-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QrDG8NT9haLZkqLnUhaXfCZ+tpWZvalyRPBUgIV3fkg2YhNmuFkNGzC3tPX2jYQN 6Sjk4en6SSArPuym2j6BLA== 0000898430-97-003717.txt : 19970828 0000898430-97-003717.hdr.sgml : 19970828 ACCESSION NUMBER: 0000898430-97-003717 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 19970827 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLYWOOD PARK INC/NEW/ CENTRAL INDEX KEY: 0000356213 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 953667491 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471 FILM NUMBER: 97671017 BUSINESS ADDRESS: STREET 1: 1050 SOUTH PRAIRIE AVENUE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 1: 1050 SOUTH PRAIRIE AVENUE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TURF PARADISE INC CENTRAL INDEX KEY: 0000100217 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 860114029 STATE OF INCORPORATION: AZ FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-01 FILM NUMBER: 97671018 BUSINESS ADDRESS: STREET 1: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLYWOOD PARK OPERATING CO CENTRAL INDEX KEY: 0000356212 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 953667220 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-02 FILM NUMBER: 97671019 BUSINESS ADDRESS: STREET 1: 1050 S PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 2134191500 MAIL ADDRESS: STREET 1: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOOMTOWN INC CENTRAL INDEX KEY: 0000891552 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 943044204 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-03 FILM NUMBER: 97671020 BUSINESS ADDRESS: STREET 1: C/O BOOMTOWN INC STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOOMTOWN HOTEL & CASINO INC CENTRAL INDEX KEY: 0000918870 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 880101849 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-04 FILM NUMBER: 97671021 BUSINESS ADDRESS: STREET 1: C/O BOOMTOWN HOTEL & CASINO INC STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISIANA GAMING ENTERPRISES INC CENTRAL INDEX KEY: 0000918881 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 721229201 STATE OF INCORPORATION: LA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-05 FILM NUMBER: 97671022 BUSINESS ADDRESS: STREET 1: C/O LOUISIANA GAMING ENTERPRISES INC STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MISSISSIPPI I GAMING L P CENTRAL INDEX KEY: 0000918883 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 640828954 STATE OF INCORPORATION: MS FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-06 FILM NUMBER: 97671023 BUSINESS ADDRESS: STREET 1: C/O MISSISSIPPI I GAMING LLP STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: LOS ANGELES STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BAYVIEW YACHT CLUB INC CENTRAL INDEX KEY: 0000918886 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] STATE OF INCORPORATION: MS FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-07 FILM NUMBER: 97671024 BUSINESS ADDRESS: STREET 1: C/O BAYVIEW YACHT CLUB INC STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HP YAKAMA INC CENTRAL INDEX KEY: 0001044946 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 944636368 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-08 FILM NUMBER: 97671025 BUSINESS ADDRESS: STREET 1: C/O HP YAKAMA INC STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISIANA I GAMING/LOUISIANA PARTNERSHIP IN COMMENDAM CENTRAL INDEX KEY: 0001044947 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 721238179 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-09 FILM NUMBER: 97671026 BUSINESS ADDRESS: STREET 1: C/O LOUISIANA I GAMING/LO PARTNERSHIP CO STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CRYSTAL PARK HOTEL & CASINO DEVELOPMENT CO LLP CENTRAL INDEX KEY: 0001044948 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 954595453 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-10 FILM NUMBER: 97671027 BUSINESS ADDRESS: STREET 1: C/O CRYSTAL PARK HOTEL & CAS DEVELP CO L STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLYWOOD PARK FOOD SERVICES INC CENTRAL INDEX KEY: 0001044949 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 952844591 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-11 FILM NUMBER: 97671028 BUSINESS ADDRESS: STREET 1: C/O HOLLYWOOD PARK FOOD SERVIES INC STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HP COMPTON INC CENTRAL INDEX KEY: 0001044950 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 954545471 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-12 FILM NUMBER: 97671029 BUSINESS ADDRESS: STREET 1: C/O HP COMPTON INC STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOLLYWOOD PARK FALL OPERATING CO CENTRAL INDEX KEY: 0001044951 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS AMUSEMENT & RECREATION [7990] IRS NUMBER: 954093972 STATE OF INCORPORATION: CA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: S-4 SEC ACT: 1933 Act SEC FILE NUMBER: 333-34471-13 FILM NUMBER: 97671030 BUSINESS ADDRESS: STREET 1: C/O HOLLYWOOD PARK FALL OPERATING CO STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 2: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 S-4 1 FORM S-4 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1997. REGISTRATION NO. 333- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- FORM S-4 REGISTRATION STATEMENT Under The Securities Act of 1933 --------------- HOLLYWOOD PARK, INC. HOLLYWOOD PARK OPERATING COMPANY AND OTHER REGISTRANTS (SEE TABLE OF OTHER REGISTRANTS BELOW) (EXACT NAME OF EACH REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE DELAWARE (STATE OR OTHER JURISDICTION (STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION) OF INCORPORATION OR ORGANIZATION) 7999 7948 (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) (PRIMARY STANDARD INDUSTRIAL CLASSIFICATION CODE NUMBER) 1050 SOUTH PRAIRIE AVENUE, INGLEWOOD, CALIFORNIA 90301 1050 SOUTH PRAIRIE AVENUE, INGLEWOOD, CALIFORNIA 90301 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
--------------- G. MICHAEL FINNIGAN PRESIDENT--SPORTS AND ENTERTAINMENT (HOLLYWOOD PARK, INC.), AND EXECUTIVE VICE PRESIDENT, TREASURER AND CHIEF FINANCIAL OFFICER HOLLYWOOD PARK, INC. HOLLYWOOD PARK OPERATING COMPANY 1050 PRAIRIE AVENUE INGLEWOOD, CALIFORNIA 90301 (310) 419-1500 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPY TO: ALVIN G. SEGEL, ESQ. ASHOK W. MUKHEY, ESQ. IRELL & MANELLA LLP 1800 AVENUE OF THE STARS LOS ANGELES, CALIFORNIA 90067 (310) 277-1010 --------------- APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the Registration Statement becomes effective. If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. [_] CALCULATION OF REGISTRATION FEE ================================================================================================= PROPOSED PROPOSED MAXIMUM AMOUNT MAXIMUM AGGREGATE AMOUNT OF TITLE OF EACH CLASS OF TO BE OFFERING PRICE OFFERING REGISTRATION SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) FEE - ------------------------------------------------------------------------------------------------- Series B 9 1/2% Senior Subordinated Notes due 2007...................... $125,000,000 100% $125,000,000 $37,879 - ------------------------------------------------------------------------------------------------- Guaranties of Series B 9 1/2% Senior Subordinated Notes due 2007......... $125,000,000 None(2) None(2) None(2) =================================================================================================
(1) Estimated solely for the purpose of computing the registration fee pursuant to Rule 457. (2) Pursuant to Rule 457(n) under the Securities Act of 1933, no separate fee is payable for the Guaranties. --------------- THE REGISTRANTS HEREBY AMEND THE REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE. OTHER REGISTRANTS
I.R.S. STATE OR OTHER JURISDICTION EMPLOYER EXACT NAME OF REGISTRANT AS OF INCORPORATION IDENTIFICATION SPECIFIED IN ITS CHARTER OR ORGANIZATION NUMBER - --------------------------- --------------------------- -------------- Hollywood Park Fall Operating Company............................ Delaware 95-4093972 Hollywood Park Food Services, Inc. . California 95-2844591 HP/Compton, Inc. ................... California 95-4545471 Crystal Park Hotel and Casino Development Company, LLC........... California 95-4595453 Turf Paradise, Inc. ................ Arizona 86-0114029 HP Yakama, Inc. .................... Delaware 95-4636368 Boomtown, Inc. ..................... Delaware 94-3044204 Boomtown Hotel & Casino, Inc. ...... Nevada 88-0101849 Bayview Yacht Club, Inc. ........... Mississippi 64-0824102 Mississippi-I Gaming, L.P. ......... Mississippi 64-0828954 Louisiana Gaming Enterprises, Inc. . Louisiana 72-1229201 Louisiana-I Gaming, a Louisiana Partnership in Commendam........... Louisiana 72-1238179
HOLLYWOOD PARK, INC. HOLLYWOOD PARK OPERATING COMPANY CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K
ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS ---------------- -------------------------- A. INFORMATION ABOUT THE TRANSACTION 1. Forepart of Registration Statement and Outside Front Cover Page of Prospectus.... Cover of Registration Statement; Outside Front Cover Page of Prospectus; Cross Reference Sheet 2. Inside Front and Outside Back Cover Pages of Prospectus... Available Information; Documents Incorporated by Reference 3. Risk Factors, Ratio of Earnings to Fixed Charges and Other Information....... Prospectus Summary; Risk Factors; Selected Historical and Pro Forma Financial Data; Unaudited Summary Pro Forma Financial Data 4. Terms of the Transaction..... Prospectus Summary; Risk Factors; The Exchange Offer; Description of Notes; Certain Federal Income Tax Considerations 5. Pro Forma Financial Information.................. Prospectus Summary; Selected Historical and Pro Forma Financial Information; Unaudited Pro Forma Combined Consolidated Financial Statements; Unaudited Summary Pro Forma Financial Data 6. Material Contacts with the Company Being Acquired...... Not Applicable 7. Additional Information Required for Reoffering by Persons and Parties Deemed to be Underwriters.......... Not Applicable 8. Interests of Named Experts and Counsel.................. Not Applicable 9. Disclosure of Commission Position on Indemnification for Securities Act Liabilities................. Not Applicable B. INFORMATION ABOUT THE REGISTRANT 10. Information with Respect to S-3 Registrants.............. Available Information; Documents Incorporated by Reference; Prospectus Summary; Business; Selected Historical and Pro Forma Financial Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Unaudited Pro Forma Combined Consolidated Financial Statements; Consolidated Financial Statements 11. Incorporation of Certain Information by Reference.... Documents Incorporated by Reference 12. Information with Respect to S-2 or S-3 Registrants...... Not Applicable
HOLLYWOOD PARK, INC. HOLLYWOOD PARK OPERATING COMPANY CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K--(CONTINUED)
ITEM OF FORM S-4 LOCATION IN THE PROSPECTUS ---------------- -------------------------- 13. Incorporation of Certain Information by Reference......................... Not Applicable 14. Information with Respect to Registrants Other Than S-3 or S-2 Registrants.......................... Not Applicable C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED 15. Information with Respect to S-3 Companies............................. Not Applicable 16. Information with Respect to S-2 or S-3 Companies............................ Not Applicable 17. Information with Respect to Companies Other Than S-3 or S-2 Companies...... Not Applicable D. VOTING AND MANAGEMENT INFORMATION 18. Information if Proxies, Consents or Authorizations are to be Solicited... Not Applicable 19. Information if Proxies, Consents or Authorizations are not to be Solicited or in an Exchange Offer.... The Exchange Offer; Management
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A + +REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE + +SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY + +OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT + +BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR + +THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE + +SECURITIES IN ANY STATE OR OTHER JURISDICTION IN WHICH SUCH OFFER, + +SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION + +UNDER THE SECURITIES LAWS OF ANY SUCH STATE OR OTHER JURISDICTION. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED AUGUST 27, 1997 PROSPECTUS , 1997 OFFER FOR ALL OUTSTANDING SERIES A 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 IN EXCHANGE FOR SERIES B 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OF HOLLYWOOD PARK, INC. AND HOLLYWOOD PARK OPERATING COMPANY, AS CO-OBLIGORS THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS EXTENDED. Hollywood Park, Inc. ("Hollywood Park" or the "Company") and Hollywood Park Operating Company, a wholly-owned subsidiary of Hollywood Park ("HPOC"), as co- obligors (together, the "Issuers") hereby offer, upon the terms and subject to the conditions set forth in this Prospectus and the accompanying Letter of Transmittal (which together constitute the "Exchange Offer"), to exchange an aggregate principal amount at maturity of up to $125,000,000 of Series B 9 1/2% Senior Subordinated Notes Due 2007 (the "New Notes") of the Issuers, which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), for a like principal amount of the issued and outstanding Series A 9 1/2% Senior Subordinated Notes Due 2007 (the "Old Notes" and, together with the New Notes, the "Notes") of the Issuers from the holders (the "Holders") thereof. The terms of the New Notes are identical in all material respects to the Old Notes except (i) the offering and sale of the New Notes will have been registered under the Securities Act of 1933, as amended (the "Securities Act"), and (ii) holders of New Notes generally will not be entitled to certain rights of holders under a Registration Rights Agreement of the Company dated as of August 1, 1997 (the "Registration Rights Agreement"). See "The Exchange Offer-- Purpose and Effect of Exchange Offer." The Old Notes have been, and the New Notes will be, issued under the indenture (the "Indenture") dated as of August 1, 1997, among the Issuers, the Guarantors (as defined herein) and The Bank of New York, as trustee (the "Trustee"). See "Description of Notes." (Continued on next page) ----------- THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION. HOLDERS OF OLD NOTES ARE URGED TO READ THIS PROSPECTUS AND THE RELATED LETTER OF TRANSMITTAL CAREFULLY BEFORE DECIDING WHETHER TO TENDER THEIR NOTES PURSUANT TO THE EXCHANGE OFFER. SEE "RISK FACTORS" ON PAGE 14 OF THIS PROSPECTUS FOR A DESCRIPTION OF CERTAIN FACTORS TO BE CONSIDERED BY HOLDERS WHO TENDER THEIR OLD NOTES IN THE EXCHANGE OFFER. THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. NEITHER THE CALIFORNIA ATTORNEY GENERAL'S OFFICE, THE NEVADA GAMING COMMISSION, THE NEVADA STATE GAMING CONTROL BOARD, THE MISSISSIPPI GAMING COMMISSION, THE LOUISIANA GAMING CONTROL BOARD NOR ANY OTHER REGULATORY AGENCY OF ANY OTHER STATE HAS PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS OR THE INVESTMENT MERITS OF THE SECURITIES OFFERED HEREBY. