agents
-------------
and/or wholesalers Please note that, in all TRAVEL AGENT advertising, the
----------- ---
airline access code must
34
<PAGE>
be included along with the travel agent 800 number. The airline systems
bring us high volumes of business at excellent rates, so you can
appreciate the reason for focusing on this. This number 800-777-7800
should also be used in all communications targeting the wholesale tour
audience. PLEASE NOTE THAT WHILE THE NUMBER IS THE SAME FOR THESE
AUDIENCES, THE FORMAT IS DIFFERENT. PLEASE USE THE CORRECT FORMAT.
3. The 800-444-3344 number should be used when advertising to meeting
planners for group business only. Please include this number when
advertising in trade publications and on any group collateral/promotion
pieces produced.
Please make no changes to these 800-number formats. The consistency of these
formats is essential in order to make Radisson's advertising effective.
REMEMBER: ALL LOCAL ADVERTISING SUBMITTED FOR AD CREDIT MUST INCLUDE ONE OF
THESE 800 NUMBERS, IN THE CORRECT FORMAT, TO RECEIVE CREDIT.
---------------------
35
<PAGE>
EXHIBIT 10.18
BLUE DIAMOND SWAP AGREEMENT
DATED AS OF AUGUST 12, 1996
BY AND AMONG
BOOMTOWN, INC.,
BLUE DIAMOND HOTEL & CASINO, INC.,
HOLLYWOOD PARK, INC.,
EDWARD P. ROSKI, JR.,
IVAC
AND
MAJESTIC REALTY CO.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
1. DEFINITIONS AND RULES OF INTERPRETATION............................... 2
1.1 Definitions...................................................... 2
1.2 Rules of Interpretation.......................................... 7
2. TRANSFER OF ROSKI NOTES............................................... 8
2.1 Transfer of Roski Notes on the Exchange Date..................... 8
2.2 Excluded Assets.................................................. 8
2.3 No Liabilities Assumed; Excluded Liabilities..................... 8
3. TRANSFER OF BD INTEREST............................................... 8
3.1 Transfer of BD Interest on the Exchange Date..................... 8
3.2 Excluded Assets.................................................. 9
3.3 Liabilities Assumed.............................................. 9
4. CASH PAYMENT.......................................................... 9
5. EXCHANGE OF ASSETS.................................................... 9
5.1 Exchange Date.................................................... 9
5.2 Cash Payment; Proration.......................................... 10
5.3 Deliveries by BD Transferor...................................... 10
5.4 Deliveries by Roski.............................................. 11
5.5 Additional Undertakings by Roski................................. 12
5.6 Additional Undertakings by Boomtown, Blue Diamond,
Hollywood Park and BD Transferor................................. 13
6. REPRESENTATIONS AND WARRANTIES........................................ 14
6.1 Representations and Warranties of the Roski Entities............. 14
6.2 Representations and Warranties of Boomtown, Blue Diamond,
Hollywood Park and BD Transferor................................. 16
7. CONDITIONS PRECEDENT.................................................. 17
7.1 Conditions to Execution and Delivery of this Agreement
by Boomtown...................................................... 17
7.2 Conditions to Execution and Delivery of this Agreement
by Roski......................................................... 17
7.3 Conditions to Exchange by BD Transferor.......................... 17
7.4 Conditions to Exchange by Roski.................................. 18
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
8. INDEMNIFICATION....................................................... 19
8.1 Indemnification by the Roski Entities........................... 19
8.2 Indemnification by Boomtown, Blue Diamond and BD Transferor..... 20
8.3 Procedure....................................................... 20
9. ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES.................... 21
9.1 Approvals....................................................... 21
9.2 Consents, Authorizations and Waivers............................ 21
9.3 Transfer Taxes.................................................. 21
9.4 Additional Deliveries; Further Assurances....................... 21
9.5 Maintenance of Resort Business.................................. 22
9.6 Director's Insurance............................................ 22
10. TERMINATION.......................................................... 22
10.1 Termination.................................................... 22
10.2 Other Merger................................................... 22
11. MISCELLANEOUS........................................................ 23
11.1 Changes, Waivers, etc.......................................... 23
11.2 Payment of Fees and Expenses................................... 23
11.3 Notices........................................................ 23
11.4 Entire Agreement............................................... 24
11.5 Survival of Representations and Warranties, etc................ 24
11.6 Headings; References to Agreement.............................. 24
11.7 Choice of Law; Interpretation.................................. 24
11.8 Counterparts................................................... 24
11.9 Severability................................................... 24
11.10 Successors and Assigns......................................... 24
11.11 No third Party Beneficiaries................................... 24
11.12 Waiver of Jury Trial........................................... 25
</TABLE>
-ii-
<PAGE>
LIST OF EXHIBITS AND SCHEDULES
------------------------------
EXHIBIT A RELEASE
EXHIBIT B ROSKI NOTE
EXHIBIT C TERMINATION AGREEMENT
SCHEDULE 1-A NOTES AND LEASES
SCHEDULE 1-B MAINTENANCE CONTRACTS
SCHEDULE 1-C OUTDOOR SIGNS
SCHEDULE 1-D LICENSE AND PROGRESSIVE SERVICE AGREEMENTS
-iii-
<PAGE>
BLUE DIAMOND SWAP AGREEMENT
This Blue Diamond Swap Agreement (this "Agreement") is made as of the 12th
day of August, 1996 by and among Boomtown, Inc., a Delaware corporation
("Boomtown"), Blue Diamond Hotel & Casino, Inc., a Nevada corporation and a
wholly-owned subsidiary of Boomtown ("Blue Diamond"), Hollywood Park, Inc., a
Delaware corporation ("Hollywood Park"), Edward P. Roski, Jr., an individual
residing in the State of California ("Roski"), IVAC, a California general
partnership of which Roski is a partner ("IVAC") and Majestic Realty Co., a
California corporation ("Majestic").
WHEREAS, IVAC owns certain real property in Las Vegas, Nevada, on which a
resort consisting of a casino, hotel, restaurant, recreational vehicle park and
related facilities (as more fully defined below, the "Resort") is being operated
by Blue Diamond as Boomtown Las Vegas;
WHEREAS, Boomtown has advanced certain funds to IVAC to enable IVAC to
complete development and construction of the Resort, which advances are
evidenced by certain promissory notes issued by IVAC, which notes are governed
by loan agreements and secured by deeds of trust on the Resort site and certain
related property;
WHEREAS, Blue Diamond has entered into a lease with IVAC for the Resort
site, and has purchased and installed certain trade fixtures in the Resort;
WHEREAS, Hollywood Park intends to enter into a strategic combination (the
"Merger") with Boomtown pursuant to an Agreement and Plan of Merger dated as of
April 23, 1996 by and among Hollywood Park, Boomtown and HP Acquisition, Inc., a
Delaware corporation and a wholly-owned subsidiary of Hollywood Park (as amended
and in effect from time to time, the "Merger Agreement");
WHEREAS, subject to consummation of the Merger pursuant to the Merger
Agreement, Boomtown and Blue Diamond intend either (a) to effect any one or
combination of the following transfers of their respective interests in the
Resort (i) a transfer to a subsidiary of Boomtown (an "SPC") created for the
purpose and designated as an "Unrestricted Subsidiary" under the Boomtown
Indenture (as defined below), or (ii) as set forth in Section 3.1, any other
transfer which would achieve the result contemplated by this Agreement or (b) to
retain their respective interests in the Resort, for the purpose of entering
directly into the transactions contemplated by this Agreement;
WHEREAS, it is the intent of the parties hereto that, upon consummation of
the Merger pursuant to the Merger Agreement, subject to the terms and conditions
set forth in this Agreement, the holder of such interests in the Resort,
regardless of whether such holder is then Boomtown, Blue Diamond, Hollywood
Park, any designated Affiliate (as defined below) of Hollywood Park, any SPC or
other designated subsidiary of Boomtown or any combination
<PAGE>
thereof (any such holder(s), "BD Transferor") would either exchange such
interests in the Resort for the Roski Notes (as defined below) or effect the
same result through a series of related transactions, and, in any such case,
Roski would exchange the Roski Notes for such interests in the Resort (such
exchange, however effected, the "Blue Diamond Swap");
NOW THEREFORE, in consideration of the foregoing premises, and for other
good and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Boomtown, Blue Diamond, Hollywood Park, Roski, IVAC and Majestic
hereby agree as follows:
1. DEFINITIONS AND RULES OF INTERPRETATION
---------------------------------------
1.1 Definitions. The following terms shall have the respective
-----------
meaning set forth below, or in the Sections of this Agreement respectively
referred to below:
"Affiliate" of any person or entity organized as a corporation,
partnership, joint venture, business trust or other non-individual person, shall
mean (i) any person or entity which directly or indirectly owns fifty percent
(50%) or more of the stock, partnership or other beneficial interest of such
person or entity, (ii) any corporation, partnership or other entity of which
fifty percent (50%) or more of the stock, partnership or other beneficial
interest is owned directly or indirectly by such person or entity, and (iii) any
corporation, partnership or entity of which fifty percent (50%) or more of the
stock, partnership or other beneficial interest is owned directly or indirectly
by any person or entity that owns fifty percent (50%) or more of the stock,
partnership or other beneficial interest of such person or entity.
"Affiliate Loan Agreement" shall mean the Affiliate Loan Agreement
dated as of June 30, 1993, by and among IVAC, Majestic and Boomtown.
"Affiliate Note" shall mean the Affiliate Loan Note dated as of June
30, 1993, made by IVAC in favor of Boomtown.
"Affiliate Loan Deed of Trust" shall mean the Deed of Trust and
Assignment of Rents and Security Agreement dated as of June 30, 1993, by and
among IVAC, as trustor, Nevada Title Company, a Nevada corporation, as trustee
and Boomtown and Majestic as tenants in common, as beneficiaries.
"Approvals" shall mean all governmental approvals, consents, licenses,
findings of suitability, and permits, including without limitation, any
approvals of Gaming Authorities, as may be required to effect the Blue Diamond
Swap.
"Assumed Contracts" shall mean (i) the leases and notes identified on
Schedule 1-A hereto, (ii) the gift shop leases and the sports book agreement
- ------------
between Boomtown and Leroy's Horse and Sports Place, dated November 30, 1995,
(iii) the agreement for the family
-2-
<PAGE>
amusement center at the Resort, (iv) the maintenance contracts listed on
Schedule 1-B hereto, (v) the outdoor sign agreements listed on Schedule 1-C
- ------------ ------------
hereto, (vi) the license and progressive service agreements listed on
Schedule 1-D hereto and (vii) the agreements for entertainment at the Resort
- ------------
in effect on the Exchange Date.
"BD Interest" shall mean all of BD Transferor's right, title and
interest in and to (i) the Affiliate Note, the Bridge Note, the Affiliate Loan
Agreement, the Bridge Loan Agreement, the Purchase Option Agreement, the
Affiliate Loan Deed of Trust, the Bridge Loan Deed of Trust and the Purchase
Option Deed of Trust, (ii) the mortgage liens on, and other rights in, the
Resort site and related properties respectively conveyed in trust under the
Affiliate Loan Deed of Trust, the Bridge Loan Deed of Trust and the Purchase
Option Deed of Trust, (iii) the Blue Diamond Lease, the Assumed Contracts, the
FF&E and the Specified Assets and (iv) security systems, customer lists,
telephone numbers, books and records, user manuals, plans, surveys, liquor and
other licenses and inventories which are located at, or used principally in
connection with, the Resort; provided, however, that the BD Interest shall
include all interests of Boomtown and Blue Diamond in the foregoing as of the
Exchange Date.
"BD Transferor" shall have the meaning ascribed thereto in the
recitals hereto.
"Blue Diamond" shall have the meaning ascribed to such term in the
recitals hereto.
"Blue Diamond Lease" shall mean the Lease dated as of June 30, 1993,
as amended by a First Amendment to Lease dated as of November 10, 1993, by and
between IVAC as lessor and Blue Diamond as lessee, pursuant to which IVAC has
agreed to lease to Blue Diamond, and Blue Diamond has agreed to lease from IVAC,
the real property in Las Vegas, Nevada on which the Resort is situated.