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. ----------- The New Notes will mature on August 1, 2007. The New Notes will bear interest at a rate per annum equal to 9 1/2%, payable semiannually in arrears on February 1 and August 1 of each year, commencing on February 1, 1998. The Issuers will not be required to make any mandatory redemption or sinking fund payment with respect to the New Notes prior to maturity. The New Notes will be redeemable at the option of the Issuers, in whole or in part, on or after August 1, 2002, at the redemption prices set forth herein, plus accrued and unpaid interest and Liquidated Damages (as defined), if any, to the date of redemption. In addition, during the first 36 months after the date of issuance of the New Notes, the Issuers may redeem up to 25% of the aggregate principal amount initially outstanding, at a redemption price equal to 109.5% of the principal amount thereof, plus accrued and unpaid interest, if any, to the redemption date, with the net cash proceeds of one or more public equity offerings; provided, that at least 75% of the aggregate principal amount of the Notes initially outstanding remain outstanding immediately after the occurrence of such redemption. Upon a Change of Control (as defined and including the occurrence of the Possible REIT Restructuring (as defined)), the Issuers will be required to make an offer to repurchase all outstanding Notes at 101% (or in the case of a REIT Change of Control (as defined), 102%) of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. The New Notes will be absolutely and unconditionally, jointly and severally, guaranteed (the "Guaranties") on a senior subordinated basis by all of the Company's other existing and certain future direct and indirect material subsidiaries (collectively, the "Guarantors") subject to receipt of any required gaming approvals for each applicable subsidiary. The Guaranty of the New Notes by the entity which owns and operates Boomtown Reno will require consent of the gaming authorities in Nevada. The New Notes and the Guaranties will be general unsecured obligations of the Issuers and the Guarantors, respectively, subordinated in right of payment to all existing and future Senior Debt (as defined) of the Issuers and the Guarantors, respectively, including the Bank Credit Facility (as defined) and effectively subordinated to all existing and future secured indebtedness of the Issuers and the Guarantors. On a pro forma basis, as of June 30, 1997, after giving effect to the issuance of the Old Notes, the application of the proceeds therefrom and the acquisition of Boomtown, Inc., the Issuers and their subsidiaries would have had approximately $10.6 million of Senior Debt. The Indenture will permit the Company and its subsidiaries to incur substantial additional indebtedness, including Senior Debt and secured indebtedness, subject to certain limitations. On August 6, 1997, the Issuers issued $125 million principal amount of Old Notes. The Old Notes were issued pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. The New Notes are being offered hereunder in order to satisfy certain obligations of the Issuers contained in the Registration Rights Agreement. Based on interpretations by the staff of the Securities and Exchange Commission (the "Commission"), as set forth in no- action letters issued to third parties, the Issuers believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by Holders thereof (other than any Holder which is an "affiliate" of either Issuer within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holder's business and such Holder, other than broker-dealers, has no arrangement with any person to engage in a distribution of such New Notes. However, the Commission has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer. Each Holder, other than a broker-dealer, must acknowledge that it is not engaged in, and does not intend to engage in, a distribution of such New Notes and has no arrangement or understanding to participate in a distribution of New Notes. If any Holder is an affiliate of either Issuer, or is engaged in or intends to engage in or has any arrangement with any person to participate in the distribution of the New Notes to be acquired pursuant to the Exchange Offer, such Holder (i) could not rely on the applicable interpretations of the staff of the Commission and (ii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired by such broker- dealer as a result of market-making activities or other trading activities. The Issuers have agreed, under certain circumstances, that, for a period of up to 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." The Issuers will not receive any proceeds from the Exchange Offer. The Issuers will pay all the expenses incident to the Exchange Offer. Tenders of Old Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the Expiration Date. There is no existing trading market for the New Notes, and there can be no assurance regarding the future development of a market for the New Notes. The Initial Purchasers (as defined herein) have advised the Issuers that they currently intend to make a market in the New Notes. The Initial Purchasers are not obligated to do so, however, and any market-making with respect to the New Notes may be discontinued at any time without notice. The Issuers do not intend to apply for listing or quotation of the New Notes on any securities exchange or stock market. There can be no assurance that an active market for the New Notes will develop. To the extent that an active market for the New Notes does develop, the market value of the New Notes will depend on market conditions (such as yields on alternative investments), general economic conditions, the Issuers' financial condition, and other factors. Such conditions might cause the New Notes, to the extent that they are actively traded, to trade at a significant discount from face value. See "Risk Factors--Lack of Public Market for the New Notes." ANY NOTES NOT TENDERED AND ACCEPTED IN THE EXCHANGE OFFER WILL REMAIN OUTSTANDING. TO THE EXTENT ANY NOTES ARE TENDERED AND ACCEPTED IN THE EXCHANGE OFFER, A HOLDER'S ABILITY TO SELL OLD NOTES COULD BE ADVERSELY AFFECTED. FOLLOWING CONSUMMATION OF THE EXCHANGE OFFER, THE HOLDERS OF OLD NOTES WILL CONTINUE TO BE SUBJECT TO THE EXISTING RESTRICTIONS UPON TRANSFER THEREOF AND THE ISSUERS WILL HAVE FULFILLED CERTAIN OF THEIR OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. HOLDERS OF OLD NOTES WHO DO NOT TENDER THEIR NOTES GENERALLY WILL NOT HAVE ANY FURTHER REGISTRATION RIGHTS UNDER THE REGISTRATION RIGHTS AGREEMENT OR OTHERWISE. See "The Exchange Offer-- Consequences of Failure to Exchange." The New Notes issued pursuant to this Exchange Offer generally will be issued in the form of Global Notes (as defined herein), which will be deposited with, or on behalf of, The Depository Trust Company ("DTC") and registered in its name or in the name of Cede & Co., its nominee. Beneficial interests in the Global Notes representing the New Notes will be shown on, and transfers thereof will be effected through, records maintained by DTC and its participants. See "Book-Entry; Delivery and Form." NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY EITHER ISSUER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY SECURITY OTHER THAN THE NEW NOTES OFFERED HEREBY, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY ANY OF THE NEW NOTES TO ANY PERSON IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION TO SUCH PERSON. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF. UNTIL , 1997 (90 DAYS AFTER COMMENCEMENT OF THE EXCHANGE OFFER), ALL DEALERS EFFECTING TRANSACTIONS IN THE NEW NOTES, WHETHER OR NOT PARTICIPATING IN THE EXCHANGE OFFER, MAY BE REQUIRED TO DELIVER A PROSPECTUS IN CONNECTION WITH SUCH TRANSACTION. THIS PROSPECTUS (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE OR TO BE MADE BY THE COMPANY) CONTAINS CERTAIN STATEMENTS WITH RESPECT TO, AMONG OTHER THINGS, THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, BUSINESS AND PROSPECTS OF THE COMPANY THAT ARE FORWARD- LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT, INCLUDING STATEMENTS RELATING TO EXPANSION OPPORTUNITIES, PRO FORMA COMBINED COMPANY FINANCIAL RESULTS, THE ABILITY TO UTILIZE HOLLYWOOD PARK'S FINANCIAL RESOURCES TO IMPROVE THE FINANCIAL POSITION OF ITS NEWLY ACQUIRED SUBSIDIARY, BOOMTOWN (AS DEFINED BELOW), STRATEGIC SYNERGIES, COST SAVINGS RELATING TO THE ACQUISITION OF BOOMTOWN, CAPITAL REQUIREMENTS AND THE POSSIBILITY OF REINSTITUTING A PAIRED-SHARE/REIT STRUCTURE AND THE POTENTIAL BENEFITS TO BE DERIVED THEREFROM, AND SUCH STATEMENTS ARE INTENDED TO BE COVERED BY THE SAFE HARBOR CREATED THEREBY (SEE "PROSPECTUS SUMMARY--THE COMPANY," "--UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA," "BUSINESS," "SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," AND "UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS"). THESE FORWARD-LOOKING STATEMENTS CONCERN MATTERS WHICH INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL PERFORMANCE OF HOLLYWOOD PARK TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FAILURE TO COMPLETE OR SUCCESSFULLY OPERATE PLANNED EXPANSION, THE FAILURE TO OBTAIN ADEQUATE FINANCING TO MEET HOLLYWOOD PARK'S STRATEGIC GOALS, DIFFICULTIES IN COMPLETING INTEGRATION OF HOLLYWOOD PARK AND BOOMTOWN, FAILURE TO OBTAIN OR RETAIN LICENCES OR REGULATORY APPROVALS AND THE OTHER FACTORS SET FORTH UNDER "RISK FACTORS." AVAILABLE INFORMATION The Company is subject to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith, is required to file reports, proxy statements and other information with the Commission. The Issuers have filed with the Commission a Registration Statement on Form S-4 under the Securities Act for the registration of the New Notes offered hereby (the "Registration Statement"). This Prospectus, which constitutes a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement, certain items of which are contained in exhibits and schedules to the Registration Statement as permitted by the rules and regulations of the Commission. For further information with respect to the Issuers or the New Notes offered hereby, reference is made to the Registration Statement, including the exhibits and financial statement schedules thereto, which may be inspected without charge at the public reference facility maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of which may be obtained from the Commission at prescribed rates. Statements made in this Prospectus concerning the contents of any document referred to herein are not necessarily complete. With respect to each such document filed with the Commission as an exhibit to the Registration Statement, reference is made to the exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. Such documents and other information filed by the Company can be inspected and copied at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and the regional offices of the Commission located at 7 World Trade Center, New York, New York 10048 and 500 West Madison Street, 14th Floor, Chicago, Illinois 60661. Copies of such materials may be obtained from the Public Reference Section i of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at its public reference facilities in New York, New York and Chicago, Illinois at prescribed rates. The Company makes its filings with the Commission electronically. The Commission maintains a website that contains reports, proxy and information statements and other information regarding registrants that file electronically, which information can be accessed at http://www.sec.gov. HPOC and the Guarantors are not currently subject to the informational requirements of the Exchange Act but HPOC voluntarily files reports and other information pursuant to the Exchange Act, due to covenants contained in the Indenture. As a result of the offering of the New Notes, HPOC and the Guarantors will become subject to the informational requirements of the Exchange Act. The Company will fulfill HPOC's and the Guarantors' obligations with respect to such requirements by including information regarding HPOC and the Guarantors in the periodic reports of the Company. So long as the Company is subject to the periodic reporting requirements of the Exchange Act, it is required to furnish the information required to be filed with the Commission to the Trustee and the holders of the Old Notes and the New Notes. The Issuers have agreed that, even if they are not required under the Exchange Act to furnish such information to the Commission, they will nonetheless continue to furnish information that would be required to be furnished by the Issuers by Section 13 of the Exchange Act to the Trustee and the holders of the Old Notes or New Notes as if they were subject to such periodic reporting requirements. In addition, the Issuers have agreed that, for so long as any of the Notes remain outstanding, they will make available, upon request, to any seller of such Notes the information specified in Rule 144(d)(4) under the Securities Act, unless the Issuers are then subject to Section 13 or 15(d) of the Exchange Act. DOCUMENTS INCORPORATED BY REFERENCE The following documents heretofore filed by the Company (Commission file number 0-10619) are incorporated herein by reference: the Company's Registration Statement on Form S-4 (Reg. No. 333-12253), effective September 20, 1996; its Annual Report on Form 10-K for the fiscal year ended December 31, 1996; its Quarterly reports on Form 10-Q for the fiscal quarters ended March 31, 1997 and June 30, 1997; its Current Reports on Form 8-K filed July 15, 1997 and August 12, 1997; and the description of the Company's common stock, $.10 par value per share (the "Common Stock") set forth in the Company's Registration Statement on Form 8-A filed with the Commission on June 29, 1994. All reports and definitive proxy or information statements filed by the Company or its subsidiaries pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the Expiration Date (as defined) shall be deemed to be incorporated by reference into this Prospectus from the date of filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. There will be provided without charge to each person, including any beneficial owner, to whom a Prospectus is delivered, upon oral or written request of any such person, a copy of all documents incorporated by reference herein (excluding exhibits unless such exhibits are specifically incorporated by reference herein). Requests for such documents should be directed to Hollywood Park, Inc., Investor Relations, 1050 South Prairie Avenue, Inglewood, California 90301 (telephone (310) 419-1610). ii PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Prospectus and the other documents incorporated by reference herein. The New Notes are to be issued by Hollywood Park, Inc. ("Hollywood Park" or the "Company") and its wholly-owned subsidiary, Hollywood Park Operating Company ("HPOC"), as Issuers, and unconditionally guaranteed by all of the Company's other direct and indirect material subsidiaries. References herein to "Hollywood Park" or the "Company" generally refer to the Company and all of its subsidiaries (including HPOC) taken as a whole. This Prospectus does not contain separate financial statements of HPOC or any other subsidiary. THE COMPANY Hollywood Park is a diversified gaming, sports and entertainment company engaged in the ownership and operation of casinos (including card club casinos) and pari-mutuel racing facilities, and the development of other related opportunities. For the year ended December 31, 1996, on a pro forma basis (giving effect to the recent acquisition of Boomtown, the disposition of Boomtown Las Vegas (as defined) and the issuance of the Notes (collectively, the "Transactions") as if the Transactions were consummated as of January 1, 1996), Hollywood Park had total revenues of approximately $336.9 million and Adjusted EBITDA (as defined herein) of approximately $52.3 million. As a result of its strategic combination with Boomtown, Hollywood Park is a company with diversified revenues, improved cash flow and significant real estate acreage available for future development. On a pro forma basis, as of June 30, 1997, the Company had total assets of approximately $438.1 million and Net Debt (as defined) of approximately $89.4 million. Hollywood Park owns and operates land-based, dockside and riverboat gaming operations in Verdi, Nevada ("Boomtown Reno"), Biloxi, Mississippi ("Boomtown Biloxi") and Harvey, Louisiana ("Boomtown New Orleans"), respectively. Hollywood Park's Boomtown properties offer gaming and other entertainment amenities primarily to middle income, value-oriented customers. Hollywood Park believes its Boomtown properties distinguish themselves from other casinos by their emphasis on the "old west" theme and their casual, friendly atmosphere. Hollywood Park also owns two card club casinos in California, both located in the Los Angeles metropolitan area, the Hollywood Park-Casino card club casino (the "Hollywood Park-Casino"), operated by the Company on the premises of the Hollywood Park Race Track (described below), and the Radisson Crystal Park Hotel & Casino ("Crystal Park"), in which Hollywood Park holds a majority interest and which is leased to an unaffiliated operator. The Hollywood Park- Casino and Crystal Park offer a variety of card games, including Poker, Pai Gow and California Blackjack. The Company's gaming properties have an aggregate of 3,269 slot machines and 379 table games. Hollywood Park is the only company that currently owns and operates both California card club casinos and traditional casinos in Nevada and other states. Hollywood Park owns and operates the Hollywood Park Race Track, a premier thoroughbred racing facility (and the site of the prestigious 1997 Breeders' Cup championship racing series) located within three miles of the Los Angeles International Airport, and the Turf Paradise Race Track ("Turf Paradise"), a thoroughbred racing facility located in Phoenix, Arizona. The following table provides certain information relating to the gaming, hotel room and undeveloped acreage data as of July 1, 1997 at Hollywood Park's properties:
BOOMTOWN BOOMTOWN BOOMTOWN HOLLYWOOD CRYSTAL HOLLYWOOD TURF PARADISE RENO NEW ORLEANS BILOXI PARK-CASINO PARK PARK SITE SITE TOTAL -------- ----------- -------- ----------- ------- --------- ------------- ----- Casino Square Footage............. 40,000 30,000 33,632 30,000 40,000 N/A N/A 173,632 Slot Machines........ 1,320 911 1,038 0 0 N/A N/A 3,269 Table Games.......... 44 55 35 145 100 N/A N/A 379 Hotel Rooms.......... 122 0 0 0 282 N/A N/A 404 Undeveloped Acreage.. 503 22 0 0 0 150 100 775
1 Gaming Properties Boomtown Reno. Boomtown Reno has been operating for over 30 years (and has been operated by current Boomtown management since 1987) on 569 acres in Verdi, Nevada (seven miles west of Reno, Nevada and two miles from the California border) on Interstate 80, the major highway connecting Northern California and Reno. Boomtown Reno caters to middle-income customers and markets itself as a gaming and entertainment property complete with amenities for the entire family. Boomtown Reno offers its guests a 40,000-square foot casino, including 1,320 slot machines and 44 table games and two Keno games. Boomtown Reno also offers a 122-room hotel, a 35,000-square foot entertainment center featuring a theater, an indoor miniature golf course, a restaurant and a ferris wheel, a 16-acre truck stop with approximately 200 parking spaces, a 203-space full- service recreational vehicle park, a service station, a mini-mart and other related amenities. The Company currently plans a $25 million expansion at Boomtown Reno to renovate existing gaming space and to add approximately 200 hotel rooms, 13,000 square feet of additional gaming space (including 200 slot machines), a restaurant, an entertainment lounge, 10,000 square feet of meeting space, additional parking and other amenities. Boomtown New Orleans. Boomtown New Orleans commenced 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 911 slot machines and 55 table games in a 30,000 square foot casino. The land-based facility adjacent to the riverboat dock is composed of a western-themed, 88,000-square foot facility. The first floor of the building opened December 1994 and offers patrons a restaurant, a 20,000 square foot family entertainment center and a western saloon/dancehall. The Company currently plans a $10 million expansion of the Boomtown New Orleans facility to refurbish the existing gaming area and to build out the second floor by adding meeting space, additional food and beverage and other entertainment amenities. Boomtown New Orleans caters to the approximately 300,000 local residents of the West Bank of the Mississippi River near New Orleans. Boomtown Biloxi. Boomtown Biloxi commenced operations in July 1994 and occupies nineteen acres on Biloxi, Mississippi's historic Back Bay, one-half mile from Interstate 110, the main highway connecting Interstate 10 and the Gulf of Mexico. Boomtown's "old west" theme is the first of its kind in the Gulf Coast area, and management believes the casual atmosphere and western theme distinguish Boomtown Biloxi from competing casinos. The dockside property consists of a land-based facility which houses all non-gaming activities and a 33,632-square foot casino constructed on a 400 x 110 foot barge permanently moored to the land-based building. The property offers 1,038 slot machines, 35 table games and various restaurants and other non-gaming amenities. Hollywood Park is considering, subject to further market analysis and the acquisition of additional land, a possible expansion of Boomtown Biloxi to add hotel rooms and/or to expand the undeveloped portion of the barge. Boomtown Biloxi caters to the over 250,000 local residents of the Biloxi area and to the employees of other casinos in the area. Hollywood Park-Casino. The Hollywood Park-Casino, a California card club casino, opened in July 1994 on the same premises as the Hollywood Park Race Track. The casino offers 145 gaming tables in 30,000-square feet of gaming space. By law, California card club casinos may neither bank card games nor offer certain of the familiar games permitted in Nevada and other traditional gaming jurisdictions. Instead, the Hollywood Park-Casino offers only certain forms of card games, including Poker, Pai Gow and California Blackjack. Patrons of the Hollywood Park-Casino pay a fee for seats at gaming tables or for each hand played. Players bet solely against each other, and the Hollywood Park- Casino does not participate in the wagers made or in the outcome of any of the games played. Crystal Park. Crystal Park, which is Southern California's first major combined hotel and casino property, opened in late 1996 with 100 gaming tables and 282 hotel rooms. Games offered are similar to those offered at the Hollywood Park-Casino. The hotel operates under a Radisson Hotels International, Inc. flag. Hollywood Park has an 89.8% interest in Crystal Park Hotel and Casino Development Company, LLC ("Crystal Park LLC"), 2 the entity that owns the facility, with unaffiliated minority investors owning the balance of the facility. In order to comply with California law, which does not allow publicly-traded companies to operate card club casinos (other than on the same property as a race track, such as the Hollywood Park-Casino), Crystal Park is operated under a five-year lease by an unaffiliated operator. Racing Properties Hollywood Park Race Track. The Hollywood Park Race Track is situated on 378 acres in the Los Angeles metropolitan area. Since 1938, the Hollywood Park Race Track has been ranked among the country's most distinguished thoroughbred racing facilities and, in 1997, will be hosting the Breeders' Cup championship racing series for the third time. Hollywood Park conducts two live on-track thoroughbred horse race meets annually, totalling approximately 100 race days per year, and in 1996 had one of the nation's largest combined live and simulcast single-track gross handles (approximately $1.1 billion). Hollywood Park simulcasts its live races, directly or indirectly through re-transmissions, to 861 locations in 40 states and four countries. Hollywood Park also accepts the simulcast signal from live races conducted at other race tracks around the world. Turf Paradise. Turf Paradise, which has operated for over 40 years, was acquired by Hollywood Park in August 1994 and is situated on approximately 275 acres in the northwest section of Phoenix, Arizona. Turf Paradise conducts a live thoroughbred meet that starts in September and runs through May and also offers limited quarter horse and Arabian horse racing during certain periods of the year. Turf Paradise simulcasts its live races to 34 off-track sites in Arizona and 34 out-of-state hubs, from which the signal is further disseminated to sites in New York, New Jersey, Pennsylvania, Nevada and Canada, among others. Sunflower Racing. The Company also owns, through its subsidiary Sunflower Racing Inc. ("Sunflower"), The Woodlands Racetrack in Kansas City, Kansas. However, in 1996 Sunflower filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code. A plan of reorganization was recently filed with the Bankruptcy Court. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Business Strategy Hollywood Park's strategic plan is to grow its gaming, sports and entertainment businesses by (i) expanding and increasing the utilization of its existing properties, (ii) developing unimproved real estate at its existing sites and developing projects at new sites, and (iii) making selected acquisitions, principally in the gaming industry, to diversify its operations and to achieve economies of scale. . Expansion/Renovation of Existing Properties. The Company plans to expand and renovate Boomtown Reno, Boomtown New Orleans and, possibly, Boomtown Biloxi, by adding hotel rooms, gaming space, dining facilities, meeting space and other amenities. . Identified Development Opportunities. The Company is exploring the development of some or all of the 150 undeveloped acres at the Hollywood Park Race Track property and the 100 undeveloped acres at Turf Paradise property through the addition of multi-use retail, entertainment and/or sports venues. In addition, the Company is considering various alternative development plans for some or all of the 503 undeveloped acres at its Boomtown Reno site. The Company is also currently seeking a riverboat gaming license for a hotel/casino on the Ohio River in Switzerland County, Indiana, located approximately 35 miles south of Cincinnati, Ohio, as part of a joint venture with a subsidiary of Hilton Gaming Corporation. . Potential Strategic Acquisitions. Hollywood Park believes that significant opportunities currently exist in the gaming industry as a result of consolidation trends and the inability of certain gaming companies to expand or maximize their opportunities due to capital constraints. Accordingly, Hollywood Park seeks to capitalize on these opportunities to diversify its operations geographically and achieve the benefits of economies of scale and synergy. The Company is exploring acquisition opportunities in emerging gaming markets (other than Las Vegas or Atlantic City) in which gaming has already been legalized. 3 RECENT DEVELOPMENTS Hollywood Park-Boomtown Merger and Disposition of Boomtown Las Vegas On June 30, 1997, pursuant to the Agreement and Plan of Merger dated as of April 23, 1996 by and among the Company, HP Acquisition, Inc., a wholly-owned subsidiary of the Company, and Boomtown, HP Acquisition, Inc. was merged with and into Boomtown (the "Merger"). As a result of the Merger, Boomtown became a wholly-owned subsidiary of the Company and each share of Boomtown common stock was converted into the right to receive 0.625 of a share of Hollywood Park's common stock. Approximately 5,363,000 shares of Hollywood Park's common stock (excluding shares purchased from Edward P. Roski, Jr. as described below) were issued in the Merger, representing approximately 22.5% of the total outstanding shares of Hollywood Park's common stock, after giving effect to such issuance. On July 1, 1997, Hollywood Park divested its entire interest in Boomtown's hotel/casino property in Las Vegas, Nevada ("Boomtown Las Vegas"), to the property's landowner and such landowner's affiliates (including Edward P. Roski, Jr.) in exchange for cash, certain receivables, the termination of the facility lease and the assumption by the landowner of certain liabilities and operating leases (collectively, the "Blue Diamond Swap"). Hollywood Park concurrently repurchased from Mr. Roski 446,491 shares of Hollywood Park's common stock received by him in the Merger. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Results of Operations--Boomtown--Disposition of Boomtown Las Vegas." New Credit Facility In connection with the Merger, the Company and a bank syndicate led by Bank of America National Trust and Savings Association ("Bank of America NT&SA") entered into a new bank credit facility (the "Bank Credit Facility") providing for a reducing revolving line of credit of up to $225 million, maturing on June 30, 2002. However, the revolving line of credit commitment was permanently reduced dollar-for-dollar by the $125 million aggregate principal amount of the Old Notes issued by the Company. The Bank Credit Facility is secured by liens on substantially all of the assets of the Company and its material subsidiaries. At June 30, 1997, the interest rate under the Bank Credit Facility was 7.44%. See "Description of Other Indebtedness--Bank Credit Facility." Improvements to Boomtown's Financial Condition Concurrently with the closing of the Merger and the Blue Diamond Swap, the Company supplied the funds necessary to enable Boomtown to repurchase and retire an aggregate of approximately 99% of the $103.5 million aggregate principal amount of Boomtown's 11.5% First Mortgage Notes due 2003 (the "Boomtown Notes") at a purchase price of $1,085 per $1,000 in principal amount (together with accrued interest thereon) pursuant to an offer to purchase the Boomtown Notes, leaving an aggregate of approximately $1 million in principal amount of Boomtown Notes outstanding. Holders who tendered their Boomtown Notes consented to the elimination or modification of certain covenants and other changes to the indenture governing the Boomtown Notes, all to permit the consummation of the Merger and the Blue Diamond Swap and to provide greater operational flexibility to Hollywood Park. In addition, Boomtown made an offer to redeem the remaining Boomtown Notes at 101% of principal amount (plus accrued interest) pursuant to a change of control offer provision in the indenture governing the Boomtown Notes and approximately $100,000 in aggregate principal amount of the remaining Boomtown Notes were tendered in response to such offer. On August 8, 1997, Hollywood Park purchased the remaining 7.5% of Boomtown New Orleans which it did not already hold for approximately $5.7 million. On August 4, 1997, Hollywood Park executed an agreement to repurchase the Boomtown Biloxi barge currently leased from National Gaming Mississippi, Inc., a subsidiary of Chartwell Leisure Inc. ("National Gaming") for approximately $5.25 million, and made a down payment of 4 $1.5 million with the balance due in three annual installments of $1.25 million. National Gaming's participation in Boomtown Biloxi's adjusted EBITDA (as defined in the lease agreement) and other related agreements terminated upon consummation of the barge repurchase. The Company also has an option to purchase the remaining 15% of Boomtown Biloxi which it does not already hold for a nominal amount, and it has delivered a notice to the minority holder of Boomtown Biloxi exercising this option with the exercise price to be determined pursuant to a formula. If consummated, elimination of these third party interests would allow the Company to benefit 100% from operations, including any improvements, expansions or renovations at these properties. In addition, during 1996 and 1997, Boomtown restructured several operating leases into capital leases through negotiated paydowns of the operating lease residual balances, with a corresponding reduction in operating expenses. Possible Restoration of Paired-Share/REIT Structure In May 1997, the Company announced that it is exploring the possible restoration of its former paired-share/REIT structure (the "Possible REIT Restructuring"). No final decision has been made as to whether, or in what manner, to implement the Possible REIT Restructuring. Further, the Company has not yet solicited the necessary stockholder approval to implement the Possible REIT Restructuring. There can be no assurance that the Company will elect to proceed with the Possible REIT Restructuring or that, if implemented, its expected benefits will be achieved. See "Business--Possible Restoration of Paired-Share/REIT Structure." The Company, subject to completing its evaluation, has begun taking the steps necessary to reinstitute such a structure over the next several months, with the objective of eventually reorganizing its assets and operations into a REIT and an operating company. In connection therewith, the Company has submitted a ruling request to the Internal Revenue Service on certain aspects of the Possible REIT Restructuring and, unless the Company chooses to implement the Possible REIT Restructuring before the Internal Revenue Service has made a determination on that ruling request, the results of that ruling request may have an impact on whether, and in what form, the Possible REIT Restructuring is implemented. There are a number of alternative transaction structures for effectuating the Possible REIT Restructuring, and the Company has not determined which alternative, if any, it would use to implement the Possible REIT Restructuring. However, under any such alternative, if the Company decides to implement the paired-share/REIT structure, the Company would become the REIT, Hollywood Park Operating Company ("HPOC") would become the operating company, and the common stock of the Company and the common stock of HPOC would be paired so that they would be transferable and tradeable only in combination as units (with each unit consisting of one share of the Company's common stock and one share of HPOC's common stock). 