"Blue Diamond Swap" shall have the meaning ascribed thereto in the
recitals hereto.
"Boomtown" shall have the meaning ascribed thereto in the preamble
hereto.
"Boomtown Indenture" shall mean the Indenture dated as of November 1,
1993, by and among Boomtown, Blue Diamond, certain of their Affiliates and the
Trustee.
"Bridge Loan Agreement" shall mean the Bridge Loan Agreement dated as
of June 30, 1993, by and between IVAC and Boomtown, as amended by an Amendment
No. 1 to Bridge Loan Agreement dated as of November 10, 1993.
"Bridge Note" shall mean the Amended and Restated Promissory Note
(Bridge) dated as of June 30, 1993, made by IVAC in favor of Boomtown.
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<PAGE>
"Bridge Loan Deed of Trust" shall mean the Deed of Trust and
Assignment of Rents and Security Agreement dated as of June 30, 1993, by and
among IVAC, as trustor, Nevada Title Company, a Nevada corporation, as trustee
and Boomtown as beneficiary.
"Designated Roski Entity" shall mean an entity designated by Roski and
either (i) reasonably acceptable to Boomtown and Hollywood Park or (ii) the
obligations of which hereunder and under the Related Documents, including all
indemnities for which such Roski Entity is liable, shall have been
unconditionally guaranteed by Roski pursuant to the Roski Guaranty.
"Effective Date" shall mean the date of this Agreement.
"Employees" shall mean the employees of Boomtown, Blue Diamond or
their Affiliates employed at or in connection with the Resort exclusively and
not employed at other facilities.
"Exchange Date" shall mean the date on which the conditions precedent
specified in Sections 7.3 and 7.4 hereof have been satisfied or waived.
"FF&E" shall mean all trade fixtures, other fixtures and equipment
located at or used principally in connection with the Resort, including, in any
event, those assets (however characterized) listed on the fixed asset register
of Blue Diamond as of the Effective Date and those assets (however
characterized) leased or purchased under the leases and notes listed on Schedule
--------
1-A; provided, however, that FF&E shall be deemed to include any replacements of
- ---
any such assets and any similar assets acquired for use at or principally in
connection with the Resort by Boomtown, Blue Diamond or BD Transferor during the
period from the Effective Date until the Exchange Date and shall be deemed to
exclude any such assets that no longer exist as of the Exchange Date due to
obsolescence or use in the ordinary course of business.
"Fixture Filings" shall mean the fixture filings with respect to the
Resort listed as of the Exchange Date on Schedule 1 to the Termination
-------- -
Agreement.
"GAAP" shall mean generally accepted accounting principles as in
effect on the relevant date of determination, consistently applied.
"Gaming Authority" shall mean the Nevada Gaming Commission, the Nevada
State Gaming Control Board, the Clark County Liquor and Gaming Licensing Board
and any other state, county or other governmental authority having
responsibility for, jurisdiction over, or regulatory authority, oversight or
supervisory responsibilities in respect of, any gaming related business operated
or contemplated to be operated at or in connection with the Resort.
"Gaming Law" shall mean all applicable provisions (i) the Nevada
Gaming Control Act and the statutes rules, and regulations promulgated
thereunder and (ii) all interpretations, decisions, judgments, orders and
decrees of any Gaming Authority.
-4-
<PAGE>
"Hollywood Park" shall have the meaning ascribed to such term in the
preamble hereto.
"IVAC" shall have the meaning ascribed to such term in the preamble
hereto.
"Majestic" shall have the meaning ascribed to such term in the
preamble hereto.
"Merger" shall have the meaning ascribed to such term in the recitals
hereto.
"Merger Agreement" shall have the meaning ascribed to such term in the
recitals hereto.
"Permitted Liens" shall mean (a) liens and encumbrances, including
rights of consent to assignment, arising under the Assumed Contracts in
accordance with the terms thereof, (b) restrictions imposed by Gaming Laws and
other applicable governmental authorities and (c) other encumbrances arising in
the ordinary course of business in connection with the operation of the Resort.
"Perishable Inventory" shall mean all liquor, beverages, foodstuff and
other consumable or perishable inventory purchased by Blue Diamond or any of its
Affiliates for consumption or use at the Resort, valued at cost on a FIFO basis.
"Purchase Option Agreement" shall mean the Purchase Option Agreement
dated as of June 30, 1993 by and among IVAC, Boomtown and Blue Diamond.
"Purchase Option Deed of Trust" shall mean the Deed of Trust and
Assignment of Rents and Security Agreement dated as of June 30, 1993, by and
among IVAC, as trustor, Nevada Title Company, a Nevada corporation, as trustee
and Blue Diamond, as beneficiary.
"Related Agreements" shall mean the Termination Agreement, the Roski
Notes, the Roski Guaranty, if applicable, the Release and all of the other
documents, instruments and agreements executed and delivered in connection with
any of the foregoing, and the transactions respectively contemplated hereby and
thereby.
"Release" shall mean the general release by each of (i) the Roski
Entities of BD Transferor, Boomtown, Blue Diamond and their respective
Affiliates of the obligations related to the Resort created by or contained in
the Blue Diamond Lease, the Assumed Contracts, the Specified Liabilities and all
obligations, liabilities and claims relating to the Resort arising or accruing
prior to the date on which Boomtown or Blue Diamond took possession of the
"Premises" (as defined in the Blue Diamond Lease) or arising or accruing on or
after the Exchange Date and (ii) BD Transferor, Boomtown and Blue Diamond of the
Roski Entities of all obligations, liabilities and claims arising under the
Affiliate Note, the Bridge Note, the Affiliate Loan Agreement, the Bridge Loan
Agreement, the Purchase Option Agreement, the Affiliate Loan Deed of Trust, the
Bridge Loan Deed of Trust and the Purchase Option Deed of Trust in substantially
the form of Exhibit A hereto.
---------
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<PAGE>
"Resort" shall mean the facility located at 3333 Blue Diamond Road,
Las Vegas, Nevada consisting of a casino, hotel, restaurant, recreational
vehicle park and related facilities, and all assets located at, used principally
in connection with, or arising principally from such facilities, including the
FF&E, the Specified Assets, certain rights under the Assumed Contracts, security
systems, customer lists, telephone numbers, books and records, user manuals,
plans, surveys, liquor and other licenses and inventories.
"Retained Employees" shall have the meaning ascribed thereto in
Section 5.6(a) of this Agreement.
"Roski" shall have the meaning ascribed to such term in the preamble
hereto.
"Roski Entities" shall mean collectively, Roski, IVAC (including
Edward P. Roski, Sr. as a general partner of IVAC) and Majestic.
"Roski Guaranty" shall mean a guaranty by Roski of the obligations of
the Designated Roski Entity hereunder and under the other Related Agreements to
which the Designated Roski Entity is a party, if required by Boomtown and
Hollywood Park, in form and substance satisfactory to Boomtown and Hollywood
Park.
"Roski Notes" shall mean (i) an unsecured promissory note made by the
Designated Roski Entity, in an initial principal amount of five million dollars
($5,000,000) having an interest rate equal to the Prime Rate, as announced by
Bank of America from time to time, plus one and one half percent (1.5%) per
annum and providing for annual principal payments of one million dollars
($1,000,000) plus accrued interest and maturing on the date that is five years
after the Exchange Date, in substantially the form of Exhibit B-1 hereto and
-----------
(ii) an unsecured promissory note, made by the Designated Roski Entity, in an
initial principal amount of $3,464,287 having an interest rate equal to the
Prime Rate, as announced by Bank of American from time to time, plus one-half
percent (.5%) per annum and providing for a payment of all principal plus
accrued interest on the date that is three (3) years after the Exchange Date, in
substantially the form of Exhibit B-2 hereto.
"Roski Stock" shall mean 714,386 shares of the common stock of
Boomtown held, as of the Effective Date, by Roski, and all shares of the common
stock of Hollywood Park into which such Boomtown common stock had then
converted, or which Roski then had a right to receive in exchange for such
Boomtown common stock.
"Roski Stock Purchase Agreement" means an agreement of even date
herewith between Roski and Hollywood Park pursuant to which Roski is selling,
transferring and conveying the Roski Stock to Hollywood Park, and Hollywood Park
is purchasing and acquiring the Roski Stock for the Roski Stock Purchase Price.
"Roski Stock Purchase Price" shall mean a note to be issued by
Hollywood Park to Roski in the principal amount of $3,464,287 pursuant to the
Roski Purchase Agreement as consideration for the purchase of the Roski Stock.
-6-
<PAGE>
"SPC" shall have the meaning ascribed to such term in the preamble
hereto.
"Specified Assets" shall mean (i) prepaid deposits with utilities with
respect to the Resort, security deposits and any other prepaid expenses, (ii)
cash in the Resort, whether in machines, gaming tables, change stations, the
gaming control center or at the hotel front desk, the restaurant or the
recreational vehicle park, (iii) Perishable Inventory (iv) applicable property
tax refunds accrued prior to the Exchange Date and not included in the tax
proration contemplated by Section 5.2 and (v) all trade receivables and all
other liquid assets other than markers (i.e., receivables and other uncontingent
payment rights convertible into cash within 90 days after the respective
issuance dates thereof), in each case, accruing or arising through the last day
prior to the Exchange Date.
"Specified Liabilities" shall mean (i) trade payables, (ii) players
points (Players Club), (iii) progressive slot winnings liability as shown on
Boomtown's books and records, (iv) caribbean stud liability, (v) advance
deposits, (vi) outstanding tokens and (vii) pre-sold concerts, with respect to
the Resort, in each case, accruing or arising through the last day prior to the
Exchange Date.
"Termination Agreement" shall have the meaning ascribed to such term
in Section 5.3(a) hereof.
"Trustee" shall mean First Trust National Association, as trustee
under the Boomtown Indenture.
1.2 Rules of Interpretation
-----------------------
(a) A reference to any document or agreement shall, unless
otherwise provided, include such document or agreement as amended, modified or
supplemented from time to time in accordance with its terms and, if applicable,
as permitted by this Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any applicable amendment
or modification to such law, or any applicable successor law.
(d) A reference to any person or entity includes its permitted
successors and permitted assignees.
(e) Accounting terms not otherwise defined herein have the
respective meanings assigned to them by GAAP applied on a consistent basis by
the accounting entity to which they refer.
-7-
<PAGE>
(f) The words "include," "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by GAAP,
which terms are defined in the Uniform Commercial Code as in effect in the State
of Nevada, shall have the respective meanings assigned to them therein.
(h) Reference to a particular "Section" refers to that section
of this Agreement unless otherwise indicated.
(i) The words "herein," "hereof," "hereunder" and words of
like import shall refer to this Agreement as a whole and not to any particular
section or subdivision of this Agreement.
2. TRANSFER OF ROSKI NOTES.
-----------------------
2.1 Transfer of Roski Notes on the Exchange Date. Subject to the
--------------------------------------------
terms and conditions of this Agreement, (i) the Designated Roski Entity agrees,
on the Exchange Date, to issue the Roski Notes to BD Transferor and (ii) BD
Transferor agrees, on the Exchange Date, to acquire and accept from Roski the
Roski Notes.
2.2 Excluded Assets. No other assets of the Roski Entities,
---------------
except those specifically listed in Section 2.1 and the cash payments
respectively contemplated by Sections 3.1 and 5.2, if applicable, shall be
transferred or deemed to be transferred hereby.