5 THE EXCHANGE OFFER Securities Offered.......... $125 million aggregate principal amount of Series B 9 1/2% Senior Subordinated Notes due August 1, 2007. The Exchange Offer.......... $1,000 principal amount of the New Notes in exchange for each $1,000 principal amount of Old Notes. As of the date hereof, $125 million aggregate principal amount of Old Notes are outstanding. The Issuers will issue the New Notes to Holders on or promptly after the Expiration Date. Based on an interpretation by the staff of the Commission set forth in no-action letters issued to third parties, the Issuers believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold and otherwise transferred by any holder thereof (other than any such holder which is an "affiliate" of either Issuer within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and that such holder does not intend to participate and has no arrangement or understanding with any person to participate in the distribution of such New Notes. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. See "Plan of Distribution." Any Holder who tenders in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the New Notes could not rely on the position of the staff of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988), Morgan Stanley & Co., Inc. (available June 5, 1991) or similar no-action letters and, in the absence of an exemption therefrom, must comply with the registration and prospectus delivery requirements of the Securities Act in connection with the resale of the New Notes. Failure to comply with such requirements in such instance may result in such Holder incurring liability under the Securities Act for which the Holder is not indemnified by the Issuers. Expiration Date............. 5:00 p.m., New York City time, on [ ], 1997, unless the Exchange Offer is extended, in which case the term "Expiration Date" means the latest date and time to which the Exchange Offer is extended. Interest on the New Notes and the Old Notes........... The New Notes will bear interest from their date of issuance. Interest will accrue on the Old Notes that are tendered in exchange for the New Notes through the issue date of the New Notes. Holders of Old Notes that are accepted for exchange will not receive interest on the Old Notes that is accrued but unpaid at the time of exchange,
6 but such interest will be payable, together with interest on the New Notes, on the first Interest Payment Date after the Expiration Date. Conditions to the Exchange Offer....................... The Exchange Offer is subject to certain customary conditions, which may be waived by the Issuers. See "The Exchange Offer--Conditions." Procedures for Tendering Old Notes................... Each Holder of Old Notes wishing to accept the Exchange Offer must complete, sign and date the accompanying Letter of Transmittal, or a facsimile thereof, in accordance with the instructions contained herein and therein, and mail or otherwise deliver the Letter of Transmittal, or such facsimile, together with the Old Notes and any other required documentation to the Exchange Agent at the address set forth in the Letter of Transmittal. Persons holding Old Notes through the Depository Trust Company ("DTC") and wishing to accept the Exchange Offer must do so pursuant to the DTC's Automated Tender Offer Program ("ATOP"), by which each tendering participant will agree to be bound by the Letter of Transmittal. By executing or agreeing to be bound by the Letter of Transmittal, each Holder will represent to the Issuers that, among other things, the Holder or the person receiving such New Notes, whether or not such person is the Holder, is acquiring the New Notes in the ordinary course of business and that neither the Holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such New Notes. Special Procedures for Beneficial Owners........... Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact such registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. If such beneficial owner wishes to tender on such owner's own behalf, such owner must, prior to completing and executing the Letter of Transmittal and delivering its Old Notes, either make appropriate arrangements to register ownership of the Old Notes in such owner's name or obtain a properly completed bond power from the registered Holder. The transfer of registered ownership may take considerable time. Guaranteed Delivery Procedures.................. Holders of Old Notes who wish to tender their Old Notes and whose Old Notes are not immediately available or who cannot deliver their Old Notes, the Letter of Transmittal or any other documents required by the Letter of Transmittal to the Exchange Agent (or comply with the procedures for book-entry transfer) prior to the Expiration Date must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures." Withdrawal Rights........... Tenders may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date pursuant to the procedures described under "The Exchange Offer--Withdrawals of Tenders."
7 Acceptance of Old Notes and Delivery of New Notes....... The Issuers will accept for exchange any and all Old Notes that are properly tendered in the Exchange Offer prior to 5:00 p.m., New York City time, on the Expiration Date. The New Notes issued pursuant to the Exchange Offer will be delivered promptly following the Expiration Date. See "The Exchange Offer--Terms of the Exchange Offer." Certain Federal Income Tax Consequences................ The exchange of the New Notes for the Old Notes pursuant to the Exchange Offer should not be taxable to the Holders thereof for federal income tax purposes. See "Certain Federal Income Tax Consequences." Effect on Holders of Old Notes....................... As a result of the making of this Exchange Offer, the Issuers will have fulfilled certain of their obligations under the Registration Rights Agreement, and Holders of Old Notes who do not tender their Old Notes, except for limited instances involving the initial purchasers of the Old Notes (the "Initial Purchasers") and Holders that are not eligible to participate in the Exchange Offer, will not have any further registration rights under the Registration Rights Agreement or otherwise. See "The Exchange Offer-- Purposes and Effect of Exchange Offer." Such Holders will continue to hold the untendered Old Notes and will be entitled to all the rights and subject to all the limitations applicable thereto under the Indenture, except to the extent such rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the Exchange Offer. All untendered Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, if any Old Notes are tendered and accepted in the Exchange Offer, the trading market for the untendered Old Notes could be adversely affected. Exchange Agent.............. The Bank of New York. 8 SUMMARY OF TERMS OF NEW NOTES The form and terms of the New Notes are the same as the form and terms of the Old Notes (which they replace) except that (i) the New Notes have been registered under the Securities Act and, therefore, will not bear legends restricting the transfer thereof and (ii) the Holders of New Notes, except for limited instances involving the Initial Purchasers and Holders that are not eligible to participate in the Exchange Offer, will not be entitled to further registration rights under the Registration Rights Agreement, which rights will be satisfied when the Exchange Offer is consummated and will not be entitled to any payments of liquidated damages for failure to satisfy such rights. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. See "Description of Notes." Issuers..................... Hollywood Park, Inc. and Hollywood Park Operating Company as co-obligors. Maturity.................... August 1, 2007. Interest Payment Dates...... February 1 and August 1 of each year, commencing February 1, 1998 ("Interest Payment Dates"). Guaranties.................. The New Notes will be, and the Old Notes remaining outstanding after the Exchange Offer will continue to be, absolutely and unconditionally, jointly and severally, guaranteed (the "Guaranties") by any existing or future Material Restricted Subsidiaries (as defined) of either Issuer (the "Guarantors"). The issuance of Guaranties by certain subsidiaries is subject to the receipt of any required gaming approvals from jurisdictions in which such subsidiaries operate. Mandatory Redemption........ None. Optional Redemption......... Except as set forth below, the Notes may not be redeemed by the Issuers prior to August 1, 2002. Thereafter, the Notes will be redeemable at any time at the option of the Issuers, in whole or in part, at the respective redemption prices set forth herein, plus accrued and unpaid interest, if any, to the date of redemption. In addition, at any time during the first 36 months after the date of issuance of the Notes, the Issuers may redeem up to 25% of the initially outstanding aggregate principal amount of Notes with the net cash proceeds of one or more Public Equity Offerings (as defined) at a price equal to 109.5% of the principal amount plus accrued and unpaid interest, if any, to the redemption date, provided that at least 75% of the initially outstanding aggregate principal amount of Notes remains outstanding immediately after the occurrence of such redemption. The Issuers have the option to redeem the Notes at any time to prevent the loss or material impairment of a gaming license or an application for a gaming license. See "Business--Regulation and Licensing" and "Description of Notes--Optional Redemption." Ranking..................... The Notes are general unsecured obligations of the Issuers, subordinated in right of payment to all Senior Debt (as defined), and effectively subordinated to all secured indebtedness, of the Issuers, including the Bank Credit Facility. The Guaranties are general 9 unsecured obligations of the Guarantors, subordinated in right of payment to all Senior Debt, and effectively subordinated to all secured indebtedness, of the Guarantors, including their guaranties of the Bank Credit Facility. On a pro forma basis, as of June 30, 1997, after giving effect to the application of the net proceeds of this Offering, and the consummation of the Transactions, the Issuers and their subsidiaries would collectively have had approximately $10.6 million of Senior Debt. Change of Control........... Upon the occurrence of a Change of Control (including the Possible REIT Restructuring, as defined), each holder of Notes may require the Issuers to repurchase such holder's Notes at 101% or, in the case of a REIT Change of Control (as defined), 102%, of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. See "Description of Notes-- Repurchase at the Option of Holders--Change of Control." Amendment of Covenants Without Noteholder Consent Upon Restoration of Paired- Share/REIT Structure........ The Indenture provides that, in the event that the Company elects to consummate the Possible REIT Restructuring, the Company would be permitted, without the consent of any holders of Notes, to enter into a supplemental indenture modifying the Indenture to permit the Company to implement the Possible REIT Restructuring and to make required rent and dividend payments, and otherwise to operate within the paired-share/REIT structure and, as determined by the Company, as necessary to maintain the relative benefits and restrictions of the Indenture thereafter, subject to the repurchase offer requirements triggered by a Change of Control, or, in the event of a resulting decline in the rating of the Notes, a REIT Change of Control, and provided that the Issuers would comply with the covenant entitled "Asset Sales" without giving effect to any amendments thereto in the Possible REIT Restructuring. See "Prospectus Summary--Recent Developments--Possible Restoration of Paired- Share/REIT Status" and "Description of Notes-- Repurchase at the Option of Holders--Change of Control" and "--Amendment, Supplement and Waiver." Certain Covenants........... The Indenture contains certain covenants that among other things, limit the ability of the Obligors and their Restricted Subsidiaries to incur additional Indebtedness (as defined) and issue preferred stock, pay dividends or make other distributions, repurchase Equity Interests (as defined) or subordinated Indebtedness, create certain liens, enter into certain transactions with affiliates, sell assets, issue or sell equity interests in their respective subsidiaries or enter into certain mergers and consolidations. In addition, under certain circumstances, the Issuers will be required to offer to purchase Notes at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages, if any, to the date of purchase, with the proceeds of certain Asset Sales (as defined). 10 For a discussion of the terms of the Notes, see "Description of Notes." For a discussion of certain factors that should be considered in connection with an investment in the Notes, see "Risk Factors." The following chart shows the Company's material direct subsidiaries, their various operational holdings and the Company's ownership interest therein. [CHART APPEARS HERE] - ------- (1) Owns the Hollywood Park Race Track property and leases the property to HPOC. (2) The Company has delivered a notice exercising its option to purchase the minority interest. See "Business--Gaming Operations--Boomtown Biloxi." (3) Joint Venture with Hilton Gaming (Switzerland County) Corporation. (4) Filed for reorganization under Ch. 11 of the Bankruptcy Code. See "Business--Racing Operations." 11 UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA The following unaudited summary pro forma financial information has been prepared by combining (i) the audited consolidated statements of operations of Hollywood Park for the year ended December 31, 1996, with the unaudited consolidated statements of operations of Boomtown, also for the year ended December 31, 1996, and (ii) the unaudited consolidated statements of operations of Hollywood Park and Boomtown for the six months ended June 30, 1997. Historically, Boomtown reported results on a fiscal year end of September 30. In addition, these pro forma financial statements are presented with Boomtown Las Vegas results excluded, because this property was divested in connection with the Merger. The information set forth below is based on, and should be read in conjunction with, the historical consolidated financial statements and the related notes thereto of Hollywood Park and Boomtown, and the Unaudited Pro Forma Combined Consolidated Condensed Financial Statements presented elsewhere herein. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger and the issuance of the Notes had been consummated in an earlier period, nor is it necessarily indicative of the future operating results or financial position.
YEAR ENDED SIX MONTHS ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ---------------- (IN THOUSANDS, EXCEPT RATIOS) INCOME STATEMENT DATA: Revenues............................... $336,878 $174,243 Operating expenses..................... 354,666 157,022 Operating income (loss)................ (17,788) 17,221 Interest expense....................... 15,468 7,398 Income (loss) before extraordinary item.................................. (37,346) 5,393 Dividends on convertible preferred stock(a).............................. 1,925 962 Income (loss) before extraordinary item attributable to (allocated to) common shareholders.......................... (39,271) 4,431 OTHER DATA: EBITDA................................. $ 3,030 $ 31,779 Adjusted EBITDA(b)..................... 52,296 33,623 Depreciation and amortization.......... 20,818 14,558 Ratio of Adjusted EBITDA to interest expense............................... 3.38x 4.54x Ratio of earnings to fixed charges(c).. -- (d) 2.09x
AS OF JUNE 30, 1997 ------------------ ACTUAL PRO FORMA -------- --------- BALANCE SHEET DATA: Cash and cash equivalents................................... $ 38,409 $ 46,012 Short-term investments...................................... 1,275 1,275 Total assets................................................ 426,098 438,139 Total debt (including current portion)...................... 122,618 136,686 Net debt(e)................................................. 82,934 89,399 Stockholders' equity........................................ 216,607 216,607
(Footnotes appear on following page) 12 - -------- (a) The Company has announced its intention to exercise its option to cause conversion of the convertible preferred stock, which conversion is expected to be effective on or about August 28, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." (b) "Adjusted EBITDA" represents earnings before interest, taxes, depreciation and amortization ("EBITDA"), adjusted to exclude the effect of (i) the write-off of Hollywood Park's $11.4 million investment in Sunflower, and (ii) the $36.6 million charge relating to the disposition of Boomtown's Blue Diamond Las Vegas resort. EBITDA should not be construed as an alternative to income from operations (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance, or as an alternative to cash flow from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (c) In computing the ratio of earnings to fixed charges: (i) earnings have been based on income from continuing operations before income taxes and fixed charges (exclusive of capitalized interest), and (ii) fixed charges consist of interest expense and amortization of debt discount and issuance costs (including amounts capitalized), and the estimated interest portion of rental expense. (d) The Company's earnings were not sufficient to cover its fixed charge requirement by $34.6 million for the year ended December 31, 1996. Included in the calculation for the twelve months ended December 31, 1996 was the one time, non-cash $11.4 million write-off of Hollywood Park's investment in Sunflower. Also included in the calculation for the twelve months ended December 31, 1996 was the $36.6 million one-time charge relating to the disposition of Boomtown's Blue Diamond Las Vegas resort. (e) Net Debt is total debt (including current portion) less all cash and cash equivalents and short-term investments. 13 RISK FACTORS In addition to the other matters described in this Prospectus, the following matters should be carefully considered by each Holder before accepting the Exchange Offer, although certain matters set forth below are equally applicable to the Old Notes. THIS PROSPECTUS (AS WELL AS INFORMATION INCLUDED IN ORAL STATEMENTS OR OTHER WRITTEN STATEMENTS MADE OR TO BE MADE BY THE COMPANY) CONTAINS CERTAIN STATEMENTS WITH RESPECT TO, AMONG OTHER THINGS, THE FINANCIAL CONDITION, RESULTS OF OPERATIONS, BUSINESS AND PROSPECTS OF THE COMPANY THAT ARE FORWARD- LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT, INCLUDING STATEMENTS RELATING TO EXPANSION OPPORTUNITIES, PRO FORMA COMBINED COMPANY FINANCIAL RESULTS, THE ABILITY TO UTILIZE HOLLYWOOD PARK'S FINANCIAL RESOURCES TO IMPROVE THE FINANCIAL POSITION OF ITS NEWLY ACQUIRED SUBSIDIARY, BOOMTOWN, STRATEGIC SYNERGIES, COST SAVINGS RELATING TO THE ACQUISITION OF BOOMTOWN, CAPITAL REQUIREMENTS AND THE POSSIBILITY OF REINSTITUTING A PAIRED-SHARE/REIT STRUCTURE AND THE POTENTIAL BENEFITS TO BE DERIVED THEREFROM, AND SUCH STATEMENTS ARE INTENDED TO BE COVERED BY THE SAFE HARBOR CREATED THEREBY (SEE "PROSPECTUS SUMMARY--THE COMPANY," "--UNAUDITED SUMMARY PRO FORMA FINANCIAL DATA," "BUSINESS," "SELECTED HISTORICAL AND PRO FORMA FINANCIAL AND OPERATING DATA," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," AND "UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS"). THESE FORWARD-LOOKING STATEMENTS CONCERN MATTERS WHICH INVOLVE CERTAIN RISKS AND UNCERTAINTIES. FACTORS THAT MAY CAUSE ACTUAL PERFORMANCE OF HOLLYWOOD PARK TO DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD-LOOKING STATEMENTS INCLUDE, AMONG OTHERS, THE FAILURE TO COMPLETE OR SUCCESSFULLY OPERATE PLANNED EXPANSION, THE FAILURE TO OBTAIN ADEQUATE FINANCING TO MEET HOLLYWOOD PARK'S STRATEGIC GOALS, DIFFICULTIES IN COMPLETING INTEGRATION OF HOLLYWOOD PARK AND BOOMTOWN, FAILURE TO OBTAIN OR RETAIN LICENSES OR REGULATORY APPROVALS AND THE OTHER FACTORS SET FORTH UNDER THIS "RISK FACTORS" SECTION. LEVERAGE AND DEBT SERVICE The Company incurred borrowings of $112.0 million under the Bank Credit Facility, guaranteed by the Guarantors, primarily in connection with the repurchase of approximately $103 million in aggregate principal amount of the Boomtown Notes. This $112 million balance was repaid in full from the proceeds of the sale of the Old Notes. The Bank Credit Facility provides for a reducing revolving credit facility in the maximum principal amount of $100 million (of which approximately $78 million is currently available under certain covenant limitations). There will be no cash proceeds to the Company from the exchanges pursuant to the Exchange Offer. See "Description of Other Indebtedness--Bank Credit Facility." Hollywood Park believes that, based on current levels of operations and anticipated growth, its cash flow from operations, together with other sources of liquidity, will be adequate to make required payments of principal and interest on its debt (including the Notes), to finance anticipated capital expenditures and to fund working capital requirements. However, the Issuers' ability to make principal and interest payments on the Notes and to repay the Notes at maturity (and the Guarantors' ability to make any payments under their Guaranties) will be dependent on Hollywood Park's future operating performance, which is itself dependent on a number of factors, many of which are out of Hollywood Park's control, including prevailing economic conditions and financial, business, regulatory and other factors affecting Hollywood Park's business and operations, and may be dependent on the availability of borrowings under the Bank Credit Facility or any refinancing thereof. There can be no assurance that Hollywood Park's business will continue to generate cash flow at or above anticipated levels. If Hollywood Park is unable to generate sufficient cash flow or is unable to refinance or extend outstanding borrowings, it may have to adopt one or more alternatives, such as reducing or delaying planned expansion and capital expenditures, selling assets, restructuring debt or obtaining additional equity or debt financing. There can be no assurance that any of these financing strategies could be effected on satisfactory terms, if at all, or that effecting such strategies would yield sufficient proceeds to service or repay the Notes. In addition, certain states' laws contain restrictions on the ability of companies engaged in the gaming business to undertake certain financing transactions. Such restrictions may prevent Hollywood Park from obtaining necessary capital. See "-- Governmental Regulation," "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." 14 The consequences of such leverage include, but are not limited to, the following: (i) Hollywood Park will have significantly increased cash requirements for debt service; (ii) the financial covenants and other restrictions contained in the Bank Credit Facility and the Indenture will require Hollywood Park to meet certain financial tests and will limit, among other things, its ability to borrow additional funds or to dispose of assets; (iii) Hollywood Park will be subject to operating restrictions under covenants contained in the Indenture and in the Bank Credit Facility and the failure or inability of Hollywood Park to comply with any of its financial or other covenants may give the lenders the right to accelerate the indebtedness of Hollywood Park thereunder and enforce other remedies against Hollywood Park; (iv) the indebtedness under the Bank Credit Facility will and indebtedness incurred under future credit facilities may, become due prior to the time the principal obligations under the Notes become due, with the commitment reducing quarterly commencing September 30, 1999; and (v) because Hollywood Park's obligations under the Bank Credit Facility will and indebtedness incurred under future credit facilities may, bear interest at a floating rate, Hollywood Park will be adversely affected by any increase in prevailing rates. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Unaudited Pro Forma Combined Condensed Financial Statements." On a pro forma basis, as of June 30, 1997, after giving effect to the Transactions, the Notes were contractually and, in some cases, also effectively subordinated to approximately $10.6 million of Senior Debt. In addition, the Company may guarantee certain debts of Sunflower in a face amount up to $30 million pursuant to a proposed plan of reorganization filed by Sunflower with the U.S. Bankruptcy Court. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." POSSIBLE RESTORATION OF PAIRED-SHARE/REIT STATUS The Company is considering the Possible REIT Restructuring. If the Company elects to proceed with the Possible REIT Restructuring, the Indenture will permit the Issuers and the Guarantors to enter into a supplemental indenture, without obtaining the consents of any holders of the Notes, to modify the Indenture as necessary to permit the consummation of the Possible REIT Restructuring (including covenant amendments to permit allocation of assets and liabilities among the REIT and the operating company), and the operation of the REIT and the Company as a paired-share/REIT thereafter (including the payment of rent and required dividends). After giving effect to the Possible REIT Restructuring, the Company would become a REIT and confine its activities primarily to ownership and leasing of some or all of Hollywood Park's real estate holdings, and HPOC, together with certain of HPOC's other direct and indirect subsidiaries, would be engaged primarily in the active conduct of gaming, sports, entertainment and related business activities. The REIT would lease all or a portion of its real estate to HPOC and its affiliates for use in their business activities. The lease rentals would be determined on a fair market value basis. See "Description of Notes--Amendment, Supplement and Waiver" and "Business--Possible Restoration of REIT/Paired-Share Structure; Potential REIT Properties." Generally, the REIT would be required to distribute as dividends to its stockholders 95% of its taxable income (other than net capital gains), and such amounts distributed would not be subject to federal income tax at the corporate level. While this would enable Hollywood Park to take advantage of the favorable tax treatment accorded to such a structure, the REIT could suffer certain disadvantages by reason of its required distributions and resultant inability to retain earnings or build its capital base. While the Issuers do not intend to effect the Possible REIT Restructuring unless they believe that it will be in the best interest of the Issuers, there can be no assurance that the required distributions from the REIT will not limit growth or impair the Issuers' or the Guarantors' ability to make planned acquisitions or capital expenditures, or satisfy their debt service obligations, including the debt service obligations arising under the Notes. SUBORDINATION AND RANKING The Old Notes and the related Guaranties are, and the New Notes and the related Guaranties will be, subordinated in priority and right of payment to all Senior Debt (as defined) of the Issuers and the Guarantors and effectively subordinated to all secured indebtedness of the Issuers and the Guarantors, including their respective obligations under the Bank Credit Facility. Further, the Bank Credit Facility is secured by substantially 15 all of the assets of the Company and its material subsidiaries, which security interest is subordinated in priority (as to the assets of Boomtown and its subsidiaries) to the liens held by holders of the remaining Boomtown Notes (approximately $1 million in principal amount). The Old Notes and the related Guaranties rank, and the New Notes and the related Guaranties will rank, pari passu with the general unsecured obligations of the Issuers and the Guarantors, respectively, and with any future senior subordinated indebtedness. The Indenture permits the Issuers and the Guarantors to incur substantial additional indebtedness, including Senior Debt and secured indebtedness. Any holders of Senior Debt of either Issuer or any Guarantor are entitled to payment of debt service on their indebtedness prior to the holders of the Notes. Holders of secured indebtedness are entitled to payments or distributions derived from the assets comprising their collateral or proceeds thereof before any such amounts would become available to satisfy the obligations of the Issuers and the Guarantors to holders of the Notes. In addition, holders of any future senior subordinated indebtedness and general unsecured obligations of the Issuers and the Guarantors would generally share pro rata in the remaining assets of the Issuers and the Guarantors with the holders of the Notes after repayment of all Senior Debt and repayment to secured creditors from their collateral. See "Description of Notes--Certain Covenants." In the event of any bankruptcy, liquidation, dissolution, reorganization or other winding up of either Issuer or any Guarantor, the assets of such entity and its subsidiaries would be available to pay obligations on the Notes only after all Senior Debt has been paid in full and holders of the Notes would participate ratably with all holders of subordinated unsecured indebtedness of such Issuer or Guarantor that was deemed to be of the same class as the Notes, based upon the respective amounts owed to each holder or creditor, in the remaining assets of such entity after payment of, or provision to, all senior and secured indebtedness. In any of the foregoing events, there can be no assurance that there would be sufficient assets to pay amounts due on the Notes. In addition, if a default other than a payment default existed in respect of the Bank Credit Facility or other Senior Debt (including any such default arising under the cross-default provisions of the Bank Credit Facility by reason of a default under the Notes), no payments of principal or interest would be permitted on the Notes for a specified period. See "Description of Notes--Subordination." In the event that either Issuer were unable to generate sufficient cash flow or otherwise to obtain sufficient funds to meet required payments of principal, premium, if any, and interest on its indebtedness, including the Notes, such Issuer could be in default under the terms of the agreements governing such indebtedness, including the Indenture. In the event of such default, the holders of such indebtedness could elect to declare all of the funds borrowed thereunder to be due and payable together with accrued and unpaid interest. If such an acceleration were effected and such Issuer did not have sufficient funds to pay the accelerated indebtedness, the holders of such indebtedness could initiate foreclosure or other enforcement action against such Issuer. Any such circumstances would materially adversely affect such Issuer's ability to pay principal, premium, if any, and interest on the Notes and the market value of the Notes. CHALLENGE OF INTEGRATING OPERATIONS AND MANAGING GROWTH The integration of Hollywood Park's and Boomtown's operations following the recent acquisition of Boomtown will continue to require the dedication of management resources which may temporarily detract from attention to the day- to-day business of the Company. Also, the continuing process of combining the two organizations may cause an interruption of, or a loss of momentum in, the activities of either or both of the companies' businesses, which could have a material adverse effect on the revenues and operating results of the Company. Thus, there can be no assurance that the Company will be able to manage the combined operations effectively or realize any of the anticipated benefits of the Merger, including synergies of operations or efficiencies from the elimination of duplicative functions. In addition, because the Company plans to pursue expansion opportunities aggressively, it faces significant challenges not only in managing and integrating the combined operations but also in managing its expansion projects and any other gaming operations that it might acquire in the future. Management of such new projects will require increased managerial resources, and Hollywood Park intends to continue its efforts to enhance its gaming management team. However, there can be no assurance that it will be successful in doing so. Failure to manage its growth effectively could materially adversely affect Hollywood Park's operating results. 