2.3 No Liabilities Assumed; Excluded Liabilities. BD Transferor
--------------------------------------------
is not assuming and shall not be responsible for any liability or obligation of
any Roski Entity, any Specified Liabilities, any obligations under Assumed
Contracts accruing on or after the Exchange Date or any other claims or
liabilities with respect to the Resort arising or accruing on or after the
Exchange Date, or any liability or obligation arising from or relating to any of
the following:
(a) any costs or expenses, including, but not limited to,
legal fees, accounting fees, consulting, other finder, broker and financing
costs incurred by Roski or his Affiliates in connection with this Agreement or
the Related Agreements or the consummation of the transactions contemplated
hereby or thereby; or
(b) any taxes owed by any Roski Entity or assessed as a result
of or in connection with the transactions contemplated hereby, including,
without limitation, any income, property, sales, use or withholding taxes.
In no event shall Hollywood Park be deemed to have assumed, or
otherwise become liable for, any liability whatsoever of any Roski Entity
(regardless of whether Hollywood Park is designated as BD Transferor).
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<PAGE>
3. TRANSFER OF BD INTEREST.
-----------------------
3.1 Transfer of BD Interest on the Exchange Date. Subject to the
--------------------------------------------
terms and conditions of this Agreement, BD Transferor agrees, on the Exchange
Date, to transfer, convey, assign and deliver to Roski, or the Designated Roski
Entity, and Roski agrees to acquire, accept and assume (or cause the Designated
Roski Entity to acquire, accept and assume) from the BD Transferor, all right,
title and interest of BD Transferor in and to the BD Interest. The parties
intend that this exchange shall occur by means of a series of contemporaneous
steps as follows: (a) Boomtown and Blue Diamond would transfer the BD Interest
to the SPC, (b) the Designated Roski Entity would convey the Roski Notes and any
cash payments to be made hereunder to the SPC and assume the liabilities
described herein, (c) the SPC would transfer and convey the BD Interest to the
Designated Roski Entity as contemplated herein, subject to the Assumed Contracts
and (d) the SPC would transfer the Roski Notes and any cash payments to be made
hereunder to Boomtown. The parties acknowledge and agree that Boomtown and
Hollywood Park may mutually agree without the consent of Roski, to utilize a
structure other than the foregoing structure, to accomplish the objectives of
the parties set forth herein, provided that such structure is economically
equivalent to the contemplated structure set forth above. It is further
acknowledged that as part of such alternative structure, Boomtown and Hollywood
Park may require Roski to continue to own and hold the Roski Stock.
3.2 Excluded Assets. No other rights, interests or assets of BD
---------------
Transferor or any of its Affiliates, except those specifically listed in Section
3.1 and the cash payment contemplated by Section 5.2, if applicable, shall be
transferred or deemed to be transferred hereby.
3.3 Liabilities Assumed. Upon and after the Exchange Date, the
-------------------
Designated Roski Entity shall be solely liable for the Specified Liabilities,
accrued liabilities relating to vacation, earned but unused under the Blue
Diamond employee benefits policy in effect as of the date hereof associated with
the employees hired by Roski pursuant to Section 5.5(F) and liabilities arising
under the Assumed Contracts and all other costs, expenses, claims, liabilities
and obligations of the Resort, of every kind and nature, in each case, arising
or accruing on or after the Exchange Date. The Designated Roski Entity shall
take such actions to assume the liabilities of the Resort accruing after the
Exchange Date under the Assumed Contracts as may be necessary to substitute the
Designated Roski Entity for BD Transferor or, as applicable, any of its
Affiliates, and/or shall relieve BD Transferor and its Affiliates of all
liability thereunder. Except for the Specified Liabilities, amounts accruing
under the Assumed Contracts on or after the Exchange Date and all of the other
costs, expenses, claims, liabilities and obligations arising on or after the
Exchange Date in connection with the Resort, the Designated Roski Entity will
not assume or otherwise become responsible for any liability or obligation of
Boomtown, Blue Diamond, Hollywood Park or any of their respective Affiliates, or
any other claims or liabilities whatsoever, including, any costs or expenses,
including, but not limited to, legal fees, accounting fees, consulting, other
finder, broker and financing costs incurred by Boomtown, Blue Diamond, Hollywood
Park, BD Transferor or any of their
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<PAGE>
Affiliates in connection with this Agreement or the Related Agreements or the
consummation of the transactions contemplated hereby or thereby.
4. CASH PAYMENT. Subject to the terms and conditions of this Agreement,
------------
each of the parties agrees to make the cash payments respectively contemplated
to be made by such party in Sections 3.1 and 5.2, as applicable.
5. EXCHANGE OF ASSETS.
------------------
5.1 Exchange Date. Subject to a restructuring in accordance with
-------------
Section 3.1, on the Exchange Date, (a) BD Transferor shall transfer, convey,
assign and deliver to Roski, and Roski shall acquire, accept and assume from BD
Transferor, the BD Interest and (b) Roski shall deliver to BD Transferor, and BD
Transferor shall acquire and accept from Roski, the Roski Notes. Each party
shall deliver to the other such endorsements, assignments, releases and other
instruments as the other party shall reasonably request or as necessary to vest
in the other party valid and marketable title, free and clear of all liens or
encumbrances (except, with respect to the BD Interest, Permitted Liens) to the
BD Interest, in the case of Roski, and to the Roski Notes, in the case of BD
Transferor.
5.2 Cash Payment; Proration. On the Exchange Date, if the amount
-----------------------
of Specified Assets is greater than the amount of Specified Liabilities as of
the Exchange Date, then Roski shall pay to BD Transferor an amount equal to the
amount of Specified Assets less the amount of Specified Liabilities. On the
Exchange Date, if the amount of Specified Liabilities is greater than the amount
of Specified Assets as of the Exchange Date, then BD Transferor shall pay to
Roski an amount equal to the amount of Specified Liabilities less the amount of
Specified Assets. In addition, all outstanding taxes, rent, utilities and
payments under the Assumed Contracts shall be pro rated as of the Exchange Date,
so that all such amounts accruing prior to the Exchange Date shall be for the
account of Blue Diamond or Boomtown and all such amounts accruing from and after
the Exchange Date shall be for the account of the applicable Roski Entity.
5.3 Deliveries by BD Transferor. On the Exchange Date, subject to
---------------------------
the terms and conditions hereof, BD Transferor shall deliver to Roski each of
the following:
(a) a termination agreement in substantially the form of
Exhibit C hereto (the "Termination Agreement"), duly executed by BD Transferor,
- ---------
Boomtown and Blue Diamond terminating all of the respective rights and
obligations of BD Transferor and the Roski Entities under the Affiliate Note,
the Bridge Note, the Affiliate Loan Agreement, the Bridge Loan Agreement, the
Purchase Option Agreement, the Affiliate Loan Deed of Trust, the Bridge Loan
Deed of Trust, the Purchase Option Deed of Trust, the Blue Diamond Lease and all
or other documents relating to the Resort and the relationship among Boomtown,
Blue Diamond and any one or more of the Roski Entities, providing, inter alia,
for the acceptance by Roski of BD Transferor's transfer of the BD Interest in a
condition which complies with the terms of the Blue Diamond Lease and this
Agreement;
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<PAGE>
(b) the Affiliate Note, marked canceled;
(c) the Bridge Note, marked canceled;
(d) a discharge of the Affiliate Loan Deed of Trust, in
recordable form;
(e) a discharge of the Bridge Loan Deed of Trust, in
recordable form;
(f) a discharge of the Purchase Option Deed of Trust, in
recordable form;
(g) a quitclaim deed, in recordable form, regarding the Resort
(including BD Transferor's interest under the Blue Diamond Lease and the
Purchase Option Agreement);
(h) a discharge in recordable form of the Construction and
Permanent Deed of Trust, Security Agreement and Fixture Filing with Assignment
of Rents dated as of November 10, 1993, among Blue Diamond, as trustor, Nevada
Title Company, as trustee, and the Trustee, as beneficiary;
(i) a discharge in recordable form of the Construction and
Permanent Deed of Trust, Security Agreement and Fixture Filing with Assignment
of Rents (Subordinated) dated as of November 10, 1993, among Blue Diamond, as
trustor, Nevada Title Company, as trustee, and Boomtown, as beneficiary;
(j) a termination in recordable form of the Collateral
Assignment of Deed of Trust dated as of November 10, 1993, between Boomtown and
the Trustee;
(k) UCC-3 termination statements, terminating the Fixture
Filings;
(l) the Release, duly executed by BD Transferor, Blue Diamond
and Boomtown;
(m) assignment agreements and any such other documents,
consents, authorizations and waivers as may be reasonably required by Roski,
lessors or other contracting parties, to assign all of BD Transferor's rights
and obligations under the Assumed Contracts;
(n) bills of sale for all personal property owned by BD
Transferor and included in the BD Interest;
(o) vehicle certificates of title and appropriate transfer
documents for all automobiles or other vehicles owned by BD Transferor and
included in the BD Interest;
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<PAGE>
(p) a list of all Employees employed at the Resort as of the
business day prior to the Exchange Date;
(q) an accounting of all cash on hand and Perishable Inventory
on the premises of the Resort on the business day prior to the Exchange Date;
and
(r) an accounting of Specified Assets and Specified
Liabilities.
5.4 Deliveries by Roski. On the Exchange Date, subject to the
-------------------
terms and conditions hereof, Roski shall deliver to BD Transferor each of the
following:
(a) the Termination Agreement, duly executed by Roski and each
other affected Roski Entity;
(b) the Roski Notes;
(c) the Release, duly executed by each affected Roski Entity;
and
(d) assumption agreements and other documents as may be
reasonably required by BD Transferor to cause Roski to assume the obligations of
BD Transferor under the Assumed Contracts.
5.5 Additional Undertakings by Roski. In addition to the transfer
--------------------------------
of the property listed in Section 2.1 and the deliveries listed in Section 5.4,
each applicable Roski Entity agrees as follows:
(a) Roski shall resign as a director of Boomtown, effective as
of the Exchange Date.
(b) Roski shall take such action as is necessary to cancel the
options on the stock of Boomtown received by Roski in connection with his
service as a director of Boomtown, effective as of the Exchange Date.
(c) From and after the Exchange Date, Roski shall maintain the
confidentiality of any non-public information pertaining to Boomtown, Blue
Diamond, Hollywood Park or BD Transferor acquired by him in his capacity as a
director of Boomtown; provided, however, that Roski shall not be obligated to
maintain the confidentiality of any information which is already in the public
domain through no act of Roski or which is required to be disclosed by court
order or applicable law.
(d) No Roski Entity shall use the name "Boomtown," or any
other trademark, trade name, service mark or similar property of Boomtown or any
of its Affiliates, after the 180th day following the Exchange Date, and no Roski
Entity shall at any time use the name "Hollywood Park" or any other trademark,
tradename, service mark or similar property of Hollywood Park or any of its
Affiliates, except by agreement with Hollywood Park or such
-12-
<PAGE>
Affiliates. So long as any Roski Entity uses the name "Boomtown", the Roski
Entities shall maintain the condition, service and operations of the Resort in
substantial conformity with those maintained by Blue Diamond and Boomtown prior
to the Exchange Date. The applicable Roski Entities and BD Transferor shall
enter into a trademark license agreement on the Exchange Date, including the
protections to Boomtown set forth in the Trademark License Agreement dated as of
June 30, 1993, by and between Boomtown and Blue Diamond.
(e) After the Exchange Date, the Roski Entities shall allow
the BD Transferor, its Affiliates and designees or appropriate governmental
agencies reasonable access to all books and records kept in connection with the
Resort prior to the Exchange Date, as reasonably requested by the BD Transferor
for legitimate business purposes. The parties will develop and follow a mutually
agreed upon retention policy with respect to the books and records of the
Resort.
(f) Prior to the Exchange Date, the Designated Roski Entity,
shall make offers of employment to substantially all of the Employees; provided,
however, that no Roski Entity shall attempt to solicit, or interfere in any
manner with, the employment of the Retained Employees.
(g) Each Roski Entity agrees, if Boomtown determines that it
is appropriate to solicit the consents to the Blue Diamond Swap from the holders
of the notes issued pursuant to the Boomtown Indenture, to cooperate as
reasonably requested by Boomtown in such consent solicitation and to cooperate
reasonably in any other actions which may be necessary to effect the
transactions contemplated hereby, regardless of the structure or form of the
Blue Diamond Swap; provided, that no Roski Entity shall be required to incur any
expense or liability in connection therewith.