16 RISKS OF EXPANSION Hollywood Park's strategic plan involves significant future expansion, including the expansion of Boomtown Reno, Boomtown New Orleans and, possibly, Boomtown Biloxi and other gaming projects as well as the continuing diversification of its gaming, sports and entertainment businesses and the development of certain unimproved acreage including at the Hollywood Park Race Track property. There can be no assurance, however, that any currently contemplated or future expansion projects of the Company will ever be completed or, if completed, will be successful. Moreover, numerous factors, including regulatory or financial constraints, could intervene and lead to a decision not to proceed with all or a portion of the Company's expansion projects or to otherwise alter or delay its current expansion plans. In the event any proposed expansion project proceeds, such project will be subject to numerous risks any of which could require substantial changes to proposed plans or otherwise alter the time frames or budgets currently contemplated. Such risks include the ability to secure all required permits, resolution of potential land use issues, as well as risks typically associated with any construction project, including possible shortages of materials or skilled labor, engineering or environmental problems, work stoppages, weather interference and unanticipated cost overruns. The Company's Boomtown subsidiary has experienced disruptions of its operations, cost overruns and delays during its past construction projects, and there can be no assurance that Hollywood Park will not experience similar disruptions in the future. The ability to expand to additional gaming jurisdictions will depend upon a number of factors, including but not limited to: (i) securing required state and local licenses, permits and approvals, which in some jurisdictions may be limited in number, and in certain cases may require legislative relief from existing laws; (ii) identification and availability of suitable locations and negotiation of an acceptable purchase, lease, joint venture or other terms; (iii) political factors, such as the California Senate Bill 100 ("SB-100") moratorium on new card club ordinances (see "Business--Regulation and Licensing--Gaming Operations--California"); (iv) availability of necessary financing for the project; and (v) the risks typically associated with any new construction project described above. In addition, while the gaming industry has recently experienced rapid growth, there can be no assurance that gaming will continue to be a growth industry resulting in opportunities for expansion. Hollywood Park expects to continue to incur significant costs in connection with the pursuit of expansion opportunities, and may, in certain circumstances, be required to write off substantial expenditures made in connection with proposed ventures that do not materialize. COMPETITION Hollywood Park faces significant competition in each of the jurisdictions in which it has established gaming operations, and such competition is expected to intensify as new gaming operations enter its markets and existing competitors expand their operations. The Company's Boomtown properties compete directly with other casinos in Nevada, Mississippi and Louisiana. To a lesser extent, Hollywood Park also competes for customers with other casino operators in North American markets, including casinos located on Indian reservations, and other forms of gaming such as lotteries. Several of Hollywood Park's competitors have substantially greater name recognition and marketing resources as well as access to lower-cost sources of financing. In many cases, these competitors have significantly greater capital which may afford them a greater opportunity to obtain gaming licenses in jurisdictions which limit the number of licenses. Moreover, consolidation of companies in the gaming industry, such as Hilton Hotels Corporation's acquisition of Bally Entertainment Corporation, and its proposed acquisition of ITT Corporation, could increase the concentration of large gaming companies in Louisiana and Mississippi and other emerging gaming markets and thus may result in Hollywood Park's competitors having even greater resources, name recognition and licensing prospects than such competitors currently enjoy. In Mississippi, competing casino operations have expanded rapidly and, as a result, the Gulf Coast market is experiencing significant dilution in gaming win per position, and a number of casinos in the Gulf Coast market have failed. Further, additional rival casinos are being planned, including a $500 million, 1,800 room hotel and casino in Biloxi by Mirage Resorts, a $150 million, 1,050 room hotel and riverboat casino in Biloxi by Imperial Palace and, in nearby Bay St. Louis, a $300 million, 1,500 room hotel and casino by Circus Circus. While the Company 17 believes it has been able to effectively compete in this market to date, there is no assurance that increasing competition will not adversely affect Hollywood Park's gaming operations in the future. Hollywood Park believes that increased legalized gaming in other states, particularly in areas close to its existing gaming properties, could adversely affect its operations without necessarily being offset by increased revenues in jurisdictions in which Hollywood Park operates. The Hollywood Park-Casino faces competition from card club casinos in neighboring cities, including two card club casinos of similar size to the Hollywood Park-Casino located within 12 miles of the Hollywood Park-Casino, from card club casinos and other forms of gaming located on Indian reservations, and from full-fledged casinos operating in Nevada. Many card club casinos in the Los Angeles area have a significant geographical advantage over the Hollywood Park-Casino, due in large part to their closer proximity to large Asian-American populations who comprise a large percentage of card club casino patrons. There is intense competition for gaming development opportunities in jurisdictions that have recently legalized gaming, as most jurisdictions strictly limit the number of gaming licenses granted, and therefore only a small number of gaming facilities can be developed in any such jurisdiction. There can be no assurance that Hollywood Park will be able to compete effectively in the acquisition of new gaming licenses in the future. Failure to do so could negatively affect the growth potential of Hollywood Park. Hollywood Park's racing operations have been adversely impacted by the proliferation of additional thoroughbred racing opportunities (including simulcasting and off-track wagering) and the proliferation of other gaming establishments. Hollywood Park believes that such establishments have had a material impact on the operating results and growth prospects of its racing operations. DEPENDENCE ON BOOMTOWN NEW ORLEANS RIVERBOAT CASINO Presently, Hollywood Park's operating results are highly dependent on the earnings generated by the Boomtown New Orleans riverboat. On a pro forma basis, for the year ended December 31, 1996, the Company's allocable share of the EBITDA generated by Boomtown New Orleans represented a substantial portion of the pro forma Adjusted EBITDA for the Company as a whole. Loss from service or damage to the Louisiana riverboat for any reason, increased competition, or any adverse change in the gaming market or regulatory environment in Louisiana, could have a material adverse effect on Hollywood Park's business and results of operations. LOSS OF RIVERBOAT OR DOCKSIDE FACILITY FROM SERVICE Hollywood Park's riverboat casino at Boomtown New Orleans and its dockside casino at Boomtown Biloxi, as well as any additional riverboats that might be developed or acquired in the future, are subject to risks in addition to those associated with land-based casinos, including loss of service due to casualty, mechanical failure, extended or extraordinary maintenance, flood, hurricane or other severe weather conditions. In addition, U.S. Coast Guard regulations require a hull inspection at a U.S. Coast Guard-approved dry docking facility for all cruising riverboats at five year intervals, which inspection is scheduled for Boomtown New Orleans in 1999. The loss of a riverboat casino or a dockside casino from service for any period of time would adversely affect Hollywood Park's results of operations. QUARTERLY AND ANNUAL FLUCTUATIONS IN OPERATING RESULTS Hollywood Park experiences significant fluctuations in its quarterly and annual operating results, due to seasonality and other factors. Historically, a substantial majority of the income from operations before non-recurring items of the Boomtown subsidiaries has been generated in the quarters ending June 30 and September 30, with the summer months being the strongest period. The Company's racing subsidiaries have historically generated approximately 50% of their revenues but over 70% of their income from operations before non- recurring items (but including depreciation and amortization) during these same months. Conversely, the 18 winter months, which primarily covers the quarter ending March 31, are Boomtown Reno's and Boomtown Biloxi's slowest periods and have historically resulted, and may in the future result, in losses for such quarter. Similarly, because the Hollywood Park Race Track conducts no live meets during such period, the Company's operating results from racing have historically been lower during that same period. Future quarterly or annual operating results may also be adversely impacted by traffic flow on major thoroughfares leading to the operations of the Company's Boomtown properties. For example, Boomtown Reno is highly dependent on the traffic flow on Interstate 80, as customers stopping at Boomtown Reno from Interstate 80 represent a substantial majority of its customer base. If traffic on Interstate 80 is significantly reduced for an extended period, as a result of inclement weather or otherwise, or the off-ramps providing access to Boomtown Reno are impaired for an extended period due to poor weather conditions, road modifications and repairs or other factors, Boomtown Reno's results of operations will be adversely affected. In the Winters of 1994/1995 and 1996/1997, severe storms, together with road repairs to Interstate 80 on the corridor between California and Reno, resulted in road closures or substantially reduced traffic flow on Interstate 80 for extended periods. Such road closures and repairs had an adverse effect on the related quarters' and years' results of operations. Future operating results may also be affected by a number of other factors, including the general level of demand for casino gaming and entertainment facilities and uncertainties in general economic, regulatory and political conditions affecting the gaming industry. ABILITY TO EFFECT REPURCHASE OF THE NOTES UPON CHANGE OF CONTROL Upon the occurrence of a Change of Control (as defined herein and including the Possible REIT Restructuring), the Issuers will be required to make an offer to repurchase the Notes at a price equal to 101% or, in the case of a REIT Change of Control (as defined herein), 102% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of repurchase. A Change of Control may also result in an event of default under the Bank Credit Facility and may result in an event of default under other future indebtedness of the Issuers or the Guarantors. An event of default under the Bank Credit Facility or other future Senior Debt could trigger the subordination provisions of the Notes, which could prohibit the Issuers from repurchasing the Notes or could require payment in full of such Senior Debt before repurchase of the Notes. See "--Subordination and Ranking." GOVERNMENTAL REGULATION Gaming and racing operations are subject to extensive federal, state and local regulations. The states and localities in which Hollywood Park and its subsidiaries have gaming and racing operations or proposed gaming projects typically require various licenses, permits and approvals to be held by the parent entity and the operating entity, as well as by certain officers, directors, key employees and securityholders. The licensing process is time consuming, costly and has no assurance of success. Typically, gaming authorities, including those in Nevada, California, Louisiana and Mississippi have discretionary authority, with or without cause, to require a holder of a security such as the Notes or the New Notes to file an application, to be investigated and to be found suitable as an owner, debt holder or landlord of a gaming establishment. While individual holders of securities such as the Notes or the New Notes are generally not required to be investigated and found suitable, gaming authorities retain the discretion to initiate such investigations for any reason, including but not limited to, a default, or where the holder of the debt instrument seeks to exercise a material or significant influence over the gaming operations of the entity in question or to elect one or more members of its Board of Directors. Any holder required to apply for licensing, qualification or a finding of suitability must pay all investigative fees and costs of the gaming authorities in connection with such an investigation. In addition, if any gaming authority requires a holder or beneficial owner of the Notes or the New Notes to be licensed, qualified or found suitable under any applicable gaming law and such holder or beneficial owner fails timely to apply for and receive the required license, qualification or a finding of suitability, such holder must immediately dispose of his Notes or the Issuers shall have the option to redeem all of such 19 holder's Notes at the lesser of (i) the aggregate principal amount of such Notes, and (ii) such holder's cost thereof, which in either case may be less than the then market value of the Notes. See "Description of Notes--Optional Redemption." Restrictions on the transfer of equity securities issued by a corporation which holds a gaming license issued by the Nevada Gaming Commission or the Mississippi Gaming Commission, or which is registered by the Nevada Gaming Commission as an intermediary company, and agreements not to encumber such securities, are ineffective unless approved in advance by the Nevada Gaming Commission or the Mississippi Gaming Commission. See "Business--Regulation and Licensing." To date, Hollywood Park and its subsidiaries have obtained all governmental licenses, registrations, findings of suitability, permits and approvals necessary for the operation of their gaming and racing facilities. However, there can be no assurance that any new licenses, registrations, findings of suitability, permits or approvals that will be required for any new facility or for any continued expansion of an existing facility will be given or that existing licenses, permits or approvals will not be revoked or fail to be renewed. Presently, Hollywood Park and the operator of Crystal Park have received only provisional licenses to operate the Hollywood Park-Casino and the Crystal Park facility, respectively. In each case, permanent registrations will not be granted until the California Department of Justice completes its review of the applications of the corporate applicants and their respective officers and directors. No assurance can be given that permanent licenses will