(h) Roski or the Designated Roski Entity agrees to give such
notices as may be required by the Worker Adjustment and Retraining Notification
Act.
(i) The Designated Roski Entity, if not a party to this
Agreement, shall become a party to this Agreement.
5.6 Additional Undertakings by Boomtown, Blue Diamond, Hollywood
------------------------------------------------------------
Park and BD Transferor. In addition to the transfer of the property listed in
- ----------------------
Section 5.3, Boomtown, Blue Diamond, Hollywood Park and BD Transferor agree as
follows:
(a) Boomtown, Blue Diamond and the BD Transferor recognize
that the Designated Roski Entity will generally need to retain the services of
the Employees (other than the Retained Employees as defined below) in order to
operate the Resort in a businesslike and efficient manner following the Exchange
Date. Accordingly, Boomtown, Blue Diamond and BD Transferor agree not to
transfer any Employees from the Resort to their other operations after the
Effective Date and agree to terminate, as of the Exchange Date, all Employees.
Notwithstanding the foregoing, Boomtown, Blue Diamond or BD Transferor may
designate, by means of a written notice received by Roski within thirty (30)
days after the
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<PAGE>
Effective Date, up to five (5) Employees as "Retained Employees" and Boomtown,
Blue Diamond and BD Transferor shall have the right to transfer the Retained
Employees from the Resort to their other operations and shall have no obligation
to terminate the Retained Employees. Following the Exchange Date, none of
Boomtown, Blue Diamond or BD Transferor, nor any of their Affiliates, shall
attempt to solicit from the Designated Roski Entity the Employees hired by the
Designated Roski Entity or otherwise interfere in their employment at the
Resort; provided that this Section 5.6 shall not be construed to restrain
Boomtown, Blue Diamond, BD Transferor or their Affiliates from hiring former
employees of the Designated Roski Entity.
(b) Boomtown, Blue Diamond, Hollywood Park and BD Transferor
shall maintain the confidentiality of any nonpublic information pertaining to
the Resort, including Resort-specific customer lists and other information
relating to patrons of the Resort; provided, however, that Boomtown, Blue
Diamond, Hollywood Park and BD Transferor shall not be obligated to maintain the
confidentiality of any information which is already in the public domain through
no act of Boomtown, Blue Diamond, Hollywood Park or BD Transferor or which is
required to be disclosed by court order or applicable law.
(c) Boomtown, Blue Diamond, and BD Transferor shall not extend
any Assumed Contract by a period of greater than one (1) year, or otherwise
amend any Assumed Contract, without obtaining the consent of Roski, which
consent shall not be unreasonably withheld.
(d) Boomtown, Blue Diamond, and BD Transferor agree to allow
Roski reasonable access to all books and records necessary to verify the amount
of Specified Assets and Specified Liabilities as of the Exchange Date, to
participate in taking a joint inventory with Roski of cash in the Resort, FF&E
and Perishable Inventory on the Exchange Date and to assist Roski in making a
general inspection of the Resort on the Exchange Date.
(e) If applicable, BD Transferor shall be designated by
Boomtown and Hollywood Park to facilitate, in Hollywood Park's and Boomtown's
judgment, the consummation of the Blue Diamond Swap. Once designated, if not a
party to this Agreement, Boomtown and Hollywood Park shall cause BD Transferor
to become a party to this Agreement.
(f) Boomtown, Blue Diamond and BD Transferor acknowledge the
need for Roski to obtain the information necessary to effect a smooth transition
of the operations of the Resort and agree to permit designees of the Roski
Entities access at reasonable times during customary business hours onto the
premises of the Resort; provided that no activities by such designees shall
materially interfere with the operations of the Resort.
(g) Blue Diamond agrees to change its name to a name not
including the words "Blue Diamond" prior to the Exchange Date so as to permit
the use of such a name
by Roski.
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<PAGE>
(h) Boomtown and Hollywood Park shall take appropriate steps
to comply with the Boomtown Indenture so as to effect the transactions
contemplated hereby, by, at Boomtown and Hollywood Park's sole election, any of
the following means: (i) soliciting, commencing no later than 45 days prior to
the scheduled termination date of the Merger Agreement, as the same may be
extended from time to time, the consent of the holders of the notes issued
pursuant to the Boomtown Indenture to the Blue Diamond Swap or (ii) such other
means, utilizing such other transactional structure, as Boomtown and Hollywood
Park may devise, in compliance with the Boomtown Indenture (including without
limitation, effecting, prior to or contemporaneously with the Exchange Date, an
asset disposition from Boomtown and Blue Diamond to Hollywood Park or an
Affiliate of Hollywood Park, in compliance with the asset sale restrictions
contained in the Boomtown Indenture).
(i) Boomtown and Blue Diamond shall cooperate with the Roski
Entities in providing such notice to the employees of Blue Diamond as may be
required by the Worker Adjustment and Retraining Notification Act.
6. REPRESENTATIONS AND WARRANTIES
------------------------------
6.1 Representations and Warranties of the Roski Entities. Each
----------------------------------------------------
Roski Entity (except Edward P. Roski, Sr. and Roski hereby represents and
warrants on behalf of Edward P. Roski, Sr.) represents and warrants to BD
Transferor and its Affiliates, as of the Effective Date and the Exchange Date
(unless a specific date is referenced below), jointly and severally, as follows:
(a) Legal Capacity. Roski is an individual with capacity to
--------------
contract; he has all requisite power and authority and is entitled to carry on
his business as now being conducted, and to own, lease or operate his properties
in the places where his business is now conducted and where his properties are
now owned, leased or operated.
Each other Roski Entity (other than Edward P. Roski, Sr.)
is duly organized and validly existing under the laws of its jurisdiction of
organization. Such Roski Entity has all requisite power and authority to, and is
entitled to, carry on its business as now conducted and to own or lease its
properties as and in the places where such business is now conducted and such
properties are now owned, leased or operated. Such Roski Entity is qualified to
do business in all foreign jurisdictions in which it is required to be so
qualified, except where the failure to be so qualified would not have a material
adverse effect on the business or assets of such Roski Entity.
(b) Authorization, etc. Each Roski Entity has all requisite
------------------
power and full legal right to enter into this Agreement and the Related
Agreements to which such Roski Entity is a party and to consummate the
transactions contemplated hereby and thereby. This Agreement and each of the
Related Agreements to which such Roski Entity is a party have been duly executed
and delivered by and constitute the valid and binding obligations of such Roski
Entity, enforceable in accordance with their respective terms, except insofar as
the enforceability thereof may be limited by applicable bankruptcy, insolvency,
receivership,
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<PAGE>
reorganization, moratorium or other laws providing relief to debtors, or laws or
principles of equity generally.
(c) Execution, Delivery and Performance. Subject to
-----------------------------------
obtaining the Approvals, neither execution and delivery nor performance of this
Agreement or any of the Related Agreements to which any Roski Entity is a party
by such Roski Entity will, with or without the giving of notice or the passage
of time, or both, conflict with, result in a default, right to accelerate by any
other party to, require any consent not obtained prior to the Exchange Date with
respect to, or result in the creation of any lien, charge or encumbrance
pursuant to any provisions of any material indenture, bond, note, loan
agreement, guaranty, franchise, mortgage, deed of trust, lease or other
agreement by which such Roski Entity is bound or conflict with, result in a
default, right to accelerate by any other party to, or result in the creation of
any lien, charge or encumbrance pursuant to any law, ordinance, rule or
regulation, or any order, judgment, award or decree to which such Roski Entity
is a party or by which it or any part of the Roski Notes may be bound or
affected.
(d) Roski Notes etc. The Roski Notes will, on the Exchange
---------------
Date, be the valid and binding obligations of the Designated Roski Entity,
enforceable against the Designated Roski Entity in accordance with its terms.
The Roski Guaranty, if required by Boomtown and Hollywood Park, will be the
valid and binding obligation of Roski, enforceable against Roski in accordance
with its terms. No part of the Roski Notes on the Exchange Date will be subject
to any mortgage, deed of trust, pledge, lien, charge, security interest,
encumbrance, restriction, lease, license, easement, shop rights, covenants not
to sue, or adverse claim of any kind or nature, or other encumbrances of any
kind, rights of use or occupancy, or any other rights or privileges, other than
as set forth in the Related Agreements. In addition to the Roski Stock, 5,001
shares of Boomtown common stock held by Roski and the options to acquire
Boomtown common stock held by Roski in his capacity as a Boomtown director, as
of the Effective Date no Roski Entity owns any other securities of Boomtown or
any of its Affiliates, or rights (contingent or otherwise) to acquire securities
of Boomtown or any of its Affiliates.
(e) Representations Complete. There is no fact known to
------------------------
Roski which could reasonably be expected to affect in a materially adverse
manner, the enforceability of the Roski Notes or the ability of any Roski Entity
to carry out the transactions contemplated by this Agreement and the Related
Agreements or for the Designated Roski Entity to satisfy such Person's
obligations under the Roski Notes.
6.2 Representations and Warranties of Boomtown, Blue Diamond,
---------------------------------------------------------
Hollywood Park and BD Transferor. Each of Boomtown, Blue Diamond and BD
- --------------------------------
Transferor (other than Hollywood Park) jointly and severally represents and
warrants to the Roski Entities, and, with respect to Subsections 6.2(a)-(c),
Hollywood Park severally represents and warrants to the Roski Entities as to
itself, as of the Effective Date and the Exchange Date (unless a specific date
is referenced below), as follows:
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<PAGE>
(a) Organization. Such entity is duly organized and validly
------------
existing under the laws of its jurisdiction of incorporation. Such entity has
all requisite power and authority to, and is entitled to, carry on its business
as now conducted and to own or lease its properties as and in the places where
such business is now conducted and such properties are now owned, leased or
operated. Such entity is qualified to do business in all foreign jurisdictions
in which it is required to be so qualified, except where the failure to be so
qualified would not have a material adverse effect on the business or assets of
such entity.
(b) Authorization, etc. Such entity has all requisite
------------------
corporate power and authority to enter into this Agreement and the Related
Agreements to which it is or is to become a party and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Related Agreements to which it is or is to become a party by
such entity and the consummation by such entity of the transactions contemplated
hereby and thereby have been duly authorized by all requisite action of such
entity. This Agreement has been, and the Related Agreements to which such entity
is or is to become a party have been or will be, duly executed and delivered by
and constitute the valid and binding obligations of such entity, enforceable in
accordance with their respective terms, except insofar as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, receivership,
reorganization, moratorium or other laws providing relief for debtors or
principles of equity generally.
(c) Execution, Delivery and Performance. Subject to
-----------------------------------
obtaining the Approvals and compliance prior to the Exchange Date with the
Boomtown Indenture, neither execution and delivery nor performance of this
Agreement by such entity will, with or without the giving of notice or the
passage of time, or both, conflict with, result in a default, right to
accelerate by any other party to, or result in the creation of any lien, charge
or encumbrance pursuant to any provisions of such person's organizational
documents or by-laws or any material franchise, mortgage, deed of trust, lease,
license, agreement or understanding, or conflict with, result in a default,
right to accelerate by any other party to, or result in the creation of any
lien, charge or encumbrance pursuant to any law, ordinance, rule or regulation,
or any order, judgment, award or decree to which such entity is a party or by
which it may be bound or affected.
(d) Title to BD Interest. BD Transferor will on the Exchange
--------------------
Date, immediately prior to the transfer to Roski contemplated hereby, have valid
and marketable title to, and unrestrained right to transfer, all of the BD
Interest. No part of the BD Interest will, prior to such transfer on the
Exchange Date, be subject to any mortgage, deed of trust, pledge, lien, charge,
security interest, encumbrance, restriction, lease, license, easement, shop
rights, covenants not to sue, or adverse claim of any kind or nature, or other
encumbrances of any kind, rights of use or occupancy, or any other rights or
privileges other than Permitted Liens. BD Transferor makes no representation or
warranty as to any interest in the Resort owned by any Roski Entity prior to the
Exchange Date or the effect of any encumbrance created by any Roski Entity on
the Resort.