be obtained. In addition, state gaming authorities often also require state approval of future gaming operations outside the applicable state, and there can be no assurance that future approvals will be obtained. The regulatory environment in any particular jurisdiction may change in the future and any such change may have a material adverse effect on the combined company's results of operations. For example, the State of Louisiana adopted a statute pursuant to which voter referendums on the continuation of gaming were held locally where gaming operations are conducted and which, had the continuation of gaming been rejected by the voters, might have resulted in the termination of Boomtown New Orleans' operations at the end of the current license term in 1999. The parish in which Boomtown New Orleans operates voted to continue gaming, but there can be no assurance that similar referendums might not produce unfavorable results in the future. In addition, the California law which permits a public company such as Hollywood Park to operate a card club casino if it owns a race track located on the same premises expires on January 1, 1999 unless, prior to that time, the California legislature enacts comprehensive gaming regulations that amend or extend the expiration date. There can be no assurance that such legislation will be adopted by such date or that the legislature will extend the deadline. If there is no legislative relief prior to January 1, 1999, it is expected that Hollywood Park would again lease the Hollywood Park-Casino to a third party operator, which could substantially reduce Hollywood Park's return from the Hollywood Park-Casino. In addition, unless and until California enacts legislation permitting the operation generally of card club casinos by public companies, Hollywood Park's involvement in other card club casino projects (such as Crystal Park) will be similarly limited to a landlord relationship, the returns from which could be substantially less than if Hollywood Park operated such facilities directly. On August 3, 1996, President Clinton signed a bill creating a nine-member National Gambling Impact Study Commission to study the economic and social impact of gaming and report its findings to Congress and the President within two years after the first meeting of the commission. The commission could recommend changes in state or federal gaming policies. The President, House Speaker and Senate Majority Leader have each selected three of the commissions's members. Additional federal regulation of the gaming industry could occur as a result of investigations or hearings by the committee, which could have a material adverse effect on Hollywood Park. ENVIRONMENTAL REGULATION; POTENTIAL ENVIRONMENT ISSUES Hollywood Park is subject to a variety of federal, state and local governmental regulations relating to the use, storage, discharge, emission and disposal of hazardous materials. Hollywood Park believes that it is presently in material compliance with applicable environmental laws. However, failure to comply with such laws could result in the imposition of severe penalties or restrictions on Hollywood Park's operations by government 20 agencies or courts of law. Hollywood Park currently does not have environmental impairment liability insurance, and a material fine or penalty or a severe restriction would adversely affect Hollywood Park's results of operations. FRAUDULENT CONVEYANCE AND PREFERENTIAL TRANSFER ISSUES If either Issuer or any Guarantor received less than reasonably equivalent value in exchange for its issuance of the Old Notes or, as the case may be, its Guaranty or the incurrence of liabilities pursuant thereto, the Notes or such Guaranty, or any payments made in respect thereof, could be avoided under federal or applicable state fraudulent transfer law, regardless of whether either Issuer or any Guarantor was subject to any bankruptcy or insolvency proceedings. In particular, to the extent that any Guarantor becomes liable for any obligations of the Issuers in excess of the value actually received by the Guarantor, the relevant Guaranty could be subject to avoidance as a fraudulent transfer if, at the time of, or as a result of, either the issuance of such Guaranty or any payment thereunder, (i) the Guarantor was or became insolvent, (ii) the Guarantor had unreasonably small capital to conduct its business as then conducted or contemplated to be conducted or (iii) the Guarantor was unable or was rendered unable, to meet its probable liabilities as they matured and became due and payable. If any Guaranty is avoided, the holders could lose the benefit of the Guaranty, and the holders could also be required to return to the Guarantor or its estate the amount of any payment or other property received in respect of the Notes. The Indenture provides that certain future subsidiaries of the Issuers will be required to guarantee the Notes. If certain bankruptcy or insolvency proceedings are initiated by or against the new subsidiaries within 90 days (or, possibly, one year) after any such guaranty, grant or assignment, or if any Guarantor incurs obligations under its Guaranty in anticipation of insolvency, all or a portion of the affected Guaranty could be avoided as a preferential transfer under federal bankruptcy or applicable state law. In addition, a court could require holders to return all payments made under any such Guaranty within such 90 day period (or, possibly, one year) as preferential transfers. The Issuers believe that they received equivalent value at the time they incurred the indebtedness represented by the Old Notes. In addition, the Issuers do not believe that the Issuers and the Guarantors, as a result of the issuance of the Old Notes, (i) were or will be insolvent or rendered insolvent under the foregoing standards, (ii) were or will be engaged in a business or transaction for which their remaining assets constitute unreasonably small capital or (iii) intended or intends to incur, or believes that they incurred or will incur, debts beyond their ability to pay such debts as they mature. These beliefs are based on the Issuers' and the Guarantors' operating history, net worth and management's analysis of internal cash flow projections and estimated values of assets and liabilities of such entity at the time of the issuance of the Old Notes. There can be no assurance, however, that a court passing on these issues would make the same determination. DEPENDENCE OF ISSUERS ON GUARANTORS FOR REPAYMENT OF NOTES; SURETYSHIP DEFENSES Although the Issuers hold assets and conduct business, a substantial portion of the revenues available for payment of debt service in respect of the Notes is expected to be generated through direct and indirect subsidiaries of the Issuers. The Issuers' cash flow and, consequently, their ability to service debt, including the Notes, will depend in substantial part upon the cash flow of the Issuers' subsidiaries and the payment of funds by those subsidiaries to the Issuers in the form of loans, dividends or otherwise. Although the Old Notes are, and the New Notes will be, guaranteed by the Guarantors, the Guarantors are separate and distinct legal entities, are subject to the provisions of the Bank Credit Facility which contains, and may in the future become parties to other financing arrangements (including senior debt financings) which may contain, limitations on the ability of the Guarantors to make payments in respect of the Guaranties, particularly upon the occurrence of any default or the insolvency of either Issuer or any Guarantor. In addition, the laws of most jurisdictions provide suretyship defenses to guarantors, which may limit the Guarantors' legal obligations to make payments under their Guaranties. 21 LACK OF PUBLIC MARKET FOR THE NEW NOTES The Old Notes are currently owned by a relatively small number of beneficial owners. The Old Notes have not been registered under the Securities Act or any state securities laws and, unless so registered and to the extent not exchanged for the New Notes, may not be offered or sold except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act and applicable state securities laws. The New Notes will constitute a new issue of securities for which there is currently no active trading market. If the New Notes are traded after their initial issuance, they may trade at a discount from their initial offering price, depending upon prevailing interest rates, the market for similar securities and other factors including general economic conditions and the financial condition of the Issuers. Although the New Notes will generally be permitted to be resold or otherwise transferred by nonaffiliates of the Issuers without compliance with the registration and prospectus delivery requirements of the Securities Act, the Issuers do not intend to apply for a listing or quotation of the New Notes on any securities exchange or stock market. The Initial Purchasers have informed the Issuers that they currently intend to make a market in the New Notes. However, the Initial Purchasers are not obligated to do so, and any such market making may be discontinued at any time without notice. In addition, such market-making activity will be subject to the limits imposed under the Exchange Act. Accordingly, there can be no assurance as to the development or liquidity of any market for the New Notes, or, in the case of non-tendering Holders of Old Notes, the trading market for the Old Notes following the Exchange Offer. If no trading market develops or is maintained, Holders of New Notes may experience difficulty in reselling New Notes or may be unable to sell them. The liquidity of, and trading market for, the Old Notes or the New Notes also may be adversely affected by general declines in the market for similar securities. Such a decline may adversely affect such liquidity and trading markets independent of the financial performance of, and prospects for, the Issuers. CONSEQUENCES OF FAILURE TO EXCHANGE Holders of Old Notes who do not exchange their Old Notes for New Notes pursuant to the Exchange Offer will continue to be subject to the restrictions on transfer of such Old Notes as set forth in the legend thereon as a consequence of the issuance of the Old Notes pursuant to exemptions from, or in transactions not subject to, the registration requirements of the Securities Act and applicable state securities laws. In general, the Old Notes may not be offered or sold, unless (i) to a person who the seller reasonably believes is a qualified institutional buyer in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if either Issuer so requests), (ii) to either Issuer or (iii) pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. See "Risk Factors--Restrictions on Transfer." The Issuers do not currently anticipate that they will register the Old Notes under the Securities Act. Based on interpretations by the staff of the Commission, as set forth in no-action letters issued to third parties, the Issuers believe that New Notes issued pursuant to the Exchange Offer in exchange for Old Notes may be offered for resale, resold or otherwise transferred by Holders thereof (other than any such Holder which is an "affiliate" of either Issuer within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery requirements of the Securities Act, provided that such New Notes are acquired in the ordinary course of such Holder's business and such Holder, other than broker-dealers, has no arrangement with any person to participate in the distribution of such New Notes. However, the Commission has not considered the Exchange Offer in the context of a no-action letter and there can be no assurance that the staff of the Commission would make a similar determination with respect to the Exchange Offer. 22 USE OF PROCEEDS Neither Issuer will receive any cash proceeds from the Exchange Offer. In consideration for issuing the New Notes in exchange for Old Notes as described in this Prospectus, the Issuers will receive Old Notes in like principal amount. The Old Notes surrendered in exchange for the New Notes will be retired and cancelled. THE EXCHANGE OFFER The following discussion sets forth or summarizes the material terms of the Exchange Offer, including those set forth in the Letter of Transmittal distributed with this Prospectus. This summary is qualified in its entirety by reference to the full text of the documents underlying the Exchange Offer (including the Indenture and the Registration Rights Agreement), copies of which are filed as exhibits to the Registration Statement on Form S-4 of which this Prospectus is a part and to the Issuers' quarterly report on Form 10-Q filed with the Commission on August 14, 1997, and are incorporated herein by reference. PURPOSE AND EFFECT OF THE EXCHANGE OFFER The Old Notes were sold by the Issuers to the Initial Purchasers on August 6, 1997, and were subsequently resold to qualified institutional buyers pursuant to Rule 144A under the Securities Act, to institutional investors that are accredited investors in a manner exempt from registration under the Securities Act and pursuant to offers and sales that occurred outside the United States within the meaning of Regulation S under the Securities Act. In connection with the offering of the Old Notes, the Issuers entered into the Registration Rights Agreement, which requires, among other things, that promptly following the Issue Date the Issuer and the Guarantors (i) file with the Commission a registration statement under the Securities Act with respect to an issue of new notes of the Issuers identical in all material respects (other than transfer restrictions, registration rights and the requirement, under certain circumstances, to pay liquidated damages) to the Old Notes (which obligation has been satisfied by the filing of the Registration Statement of which this Prospectus is a part), (ii) use their best efforts to cause such registration statement to become effective under the Securities Act and (iii) upon the effectiveness of that registration statement, offer to the Holders of the Notes the opportunity to exchange their Old Notes for a like principal amount of New Notes, which would be issued without a restrictive legend and may be reoffered and resold by the Holder without restrictions or limitations under the Securities Act (other than any such Holder that is an "affiliate" of either Issuer within the meaning of Rule 405 under the Securities Act). Any Old Notes tendered and exchanged in the Exchange Offer will reduce the aggregate principal amount of Old Notes outstanding. Following the consummation of the Exchange Offer, Holders of the Old Notes who did not tender their Old Notes generally will not have any further registration rights under the Registration Rights Agreement, and such Old Notes will continue to be subject to certain restrictions on transfer. Accordingly, the liquidity of the market for such Old Notes could be adversely affected. The Old Notes are currently eligible for sale pursuant to Rule 144A through the PORTAL System of the National Association of Securities Dealers, Inc. Because the Issuers anticipate that most Holders of Old Notes will elect to exchange such Old Notes for New Notes due to the absence of restrictions on the resale of New Notes under the Securities Act, the Issuers anticipate that the liquidity of the market for any Old Notes remaining after the consummation of the Exchange Offer may be substantially limited. TERMS OF THE EXCHANGE OFFER Upon the terms and subject to the conditions set forth in this Prospectus and in the Letter of Transmittal, the Issuers will accept any and all Old Notes validly tendered and not withdrawn prior to 5:00 p.m., New York City time on the Expiration Date. The Issuers will issue $1,000 principal amount of New Notes in exchange for each $1,000 principal amount of outstanding Old Notes accepted in the Exchange Offer. Holders may tender some or all of their Old Notes pursuant to the Exchange Offer. However, Old Notes may be tendered only in integral multiples of $1,000. 