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<PAGE>
(e) Liabilities. Other than the Specified Liabilities and
-----------
the liabilities of Blue Diamond and Boomtown arising under the Boomtown
Indenture and the Blue Diamond Lease and certain related documents, the Assumed
Contracts constitute all of the indebtedness and lease obligations of Boomtown,
Blue Diamond, Hollywood Park and BD Transferor incurred in connection with the
Resort.
7. CONDITIONS PRECEDENT.
--------------------
7.1 Conditions to Execution and Delivery of this Agreement by
---------------------------------------------------------
Boomtown. This Agreement shall not take effect until Boomtown, Blue Diamond
- --------
and Hollywood Park shall have received an original or facsimile counterpart of
this Agreement, duly executed and delivered by the appropriate Roski Entities.
7.2 Conditions to Execution and Delivery of this Agreement by
---------------------------------------------------------
Roski. This Agreement shall not take effect until each of the Roski Entities
- -----
(excluding Edward P. Roski, Sr.) shall have received an original or facsimile
counterpart of this Agreement, duly executed and delivered by Boomtown, Blue
Diamond and Hollywood Park.
7.3 Conditions to Exchange by BD Transferor. The obligation of BD
---------------------------------------
Transferor to transfer to Roski the BD Interest in exchange for the Roski Notes
is subject to the satisfaction (or waiver by BD Transferor) of the conditions
set forth below:
(a) The representations and warranties made by the Roski
Entities in this Agreement and the Related Agreements shall be true and correct
in all material respects on and as of the Exchange Date with the same effect as
if made on and as of the Exchange Date, except as otherwise contemplated by this
Agreement and the Related Agreements. Each Roski Entity shall have performed and
complied with all agreements, covenants and conditions on the part of such Roski
Entity required to be performed or complied with on or prior to the Exchange
Date in all material respects.
(b) The execution, delivery and performance of this Agreement
and the Related Agreements and the consummation of the transactions contemplated
by this Agreement and the Related Agreements shall not violate any law, rule or
regulation applicable to BD Transferor, including without limitation, Gaming
Laws, federal and state securities laws or any order, decree or judgment of any
court or governmental body having competent jurisdiction, and no order shall
have been issued by a court of competent jurisdiction restraining, prohibiting
or rendering unlawful the execution, delivery and performance of this Agreement
or the Related Agreements or the consummation of the transactions contemplated
by this Agreement and the Related Agreements. No default or breach by any Roski
Entity shall have occurred and be continuing in respect of any document,
instrument or agreement comprising a part of the BD Interest, except as would
not be material after giving effect to the transactions contemplated hereby as
of the Exchange Date.
(c) All Approvals necessary to effect the transactions
hereunder and under the Related Agreements shall have been obtained and shall be
in full force and effect.
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<PAGE>
No Gaming Authority shall have indicated to the parties hereto that in, the
opinion of such Gaming Authority, any Approvals required for the consummation of
the transactions contemplated hereby are likely to be revoked or rejected. No
registration with any governmental authority or agency (except for filing and
recording of UCC statements and real estate documents) which has not been
effected shall be necessary to effect the transactions contemplated hereby.
(d) Roski shall have duly delivered each item listed in
Section 5.4.
(e) All of the conditions precedent to the Merger shall have
been satisfied or waived and the Merger shall have been consummated.
(f) The consummation of the transactions contemplated by this
Agreement and the Stock Purchase Agreement shall not, as a result of any changes
in tax law occurring after the Effective Date (including without limitation
statutory, regulatory, administrative or judicial changes) create a material
risk that the contemplated treatment of the Merger as a tax-free reorganization
would be impaired or adversely affected in the view of either Boomtown or
Hollywood Park, based upon advise of its respective tax counsel.
(g) Subject to a restructuring in accordance with Section 3.1,
the transactions contemplated by the Roski Stock Purchase Agreement, including
the sale and transfer of the Roski Stock to Hollywood Park, shall have been
consummated.
7.4 Conditions to Exchange by Roski. The obligation of Roski to
-------------------------------
transfer to BD Transferor the Roski Notes in exchange for the BD Interest
hereunder shall be subject to the satisfaction (or waiver by Roski) of the
conditions set forth below:
(a) The representations and warranties made by Boomtown, Blue
Diamond, Hollywood Park and BD Transferor in this Agreement and the Related
Agreements shall be true and correct in all material respects on and as of the
Exchange Date with the same effect as if made on and as of the Exchange Date,
except as otherwise contemplated by this Agreement and the Related Agreements.
Each of Boomtown, Blue Diamond, Hollywood Park and BD Transferor, as applicable,
shall have performed and complied with all agreements, covenants and conditions
on the part of such entity required to be performed or complied with on or prior
to the Exchange Date in all material respects.
(b) The execution, delivery and performance of this Agreement
and the Related Agreements and the consummation of the transactions contemplated
by this Agreement and the Related Agreements shall not violate any law, rule or
regulation applicable to the Roski Entities, including, without limitation,
Gaming Laws, federal and state securities laws, or any order, decree or judgment
of any court or governmental body having competent jurisdiction, and no order
shall have been issued by a court of competent jurisdiction restraining,
prohibiting or rendering unlawful the execution, delivery and performance of
this Agreement or the Related Agreements or the consummation of the transactions
contemplated by this Agreement and the Related Agreements. No default or breach
on the part of
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<PAGE>
Boomtown, Blue Diamond, Hollywood Park or BD Transferor shall have occurred and
be continuing in respect of any document, instrument or agreement comprising a
part of the BD Interest, except as would not be material after giving effect to
the transactions contemplated hereby as of the Exchange Date.
(c) All Approvals necessary to effect the transactions
contemplated hereby and by the Related Agreements and for the Designated Roski
Entity (or its designee) to operate the Resort shall have been obtained. No
Gaming Authority shall have indicated to the parties hereto that the opinion of
such Gaming Authority, any Approvals required for the consummation of the
transactions contemplated hereby are likely to be revoked or rejected. No
registration or filing with any governmental agency or authority (other than UCC
filings and recordings in the real estate records) which has not been effected
shall be necessary to effect the transaction contemplated hereby.
(d) BD Transferor shall have duly delivered each item listed
in Section 5.3 and any other documents of transfer Roski may reasonably request
to effect the transfer of the BD Interest.
8. INDEMNIFICATION.
---------------
8.1 Indemnification by the Roski Entities. The Roski Entities
-------------------------------------
party hereto jointly and severally agree to indemnify and hold harmless
Boomtown, Blue Diamond and BD Transferor and their respective Affiliates,
officers, directors, employees, agents and attorneys against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses of investigation incurred by any of them (a) as a
result of any inaccuracy of a representation or breach of any warranty by any
Roski Entity contained herein, in any Related Agreement delivered pursuant
hereto or in the Roski Stock Purchase Agreement by any Roski Entity, or any
failure by any Roski Entity to perform or comply with any covenant of such Roski
Entity contained herein, in any Related Agreement or in the Roski Stock Purchase
Agreement or any other document delivered by any Roski Entity pursuant hereto or
thereto, (b) related to any costs, expenses, claims, liabilities or obligations
incurred in connection with the Resort arising or accruing prior to the
"Original Term" of the Blue Diamond Lease (as defined therein) or arising or
accruing on or after the Exchange Date (including, but not limited to, any
costs, expenses, claims, liabilities or obligations arising in connection with
the Assumed Contracts or Hazardous Substances) or in connection with the
Specified Liabilities as of the Exchange Date, other than the consequences of
any act or omission by Boomtown, Blue Diamond or any of their respective
Affiliates, officers, directors, agents, employees or attorneys, (c) related to
any guaranties made by Boomtown, Blue Diamond or any of their Affiliates of any
obligations of IVAC or any of its Affiliates under construction or development
financing relating to the Resort or any bond or similar obligations with Clark
County, Nevada, or (d) as a result of acts or omissions of the Roski Entities,
including but not limited to acts or omissions related to the construction of
the Resort.
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<PAGE>
8.2 Indemnification by Boomtown, Blue Diamond and BD Transferor.
-----------------------------------------------------------
Boomtown, Blue Diamond and BD Transferor jointly and severally agree to
indemnify and hold harmless the Roski Entities and their respective Affiliates,
officers, directors, employees, agents and attorneys against all claims, losses,
liabilities, damages, deficiencies, costs and expenses, including reasonable
attorneys' fees and expenses of investigation incurred by any of them (a) as a
result of any inaccuracy of a representation or breach of any warranty by
Boomtown, Blue Diamond or BD Transferor contained herein or in any Related
Agreement delivered pursuant hereto by Boomtown, Blue Diamond or BD Transferor,
or any failure by Boomtown, Blue Diamond or BD Transferor to perform or comply
with any covenant of Boomtown, Blue Diamond or BD Transferor contained herein or
in any Related Agreement, or any such other document delivered by Boomtown, Blue
Diamond or BD Transferor pursuant hereto or thereto and (b) related to any
costs, expenses, claims, liabilities or obligations of the Resort both accruing
during the "Original Term" of the Blue Diamond Lease (as defined therein) and
arising or accruing prior to the Exchange Date (including, but not limited to,
any costs, expenses, claims, liabilities, or obligations arising in connection
with the Assumed Contracts or, except as set forth below, Hazardous Substances)
other than (i) the Specified Liabilities as of the Exchange Date, (ii)
obligations accruing under the Assumed Contracts on or after the Exchange Date
and (iii) the consequences of any act or omission by any of the Roski Entities
or any of their respective Affiliates, officers, directors, employees, agents or
attorneys. Notwithstanding the foregoing, (i) in no event shall the BD
Transferor (other than Blue Diamond and Boomtown) have any liability or
responsibility for any "Hazardous Substances" (as defined in the Blue Diamond
Lease) or any other environmental matters with respect to the Resort, (ii) in no
event shall the liability of Boomtown for any such Hazardous Substances or any
other environmental matters with respect to the Resort exceed the remaining
principal amount of the Note the form of which is attached hereto as Exhibit B-1
as of the date a claim for indemnity is made hereunder, and (iii) the extent of
the liability of Boomtown and Blue Diamond for all Hazardous Substances or other
environmental matters shall be limited to applicable law or to the extent of
liability under Blue Diamond's paragraph 6.2(c) of the Blue Diamond Lease. In
addition, from and after the Exchange Date, Boomtown shall continue at all times
to indemnify Roski with respect to his actions as a director of Boomtown to the
same extent as it is obligated to provide such indemnification immediately prior
to the Exchange Date. In no event shall the provisions of this section 8.2
subject Hollywood Park to any indemnity obligation or other liability,
contingent or otherwise, regardless of whether Hollywood Park is designated as
BD Transferor.
8.3 Procedure. Upon obtaining knowledge of the institution of any
---------
action, proceeding, or other event which could give rise to a claim of indemnity
pursuant to this Section 8, the party seeking indemnification (the "indemnified
party") shall promptly give written notice thereof to the other party (the
"indemnifying party"); provided, however, that the failure to give such notice
-------- -------
shall not relieve the indemnifying party of its obligations under this Section 8
unless it is materially prejudiced by such failure. Each party will cooperate
with the other in determining the validity of any such claim or assertion. If
such claim or demand relates to a claim or demand asserted by a third party, the
indemnifying party shall have the right at its expense to employ counsel
satisfactory to the indemnified party to defend such claim or demand and the
indemnified party shall have the right, but not the obligation, to
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<PAGE>
participate in the defense of any such claim or demand at its expense. Each
party agrees not to settle or compromise any such third party suit, claim or
proceeding without the prior written consent of the other, which consent shall
not be unreasonably withheld. The indemnified party shall make available to the
indemnifying party all records and other materials reasonably required by it in
contesting a claim or demand asserted by a third party against the indemnified
party and shall cooperate in the defense thereof.
9. ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES.
--------------------------------------------------
9.1 Approvals. The parties agree to use their best efforts and to
---------
cooperate with each other to obtain the Approvals necessary to effect the
transactions hereunder.
9.2 Consents, Authorizations and Waivers. The parties agree to use
------------------------------------
their best efforts and to cooperate with each other to obtain, prior to the
Exchange Date, all consents, authorizations or waivers necessary to assign the
Assumed Contracts to the Designated Roski Entity. If the parties are unable to
obtain any consents, authorizations or waivers necessary to assign any of the
Assumed Contracts, the Designated Roski Entity shall indemnify the BD Transferor
against any claims or losses resulting from the failure to obtain such consents,
authorizations or waivers. The parties agree that any failure to so obtain such
consents, authorizations or waivers shall not prevent the parties from, or
relieve the parties from the obligation of, consummating the transactions
contemplated hereunder.
9.3 Transfer Taxes. The parties acknowledge and agree that all
--------------
transfer, stamp, recording and similar taxes assessed or otherwise payable by
reason of the conveyances contemplated hereby, or in connection with the Blue
Diamond Swap, shall be for the account of the Roski Entities. The parties agree
to cooperate with each other to the extent legally permitted to minimize any
such taxes and charges.
9.4 Additional Deliveries; Further Assurances. After the Effective
-----------------------------------------
Date, each party to this Agreement shall, at the request of the other, furnish,
execute, and deliver such documents, instruments, certificates, notices or other
further assurances as the requesting party shall reasonably request as necessary
or desirable to effect complete consummation of this Agreement, the Related
Agreements and the transactions contemplated hereby and thereby. After the
Exchange Date, Roski and its Affiliates shall, at the request of BD Transferor,
(a) execute and deliver and file or record, such further instruments of sale,
conveyance, transfer and assignment, and (b) take such other actions as BD
Transferor may reasonably request in order to effectuate the purposes hereof.
After the Exchange Date, BD Transferor and its Affiliates shall, at the request
of Roski, (a) take such further actions as may be reasonably necessary to vest
in the applicable Roski Entity title to the BD Interest, (b) execute and deliver
and file or record, such further instruments of sale, conveyance, transfer and
assignment, and (c) take such other actions, as Roski may reasonably request in
order effectively to sell, convey, transfer and assign the BD Interest to Roski
and otherwise to effectuate the purposes hereof.
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<PAGE>
9.5 Maintenance of Resort Business. During the period from the
------------------------------
Effective Date until the Exchange Date, Boomtown, Blue Diamond and BD Transferor
(but not Hollywood Park, regardless of whether Hollywood Park is designated as
BD Transferor) agree to operate the Resort in all material respects in the
ordinary course of business at not less than the same standards of operation,
maintenance, services and advertising as are in effect as of the Effective Date
and agree to remain in compliance in all material respects with the Blue Diamond
Lease at all times. Without limiting the foregoing, from the Effective Date
until the Exchange Date Boomtown, Blue Diamond and BD Transferor agree not to
transfer from the Resort any material assets thereof.
9.6 Director's Insurance. Boomtown shall continue to provide
--------------------
insurance covering Roski with respect to his actions as a director of Boomtown,
to the extent that such insurance is provided for directors or former directors
of Boomtown, as set forth in the Merger Agreement.
10. TERMINATION.
-----------
10.1 Termination. If (a) the Exchange Date has not occurred prior
-----------
to or on June 30, 1997, or, if the Merger Agreement is extended, such later date
as may then be the scheduled termination date of the Merger Agreement, or such
later date as may have been agreed to by the parties in writing, or (b) the
Merger Agreement has terminated in accordance with its terms, then this
Agreement and the Related Agreements shall, on such date, automatically and
without further action by either party, terminate and have no further force and
effect. In addition, if any representation or warranty made by any party herein
or in any Related Agreement shall prove to have been false, inaccurate or
misleading in any material respect when made, then the party to whom such
representation or warranty is made may terminate this Agreement and the Related
Agreements by notice to the breaching party any time prior to the Exchange Date.
In the event that this Agreement shall terminate by reason of the material
falsity, inaccuracy or misleading character of any representation or warranty,
the party to whom such representation or warranty is made shall retain, both
before and after such termination, all rights and remedies available under
applicable law.
10.2 Other Merger. Notwithstanding any other provision of this
------------
Agreement, if Boomtown enters into a merger or similar transaction with any
person or entity other than Hollywood Park, the failure of the Merger to be
consummated shall not result in the termination of this Agreement or any of the
Related Agreements except as to Hollywood Park. Boomtown shall cause any such
person or entity with which it plans to enter into a merger or similar
transaction to become a party to this Agreement and the Related Agreements and
to assume the obligations of Hollywood Park hereunder and thereunder. Nothing in
this Agreement shall alter the rights or obligations of Hollywood Park and
Boomtown under the Merger Agreement.
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<PAGE>
11. MISCELLANEOUS.
-------------
11.1 Changes, Waivers, etc. Neither this Agreement nor any
---------------------
provision hereof may be changed, waived, discharged or terminated orally, except
by a statement in writing which references this Agreement and is signed by the
party against whom enforcement of the change, waiver, discharge or termination
is sought.
11.2 Payment of Fees and Expenses. Each of the parties hereto shall
----------------------------
pay its own respective fees and expenses incurred in connection herewith. In the
event of any litigation or other proceeding resulting from a dispute hereunder,
the legal fees, costs and expenses of the prevailing party shall be paid by the
losing party.
11.3 Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first-class postage prepaid, registered or certified mail,
or delivered via overnight courier;
If to Hollywood Park: Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Attention: Michael Finnigan
with copy to: Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, CA 90067
Attention: Al Segel, Esq.
If to Boomtown or Boomtown, Inc.
Blue Diamond: Interstate 80/Garson Road
Verdi, Nevada 89439
Attention: Timothy J. Parrott
with copy to: Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94306
Attention: John V. Roos, Esq.
If to any Roski Entity: Edward P. Roski, Jr.
Majestic Realty Co.
13191 Crossroads Parkway North
6th Floor
City of Industry, California 91746
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<PAGE>
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: David B. Rogers, Esq.
Such notices and other communications shall for all purposes of this Agreement
be treated as being effective or having been given on the date of delivery, if
delivered personally, one (1) day following the date of delivery, if delivered
by overnight courier or, if sent by mail, five (5) days thereafter.
11.4 Entire Agreement. This Agreement and the Related Agreements,
----------------
including the schedules and exhibits which are incorporated into and made an
integral part of this Agreement or any of the Related Agreements by reference,
set forth the entire understanding of the parties and supersede all prior
agreements of the parties with respect to the subject matter hereof and thereof.
11.5 Survival of Representations and Warranties, etc. All
-----------------------------------------------
representations and warranties contained herein shall survive the execution and
delivery of this Agreement.
11.6 Headings; References to Agreement. The headings of the
---------------------------------
sections of this Agreement have been inserted for convenience of reference only
and do not constitute a part of this Agreement. References herein to "this
Agreement" shall include all exhibits and schedules hereto.
11.7 Choice of Law; Interpretation. THIS AGREEMENT SHALL FOR ALL
-----------------------------
PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE
OF NEVADA (WITHOUT REFERENCE TO CONFLICTS OF LAW).
11.8 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but which shall
together constitute but one and the same instrument. To make proof of this
Agreement, it shall only be necessary to produce one such counterpart.
11.9 Severability. To the extent any provision of this Agreement
------------
shall be invalid or unenforceable, it shall be considered deleted from this
Agreement and the remaining provisions of this Agreement shall be unaffected and
shall continue in full force and effect.
11.10 Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither party may assign its
rights or obligations hereunder other than to an Affiliate without the prior
written approval of the other party.
-25-
<PAGE>
11.11 No third Party Beneficiaries. This Agreement is not intended to
----------------------------
confer upon any person or entity other than each party hereto (and their
successors and assigns permitted hereby) any rights or remedies hereunder.
11.12 Waiver of Jury Trial. EACH PARTY HERETO KNOWINGLY, ABSOLUTELY
--------------------
AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS IT MAY OTHERWISE HAVE HAD TO A
TRIAL BY JURY WITH RESPECT TO OR IN CONNECTION WITH THIS AGREEMENT, THE RELATED
DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY.
-26-
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date and year first above written.
BOOMTOWN, INC.
By:
------------------------------- ------------------------
EDWARD P. ROSKI, JR.
Title:
----------------------------
BLUE DIAMOND HOTEL & CASINO, INC. IVAC
By: EDWARD P. ROSKI, JR.
its General Partner
By:
-------------------------------
------------------------
Title: EDWARD P. ROSKI, JR.
----------------------------
HOLLYWOOD PARK, INC. MAJESTIC REALTY CO.
By: By:
------------------------------- --------------------
Title: Title:
---------------------------- -----------------
-27-
<PAGE>
EXHIBIT 10.19
TO HOLLYWOOD PARK, INC.'S
JUNE 30, 1996, FORM 10-Q
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made as of the _____ day
of August, 1996 by and between Hollywood Park, Inc., a Delaware corporation
("Hollywood Park"), and Edward P. Roski, Jr., an individual residing in the
State of California ("Roski").
WHEREAS, Hollywood Park intends to enter into a strategic combination (the
"Merger") with Boomtown, Inc., a Delaware corporation ("Boomtown"), pursuant to
an Agreement and Plan of Merger dated as of April 23, 1996 by and among
Hollywood Park, Boomtown and HP Acquisition, Inc., a Delaware corporation and a
wholly-owned subsidiary of Hollywood Park (as amended and in effect from time to
time, the "Merger Agreement"); and
WHEREAS, subject to consummation of the Merger pursuant to the Merger
Agreement and certain other conditions set forth herein, Hollywood Park intends
to purchase from Roski, and Roski intends to sell to Hollywood Park, the Roski
Stock (as defined herein).
NOW THEREFORE, in consideration of the foregoing premises, and for other good
and valuable consideration the receipt and sufficiency of which are hereby
acknowledged, Hollywood Park and Roski hereby agree as follows:
1. DEFINITIONS AND RULES OF INTERPRETATION
---------------------------------------
1 Definitions. The following terms shall have the
-----------
respective meaning set forth below, or in the Sections of this Agreement
respectively referred to below:
"Affiliate" of any person or entity organized as a corporation,
partnership, joint venture, business trust or other non-individual person,
shall mean (i) any person or entity which directly or indirectly owns fifty
percent (50%) or more of the stock, partnership or other beneficial interest
of such person or entity, (ii) any corporation, partnership or other entity
of which fifty percent (50%) or more of the stock, partnership or other
beneficial interest is owned directly or indirectly by such person or entity,
and (iii) any corporation, partnership or entity of which fifty percent (50%)
or more of the stock, partnership or other beneficial interest is owned
directly or indirectly by any person or entity that owns fifty percent (50%)
or more of the stock, partnership or other beneficial interest of such person
or entity.
"Approvals" shall mean all governmental approvals, consents, licenses,
findings of suitability, and permits, including without limitation, any
approvals of Gaming Authorities, as may be required to effect the
transactions contemplated hereby.
36
<PAGE>
"Boomtown" shall have the meaning ascribed thereto in the recitals
hereto.
"Effective Date" shall mean the date of this Agreement.
"Exchange Date" shall mean the date on which the conditions precedent
specified in Sections 5.3 and 5.4 hereof have been satisfied or waived.
"GAAP" shall mean generally accepted accounting principles as in
effect on the relevant date of determination consistently applied.
"Gaming Authority" shall mean the Nevada Gaming Commission, the Nevada
State Gaming Control Board, the Clark County Liquor and Gaming Licensing
Board and any other state, county or other governmental authority having
responsibility for, jurisdiction over, or regulatory authority, oversight or
supervisory responsibilities in respect of, any gaming related business
operated or contemplated to be operated at or in connection with the Resort.
"Gaming Laws" shall mean (i) all applicable provisions of the Nevada
Gaming Control Act and the statutes rules, and regulations promulgated
thereunder and (ii) all interpretations, decisions, judgments, orders and
decrees of any Gaming Authority.
"Hollywood Park" shall have the meaning ascribed to such term in the
preamble hereto.
"IVAC" shall mean IVAC, a California general partnership.
"Merger" shall have the meaning ascribed to such term in the recitals
hereto.
"Merger Agreement" shall have the meaning ascribed to such term in the
recitals hereto.
"Resort" shall mean the facility located at 3333 Blue Diamond Road,
Las Vegas, Nevada consisting of a casino, hotel, restaurant, recreational
vehicle park and related facilities, and all assets located at, used
principally in connection with, or arising principally from such facilities.
"Roski" shall have the meaning ascribed to such term in the preamble
hereto.
"Roski Stock" shall mean 714,386 shares of the common stock of
Boomtown held, as of the Effective Date, by Roski, and all shares of the
common stock of Hollywood Park into which such Boomtown common stock may
hereafter be converted in the Merger, or which Roski may hereafter have a
right to receive in exchange for such Boomtown common stock.
37
<PAGE>
"Roski Stock Value" shall mean the average per share closing price of
the Boomtown common stock on the Nasdaq National Market over the five trading
days preceding the date of signing this Agreement multiplied by the number of
shares of Roski Stock.
"Swap Agreement" shall mean that certain Blue Diamond Swap Agreement,
dated as of even date herewith, by and among Boomtown, Hollywood Park, Roski,
IVAC and certain other Affiliates of such parties.
2 Rules of Interpretation
-----------------------
(a) A reference to any document or agreement shall, unless
otherwise provided, include such document or agreement as amended, modified
or supplemented from time to time in accordance with its terms and, if
applicable, as permitted by this Agreement.
(b) The singular includes the plural and the plural includes
the singular.
(c) A reference to any law includes any applicable amendment
or modification to such law, or any applicable successor law.
(d) A reference to any person or entity includes its permitted
successors and permitted assignees.
(e) Accounting terms not otherwise defined herein have the
respective meanings assigned to them by GAAP applied on a consistent basis by
the accounting entity to which they refer.
(f) The words "include," "includes" and "including" are not
limiting.
(g) All terms not specifically defined herein or by GAAP,
which terms are defined in the Uniform Commercial Code as in effect shall
have the respective meanings assigned to them therein.
(h) Reference to a particular "Section" refers to that section
of this Agreement unless otherwise indicated.
(i) The words "herein," "hereof," "hereunder" and words of
like import shall refer to this Agreement as a whole and not to any
particular section or subdivision of this Agreement.
2. TRANSFER OF ROSKI STOCK
-----------------------
Subject to the terms and conditions of this Agreement, (i) Roski agrees,
on the Exchange Date, to transfer, convey, assign and deliver to Hollywood
Park all of Roski's right, title and interest in and to the Roski Stock and
(ii) Hollywood Park agrees, on the Exchange Date, to acquire and
38
<PAGE>
accept from Roski all of Roski's right, title and interest in and to the
Roski Stock, in exchange for a promissory note to be issued by Hollywood Park
in the principal amount of the Roski Stock Value in the form attached as
Exhibit A hereto (the "Hollywood Park Note").
3. EXCHANGE DATE DELIVERIES
------------------------
On the Exchange Date, subject to the terms and conditions hereof, (a)
Roski shall transfer, convey, assign, and deliver to Hollywood Park, and
Hollywood Park shall acquire and accept from Roski, the Roski Stock and (b)
Hollywood Park shall deliver to Roski the Hollywood Park Note. Each party
shall deliver to the other such endorsements, assignments, stock powers,
releases and other instruments as the other party shall reasonably request or
as necessary to vest in the other party valid and marketable title, free and
clear of all liens or encumbrances to the Hollywood Park Note, in the case of
Roski, and to the Roski Stock, in the case of Hollywood Park.
4. REPRESENTATIONS AND WARRANTIES
------------------------------
1 Representations and Warranties of Roski. Roski represents and
---------------------------------------
warrants to Hollywood Park, as of the Effective Date and the Exchange Date
(unless a specific date is referenced below), as follows:
(a) Legal Capacity. Roski is an individual with capacity to
--------------
contract; he has all requisite power and authority and is entitled to carry
on his business as now being conducted, and to own, lease or operate his
properties in the places where his business is now conducted and where his
properties are now owned, leased or operated.
(b) Authorization, etc. Roski has all requisite power and full
------------------
legal right to enter into this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly executed and delivered by
and constitutes the valid and binding obligation of Roski, enforceable in
accordance with its terms, except insofar as the enforceability hereof may be
limited by applicable bankruptcy, insolvency, receivership, reorganization,
moratorium or other laws providing relief to debtors, or laws or principles
of equity generally.
(c) Execution, Delivery and Performance. Neither execution and
-----------------------------------
delivery nor performance of this Agreement by Roski will, with or without the
giving of notice or the passage of time, or both, conflict with, result in a
default, right to accelerate by any other party to, require any consent not
obtained prior to the Exchange Date with respect to, or result in the
creation of any lien, charge or encumbrance pursuant to any provisions of any
material indenture, bond, note, loan agreement, guaranty, franchise,
mortgage, deed of trust, lease or other agreement by which Roski is bound or
conflict with, result in a default, right to accelerate by any other party
to, or result in the creation of any lien, charge or encumbrance pursuant to
any law, ordinance, rule or regulation, or any order, judgment, award or
decree to which Roski is a party or by which Roski or any portion of the
Roski Stock may be bound or affected.
39
<PAGE>
(d) Title to Roski Stock, etc. Roski has, and will on the
-------------------------
Exchange Date, immediately prior to the transfer to Hollywood Park
contemplated hereby, have, valid and marketable title to, and unrestrained
right to transfer, all of the Roski Stock. No part of the Roski Stock on the
Exchange Date will be subject to any mortgage, deed of trust, pledge, lien,
charge, security interest, encumbrance, restriction, lease, license,
easement, shop rights, covenants not to sue, or adverse claim of any kind or
nature, or other encumbrances of any kind, rights of use or occupancy, or any
other rights or privileges, other than those imposed by Gaming Laws on the
Roski Stock. In addition to the Roski Stock and 5,001 shares of Boomtown
common stock held by Roski as of the Effective Date and the options to
acquire shares of Boomtown common stock in his capacity as a Boomtown
director, neither Roski nor any of his Affiliates owns any other securities
of Boomtown or any of its Affiliates, or rights (contingent or otherwise) to
acquire securities of Boomtown or any of its Affiliates.
(e) Representations Complete. There is no fact known to Roski
------------------------
which could reasonably be expected to affect, in a materially adverse manner,
the transferability of the Roski Stock or otherwise to carry out the
transactions contemplated by this Agreement.
2 Representations and Warranties of Hollywood Park. Hollywood Park
------------------------------------------------
represents and warrants to Roski, as of the Effective Date and the Exchange
Date (unless a specific date is referenced below), as follows:
(a) Organization. Hollywood Park is duly organized and validly
------------
existing under the laws of its jurisdiction of incorporation. Hollywood Park
has all requisite power and authority to, and is entitled to, carry on its
business as now conducted and to own or lease its properties as and in the
places where such business is now conducted and such properties are now
owned, leased or operated. Hollywood Park is qualified to do business in all
foreign jurisdictions in which it is required to be so qualified, except
where the failure to be so qualified would not have a material adverse effect
on the business or assets of Hollywood Park.
(b) Authorization, etc. Hollywood Park has all requisite
------------------
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement by Hollywood Park and the consummation by Hollywood Park of the
transactions contemplated hereby have been duly authorized by all requisite
action of Hollywood Park. This Agreement has been duly executed and
delivered by and constitutes the valid and binding obligation of Hollywood
Park, enforceable in accordance with its terms, except insofar as the
enforceability hereof may be limited by applicable bankruptcy, insolvency,
receivership, reorganization, moratorium or other laws providing relief for
debtors or principles of equity generally.
(c) Execution, Delivery and Performance. Neither execution,
-----------------------------------
delivery nor performance of this Agreement by Hollywood Park will, with or
without the giving of notice or the passage of time, or both, conflict with,
result in a default, right to accelerate by any other party to, or result in
the creation of any lien, charge or encumbrance pursuant to any provisions of
such person's organizational documents or by-laws or any material franchise,
mortgage, deed of trust,
40
<PAGE>
lease, license, agreement or understanding, or conflict with, result in a
default, right to accelerate by any other party to, or result in the creation
of any lien, charge or encumbrance pursuant to any law, ordinance, rule or
regulation, or any order, judgment, award or decree to which Hollywood Park
is a party or by which it may be bound or affected.
(d) Validity of Note. The Hollywood Park Note will, on the
----------------
Exchange Date, be the valid and binding obligation of Hollywood Park,
enforceable against Hollywood Park in accordance with its terms.
5. CONDITIONS PRECEDENT
--------------------
1 Conditions to Execution and Delivery of this Agreement by
---------------------------------------------------------
Hollywood Park. This Agreement shall not take effect until Hollywood Park
--------------
shall have received a facsimile or an original counterpart of this Agreement,
duly executed and delivered by Roski.
2 Conditions to Execution and Delivery of this Agreement by
---------------------------------------------------------
Roski.
-----
This Agreement shall not take effect until Roski shall have received a
facsimile or an original counterpart of this Agreement duly executed and
delivered by Hollywood Park.
3 Conditions to Exchange by Hollywood Park. The obligation of
----------------------------------------
Hollywood Park to transfer to Roski the Hollywood Park Note in exchange for
the Roski Stock is subject to the satisfaction (or waiver by Hollywood Park)
of the conditions set forth below:
(a) The representations and warranties made by Roski in this
Agreement shall be true and correct in all material respects on and as of the
Exchange Date with the same effect as if made on and as of the Exchange Date,
except as otherwise contemplated by this Agreement. Roski shall have
performed and complied with all agreements, covenants and conditions on his
part required to be performed or complied with on or prior to the Exchange
Date in all material respects.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement shall
not violate any law, rule or regulation applicable to Hollywood Park,
including without limitation, Gaming Laws, federal and state securities laws,
or any order, decree or judgment of any court or governmental body having
competent jurisdiction, and no order shall have been issued by a court of
competent jurisdiction restraining, prohibiting or rendering unlawful the
execution, delivery and performance of this Agreement or the consummation of
the transactions contemplated by this Agreement.
(c) All Approvals necessary to effect the transactions
hereunder and to vest valid and marketable title to the Roski Stock in
Hollywood Park shall have been obtained and shall be in full force and
effect. No Gaming Authority shall have indicated to any party hereto that in,
the opinion of such Gaming Authority, any Approvals required for the
consummation of the transactions contemplated hereby are likely to be revoked
or rejected. No registration with any governmental authority or agency which
has not been effected shall be necessary to effect the transactions
contemplated hereby.
41
<PAGE>
(d) Roski shall have duly delivered the Roski Stock as set
forth in Section 3 and any other documents of transfer Hollywood Park may
reasonably request to effect the transfer of the Roski Stock.
(e) All of the conditions precedent to the Merger shall have
been satisfied or waived and the Merger shall have been consummated.
(f) Each of the transactions contemplated by the Swap
Agreement shall have been consummated under the terms of the Swap Agreement.
(g) The consummation of the transactions contemplated by this
Agreement and the Swap Agreement shall not, as a result of any changes in tax
law occurring after the signing of this Agreement (including without
limitation statutory, regulatory, administrative, or judicial changes),
create a material risk that the contemplated treatment of the Merger as a
tax-free reorganization would be impaired or adversely affected in the view
of either Hollywood Park or Boomtown, based upon advice of its respective tax
counsel.
4 Conditions to Exchange by Roski. The obligation of Roski to
-------------------------------
transfer to Hollywood Park the Roski Stock in exchange for the Hollywood Park
Note hereunder shall be subject to the satisfaction (or waiver by Roski) of
the conditions set forth below:
(a) The representations and warranties made by Hollywood Park
in this Agreement shall be true and correct in all material respects on and
as of the Exchange Date with the same effect as if made on and as of the
Exchange Date, except as otherwise contemplated by this Agreement. Hollywood
Park shall have performed and complied with all agreements, covenants and
conditions on the part of such entity required to be performed or complied
with on or prior to the Exchange Date in all material respects.
(b) The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated by this Agreement shall
not violate any law, rule or regulation applicable to Roski, including,
without limitation, Gaming Laws, federal and state securities laws, or any
order, decree or judgment of any court or governmental body having competent
jurisdiction, and no order shall have been issued by a court of competent
jurisdiction restraining, prohibiting or rendering unlawful the execution,
delivery and performance of this Agreement or the consummation of the
transactions contemplated by this Agreement.
(c) All Approvals necessary to effect the transactions
contemplated hereby shall have been obtained. No Gaming Authority shall have
indicated to any party hereto that, in the opinion of such Gaming Authority,
any Approvals required for the consummation of the transactions contemplated
hereby are likely to be revoked or rejected. No registration with any
governmental authority or agency which has not been effected shall be
necessary to effect the transactions contemplated hereby.
42
<PAGE>
(d) Hollywood Park shall have duly delivered the Hollywood
Park Note as set forth in Section 3 and any other documents of transfer Roski
may reasonably request to effect the issuance of the Hollywood Park Note.
(e) Each of the transactions contemplated by the Swap
Agreement shall have been consummated under the terms of the Swap Agreement.
6. ADDITIONAL COVENANTS AND AGREEMENTS OF THE PARTIES.
--------------------------------------------------
1 Approvals. The Parties agree to use their best efforts and
---------
to cooperate with each other to obtain the Approvals necessary to effect the
transactions hereunder.
2 Transfer Taxes. The parties acknowledge and agree that
--------------
all transfer, stamp, recording and similar taxes assessed or otherwise
payable by reason of the conveyance contemplated hereby shall be for the
account of Roski. The parties agree to cooperate with each other to the
extent legally permitted to minimize any such taxes and charges.
3 Additional Deliveries; Further Assurances. After the Effective
-----------------------------------------
Date, each party to this Agreement shall, at the request of the other,
furnish, execute, and deliver such documents, instruments, certificates,
notices or other further assurances as the requesting party shall reasonably
request as necessary or desirable to effect complete consummation of this
Agreement and the transactions contemplated hereby. After the Exchange Date,
Roski and his Affiliates shall, at the request of Hollywood Park, (a) take
such further actions as may be reasonably necessary to vest in Hollywood Park
marketable title to the Roski Stock, (b) execute and deliver and file or
record, such further instruments of sale, conveyance, transfer and
assignment, and (c) take such other actions, as Hollywood Park may reasonably
request in order effectively to sell, convey, transfer and assign the Roski
Stock to Hollywood Park and otherwise to effectuate the purposes hereof.
After the Exchange Date, Hollywood Park and its Affiliates shall take such
further actions as Roski may reasonably request in order effectively to issue
the Hollywood Park Note to Roski and otherwise to effectuate the purposes
hereof.
7. TERMINATION.
-----------
If (a) the Exchange Date has not occurred prior to or on June 30,
1997, or, if the Merger Agreement is extended, such later date as may then be
the scheduled termination date of the Merger Agreement, or such later date as
may have been agreed to by the parties in writing, or (b) the Merger
Agreement has terminated in accordance with its terms, then this Agreement
shall, on such date, automatically and without further action by either
party, terminate and have no further force and effect. In addition, if any
representation or warranty made by any party herein shall prove to have been
false, inaccurate or misleading in any
43
<PAGE>
material respect when made, then the party to whom such representation or
warranty is made may terminate this Agreement by notice to the breaching
party any time prior to the Exchange Date. In the event that this Agreement
shall terminate by reason of the material falsity, inaccuracy or misleading
character of any representation or warranty, the party to whom such
representation or warranty is made shall retain, both before and after such
termination, all rights and remedies available under applicable law.
Furthermore, in the event that Boomtown and Hollywood Park elect to utilize
an alternate structure to effect the transactions contemplated by the Blue
Diamond Swap Agreement in accordance with such agreement, which structure
involves Roski retaining the Roski Stock, then Hollywood Park may terminate
this Agreement without any liability to Roski. If Roski is so required to
retain the Roski Stock, the shares of Hollywood Park common stock he would be
entitled to receive in the Merger will be covered by the same Registration
Statement on Form S-4 as the other shares of Hollywood Park common stock
issuable in the Merger.
8. MISCELLANEOUS.
-------------
1 Changes, Waivers, etc. Neither this Agreement nor any
---------------------
provision hereof may be changed, waived, discharged or terminated orally,
except by a statement in writing which references this Agreement and is
signed by the party against whom enforcement of the change, waiver, discharge
or termination is sought.
2 Payment of Fees and Expenses. Each of the parties hereto shall
----------------------------
pay its own respective fees and expenses incurred in connection herewith. In
the event of any litigation or other proceeding resulting from a dispute
hereunder, the legal fees, costs and expenses of the prevailing party shall
be paid by the losing party.
3 Notices. All notices, requests, consents and other
-------
communications required or permitted hereunder shall be in writing and shall
be delivered, or mailed first-class postage prepaid, registered or certified
mail, or delivered via overnight courier;
If to Hollywood Park: Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, CA 90301
Attention: Michael Finnigan
with copy to: Irell & Manella LLP
1800 Avenue of the Stars
Suite 900
Los Angeles, CA 90067
Attention: Al Segel, Esq.
44
<PAGE>
If to Roski: Edward P. Roski, Jr.
Majestic Realty Co.
13191 Crossroads Parkway North
6th Floor
City of Industry, California 91746
with a copy to: Latham & Watkins
633 West Fifth Street, Suite 4000
Los Angeles, California 90071
Attention: David B. Rogers, Esq.
Such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given on the date of
delivery, if delivered personally, one (1) day following the date of
delivery, if delivered by overnight courier or, if sent by mail, five (5)
days thereafter.
4 Entire Agreement. This Agreement, including the exhibits which
----------------
are incorporated into and made an integral part of this Agreement by
reference, set forth the entire understanding of the parties and supersede
all prior agreements of the parties with respect to the subject matter
hereof.
5 Survival of Representations and Warranties, etc. All
-----------------------------------------------
representations and warranties contained herein shall survive the execution
and delivery of this Agreement.
6 Headings; References to Agreement. The headings of the
---------------------------------
sections of this Agreement have been inserted for convenience of reference
only and do not constitute a part of this Agreement. References herein to
"this Agreement" shall include all exhibits hereto.
7 Choice of Law; Interpretation. THIS AGREEMENT SHALL FOR ALL
-----------------------------
PURPOSES BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF CALIFORNIA (WITHOUT REFERENCE TO CONFLICTS OF LAW).
8 Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed an original, but which shall
together constitute but one and the same instrument. To make proof of this
Agreement, it shall be necessary to produce one such counterpart.
9 Severability. To the extent any provision of this Agreement
------------
shall be invalid or unenforceable, it shall be considered deleted from this
Agreement and the remaining provisions of this Agreement shall be unaffected
and shall continue in full force and effect.
45
<PAGE>
10 Successors and Assigns. This Agreement shall be binding upon
----------------------
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither party may assign its
rights or obligations hereunder other than to an Affiliate without the prior
written approval of the other party.
11 Waiver of Jury Trial. EACH PARTY HERETO KNOWINGLY, ABSOLUTELY
--------------------
AND UNCONDITIONALLY WAIVES ANY AND ALL RIGHTS IT MAY OTHERWISE HAVE HAD TO A
TRIAL BY JURY WITH RESPECT TO OR IN CONNECTION WITH THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.
46
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed and delivered as of the date and year first above written.
/s/ Edward P. Roski, Jr.__________________
EDWARD P. ROSKI, JR.
HOLLYWOOD PARK, INC.
By:/s/ G.Michael Finnigan__________________
Title: President, Sports and Entertainment, CFO_________
47
<PAGE>
Exhibit A
---------
FORM OF PROMISSORY NOTE
_________$ Los Angeles, California
_______________, 1996
FOR VALUE RECEIVED, Hollywood Park, Inc., a Delaware corporation (the
"Maker") hereby absolutely and unconditionally promises to pay to Edward J.
Roski, Jr. (the "Holder"), or order, in accordance with the payment schedule set
forth below, in immediately available funds, the principal amount of ___________
______________________ ($_________), and to pay interest on the unpaid principal
amount hereof at an annual rate of interest equal to the rate announced by Bank
of America from time to time as its "reference rate", adjusted on the first
business day of the next succeeding calendar month after any change to such rate
is announced, plus one percent (1.0%), in immediately available funds, payable
annually in arrears on the anniversaries of the issuance date of this Note,
provided, that interest on any amounts not paid when due hereunder shall accrue
at an annual rate which is two percent (2%) above the rate otherwise payable
hereunder; and provided, further, that in no event shall the interest rate of
this Note exceed the maximum rate permitted by applicable law. This Note is
issued pursuant to the Stock Purchase Agreement dated as of August __, 1996 (the
"Purchase Agreement") by and among the Maker and the Holder and constitutes the
"Hollywood Park Note" described therein. Capitalized terms defined in the
Purchase Agreement, whether directly or indirectly by reference, shall have the
respective meanings herein assigned to such terms in the Purchase Agreement.
Principal obligations of the Maker evidenced hereby shall be paid in four (4)
equal installments of $_________ each [20% of the principal amount], on each
anniversary of the issuance date of this Note, and an additional, final payment
on the fifth anniversary thereof in an amount equal to all obligations of the
Maker then outstanding hereunder.
Upon the occurrence and during the continuance of any of the following events
(each, an "Event of Default"): (i) failure to pay any interest accrued
hereunder within five days following the date such payment was due, or the
failure to pay any principal amount owing by the Maker hereunder when due and
payable, (ii) material falsity of any representations or warranties by the Maker
in the Purchase Agreement, (iii) initiation of any bankruptcy, insolvency,
moratorium, receivership or reorganization by or against the Maker, or (iv)
acceleration of any indebtedness in excess of $1,000,000 by other creditors of
the Maker, the entire unpaid principal balance of this Note, all of the unpaid
interest accrued thereon and
48
<PAGE>
all other amounts owing in respect thereof may automatically become, in the case
of a default under clauses (iii) or (iv), or may be declared to be, in the case
of a default under clauses (i) or (ii), immediately due and payable. Thereupon,
the Holder may proceed to enforce its rights and remedies under this Note and
applicable law, all of such remedies being cumulative and not exclusive.
No delay or omission on the part of the Holder or any holder hereof in
exercising any right hereunder shall operate as a waiver of such right or any
other right of the Holder, nor shall any delay, omission or waiver of any one
occasion be deemed a bar to or waiver of the same or any other right or any
other occasion. The Maker and every endorser and guarantor of this Note
regardless of the time, order or place of signing hereby waives presentment,
demand, protest and notice of every kind, and assents to any extension or
postponement of the time for payment or any other indulgence, to any
substitution, exchange or release of collateral, and to the addition or release
of any other party or person or entity primarily or secondarily liable.
All costs incurred in any litigation arising from this Note shall be borne by
the prevailing party. All other expenses of enforcement of the Holder's rights
hereunder (including reasonable legal and other professional fees) shall be for
the account of the Maker.
THIS NOTE SHALL FOR ALL PURPOSES BY GOVERNED BY, AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF CALIFORNIA (WITHOUT REFERENCE TO CONFLICTS OF
LAW).
This Note shall be binding upon the Maker's successors and assigns, and shall
inure to the benefit of the Holder's successors and assigns.
IN WITNESS WHEREOF, the Maker has caused this Note to be executed by its duly
authorized officer to take effect as of the date first hereinabove written.
"Maker"
Hollywood Park, Inc.
By: /s/ G. Michael Finnigan
------------------------------
G. Michael Finnigan
Chief Financial Officer
49
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