23 The form and terms of the New Notes are the same as the form and terms of the Old Notes except that (i) the New Notes have been registered under the Securities Act and hence will not bear legends restricting the transfer thereof and (ii) the holders of the New Notes generally will not be entitled to certain rights under the Registration Rights Agreement or with respect to liquidated damages, which rights generally will terminate upon consummation of the Exchange Offer. The New Notes will evidence the same debt as the Old Notes and will be entitled to the benefits of the Indenture. Holders of Old Notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law or the Indenture in connection with the Exchange Offer. The Issuers intend to conduct the Exchange Offer in accordance with the applicable requirements of the Exchange Act and the rules and regulations of the Commission thereunder, including Rule 14e-1. The Issuers shall be deemed to have accepted validly tendered Old Notes when, as and if the Issuers have given oral or written notice thereof to the Exchange Agent. The Exchange Agent will act as agent for the tendering Holders for the purpose of receiving the New Notes from the Issuers. If any tendered Old Notes are not accepted for exchange because of an invalid tender, the occurrence of certain other events set forth herein or otherwise, the certificates for any such unaccepted Old Notes will be returned, without expense, to the tendering Holder thereof as promptly as practicable after the Expiration Date. Holders who tender Old Notes in the Exchange Offer will not be required to pay brokerage commissions or fees or, subject to the instructions in the Letter of Transmittal, transfer taxes with respect to the exchange of Old Notes pursuant to the Exchange Offer. The Issuers will pay all charges and expenses, other than transfer taxes in certain circumstances, in connection with the Exchange Offer. See "--Fees and Expenses." EXPIRATION DATE; EXTENSIONS; AMENDMENTS The term "Expiration Date" shall mean 5:00 p.m., New York City time, on [ ], 1997, unless the Issuers, in their sole discretion, extend the Exchange Offer, in which case the term "Expiration Date" shall mean the latest date and time to which the Exchange Offer is extended. To extend the Exchange Offer, the Issuers will notify the Exchange Agent of any extension by oral or written notice, followed by a public announcement thereof no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date. The Issuers reserve the right, in their reasonable judgment, (i) to delay accepting any Old Notes, to extend the Exchange Offer or to terminate the Exchange Offer if any of the conditions set forth below under "--Conditions" shall not have been satisfied, by giving oral or written notice of such delay, extension or termination to the Exchange Agent or (ii) to amend the terms of the Exchange Offer in any manner. Any such delay in acceptance, extension, termination or amendment will be followed as promptly as practicable by a public announcement thereof. If the Exchange Offer is amended in a manner determined by the Issuers to constitute a material change, the Issuers will promptly disclose such amendment by means of a prospectus supplement that will be distributed to the registered Holders, and, depending upon the significance of the amendment and the manner of disclosure to the registered Holders, the Issuers will extend the Exchange Offer for a period of five to ten business days if the Exchange Offer would otherwise expire during such five to ten business day period. INTEREST ON NEW NOTES The New Notes will bear interest from their date of issuance. Interest will accrue on the Old Notes that are tendered in exchange for the New Notes through the issue date of the New Notes. Holders of Old Notes that are accepted for exchange will not receive interest that is accrued but unpaid on the Old Notes at the time of exchange, but such interest will be payable, together with interest on the New Notes, on the first Interest Payment Date after the Expiration Date. Interest on the New Notes will be payable semi- annually on each February 1 and August 1, commencing on February 1, 1998. 24 PROCEDURES FOR TENDERING Only a Holder of Old Notes may tender such Old Notes in the Exchange Offer. To tender in the Exchange Offer, a Holder must complete, sign and date the Letter of Transmittal, or a facsimile thereof, have the signatures thereon guaranteed if required by the Letter of Transmittal and mail or otherwise deliver such Letter of Transmittal or such facsimile, together with the Old Notes and any other required documents, to the Exchange Agent so as to be received by the Exchange Agent at the address set forth below prior to 5:00 p.m., New York City time, on the Expiration Date. Delivery of the Old Notes may be made by book-entry transfer in accordance with the procedures described below. Confirmation of such book-entry transfer must be received by the Exchange Agent prior to the Expiration Date. By executing the Letter of Transmittal, each Holder will make to the Issuers the representation set forth below in the second paragraph under the heading "--Resale of New Notes." The tender by a Holder and the acceptance thereof by the Issuers will constitute an agreement between such Holder and the Issuers in accordance with the terms and subject to the conditions set forth herein and in the Letter of Transmittal. THE METHOD OF DELIVERY OF OLD NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN OVERNIGHT OR HAND DELIVERY SERVICE. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES SHOULD BE SENT TO THE ISSUERS. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS, DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE TRANSACTIONS FOR SUCH HOLDERS. Any beneficial owner whose Old Notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee and who wishes to tender should contact the registered Holder promptly and instruct such registered Holder to tender on such beneficial owner's behalf. Signatures on the Letter of Transmittal or a notice of withdrawal, as the case may be, must be guaranteed by an Eligible Institution (as defined below) unless the Old Notes tendered pursuant thereto are tendered (i) by a registered Holder who has not completed the box entitled "Special Registration Instructions" or "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. In the event that signatures on a Letter of Transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, such guarantee must be by a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., a commercial bank or trust company having an office or correspondent in the United States or an "eligible guarantor institution" within the meaning of Rule 17Ad-15 under the Exchange Act (an "Eligible Institution"). If the Letter of Transmittal is signed by a person other than the registered Holder of any Old Notes listed therein, such Old Notes must be endorsed or accompanied by a properly completed bond power, signed by such registered Holder as such registered Holder's name appears on such Old Notes with the signature thereon guaranteed by an Eligible Institution. If the Letter of Transmittal or any Old Notes or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing, and unless waived by the Issuers, evidence satisfactory to the Issuers of their authority to so act must be submitted with the Letter of Transmittal. All questions as to the validity, form, eligibility (including time of receipt), acceptance of tendered Old Notes and withdrawal of tendered Old Notes will be determined by the Issuers in their sole discretion, which determination will be final and binding. The Issuers reserve the absolute right to reject any and all Old Notes not 25 properly tendered or any Old Notes the Issuers' acceptance of which would, in the opinion of counsel for the Issuers, be unlawful. The Issuers also reserve the right to waive any defects, irregularities or conditions of tender as to particular Old Notes. The Issuers' interpretation of the terms and conditions of the Exchange Offer (including the instructions in the Letter of Transmittal) will be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of Old Notes must be cured within such time as the Issuer shall determine. Although the Issuers intend to notify Holders of defects or irregularities with respect to tenders of Old Notes, none of the Issuers, the Exchange Agent or any other person shall incur any liability for failure to give such notification. Tenders of Old Notes will not be deemed to have been made until such defects or irregularities have been cured or waived. Any Old Notes received by the Exchange Agent that are not properly tendered and as to which the defects or irregularities have not been cured or waived will be returned by the Exchange Agent to the tendering Holders, unless otherwise provided in the Letter of Transmittal, as soon as practicable following the Expiration Date. Tender of Old Notes Held Through DTC The Exchange Agent and DTC have confirmed that the Exchange Offer is eligible for ATOP, the DTC automated Tender Offer Program. Accordingly, DTC participants may, in lieu of physically completing and signing the applicable Letter of Transmittal and delivering it to the Exchange Agent, electronically transmit their acceptance of the Exchange Offer by causing DTC to transfer Old Notes to the Exchange Agent in accordance with DTC's ATOP procedures for transfer. DTC will then send an Agent's Message to the Exchange Agent. The term "Agent's Message" means a message transmitted by DTC, received by the Exchange Agent and forming part of the Book-Entry Confirmation, which states that DTC has received an expressed acknowledgement from a participant in DTC that is tendering Old Notes which are the subject of such Book Entry Confirmation, that such participant has received and agrees to be bound by the terms of the applicable Letter of Transmittal (or, in the case of an Agent's Message relating to guaranteed delivery, that such participant has received and agrees to be bound by the applicable Notice of Guaranteed Delivery), and that the Issuers may enforce such agreement against such participant. Book Entry Delivery Procedures Within two business days after the date hereof, the Exchange Agent will establish accounts with the respect to the Securities at DTC, the Midwest Securities Transfer Company ("MSTC") and the Philadelphia Depositary Trust Company ("Philadep") (each a "Book-Entry Transfer Facility" and, collectively, the "Book-Entry Transfer Facilities") for purposes of the Exchange Offer. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities systems may make book-entry delivery of the Old Notes by causing DTC, MSTC or Philadep to transfer such Old Notes into the Exchange Agent's account at such Book-Entry Transfer Facility in accordance with such Book- Entry Transfer Facility's procedures for such transfer. Timely book-entry delivery of Securities pursuant to the Offers, however, requires receipt of a Book-Entry Confirmation prior to the Expiration Date. In addition, although delivery of Old Notes may be effected through book-entry transfer into the Exchange Agent's account at a Book-Entry Transfer Facility, the Letter of Transmittal (or a manually signed facsimile thereof), together with any required signature guarantees and any other required documents, or an Agent's Message in connection with a book-entry transfer, must, in any case, be delivered or transmitted to and received by the Exchange Agent at its address set forth on the back cover page of this Prospectus prior to the Expiration Date to receive New Notes for tendered Old Notes, or the guaranteed delivery procedure described below must be complied with. Tender will not be deemed made until such documents are received by the Exchange Agent. Delivery of documents to a Book-Entry Transfer Facility does not constitute delivery to the Exchange Agent. 26 GUARANTEED DELIVERY PROCEDURES Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available, (ii) who cannot deliver their Old Notes, the Letter of Transmittal or any other required documents to the Exchange Agent or (iii) who cannot complete the procedures for book-entry transfer, prior to the Expiration Date, may effect a tender if: (a) the tender is made through an Eligible Institution; (b) prior to the Expiration Date, the Exchange Agent receives from such Eligible Institution a properly completed and duly executed Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery) setting forth the name and address of the Holder, the certificate number(s) of such Old Notes and the principal amount of Old Notes tendered, stating that the tender is being made thereby and guaranteeing that, within three New York Stock Exchange trading days after the Expiration Date, the Letter of Transmittal (or facsimile thereof), together with the certificate(s) representing the Old Notes (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC) and any other documents required by the Letter of Transmittal, will be deposited by the Eligible Institution with the Exchange Agent; and (c) such properly completed and executed Letter of Transmittal (or facsimile thereof), as well as the certificate(s) representing all tendered Old Notes in proper form for transfer (or a confirmation of book-entry transfer of such Old Notes into the Exchange Agent's account at DTC) and all other documents required by the Letter of Transmittal, are received by the Exchange Agent within three New York Stock Exchange trading days after the Expiration Date. Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be sent to Holders who wish to tender their Old Notes according to the guaranteed delivery procedures set forth above. WITHDRAWALS OF TENDERS Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time prior to 5:00 p.m., New York City time, on the Expiration Date. To withdraw a tender of Old Notes in the Exchange Offer, a written or facsimile transmission notice of withdrawal must be received by the Exchange Agent at the address set forth herein prior to 5:00 p.m., New York City time, on the Expiration Date. Any such notice of withdrawal must (i) specify the name of the person having deposited the Old Notes to be withdrawn (the "Depositor"), (ii) identify the Old Notes to be withdrawn (including the certificate number(s) and principal amount of such Old Notes, or, in the case of notes transferred by book-entry transfer, the name and number of the account at DTC to be credited), (iii) be signed by the Holder in the same manner as the original signature on the Letter of Transmittal by which such Old Notes were tendered (including any required signature guarantees) or be accompanied by documents of transfer sufficient to have the Trustee register the transfer of such Old Notes into the name of the person withdrawing the tender and 27 (iv) specify the name in which any such Old Notes are to be registered, if different from that of the Depositor. All questions as to the validity, form and eligibility (including time or receipt) of such notices will be determined by the Issuers, whose determination shall be final and binding on all parties. Any Old Notes so withdrawn will be deemed not to have been validly tendered for purposes of the Exchange Offer and no New Notes will be issued with respect thereto unless the Old Notes so withdrawn are validly retendered. Any Old Notes which have been tendered but which are not accepted for exchange will be returned to the Holder thereof without cost to such Holder as soon as practicable after withdrawal, rejection of tender or termination of the Exchange Offer. Properly withdrawn Old Notes may be retendered by following one of the procedures described above under "--Procedures for Tendering" at any time prior to the Expiration Date. CONDITIONS Notwithstanding any other term of the Exchange Offer, the Issuers shall not be required to accept for exchange, or to exchange New Notes for any Old Notes, and may terminate or amend the Exchange Offer as provided herein before the acceptance of such Old Notes, if: (a) in the opinion of counsel to the Issuers or Guarantors, the Exchange Offer or any part thereof contemplated herein violates any applicable law or interpretation of the staff of the Commission; (b) any action or proceeding shall have been instituted or threatened in any court or by any governmental agency which might materially impair the ability of the Issuers to proceed with the Exchange Offer or any material adverse development shall have occurred in any existing action or proceeding with respect to either Issuer or the Issuers and the Guarantors taken as a whole; (c) any governmental approval has not been obtained, which approval the Issuers shall deem necessary for the consummation of the Exchange Offer as contemplated hereby; (d) any cessation of trading on Nasdaq or any exchange, or any banking moratorium, shall have occurred, as a result of which the Issuers are unable to proceed with the Exchange Offer; or (e) a stop order shall have been issued by the Commission or any state securities authority suspending the effectiveness of the Registration Statement or proceedings shall have been initiated or, to the knowledge of the Issuers, threatened for that purpose. If the Issuers determine in their reasonable judgment that any of the conditions are not satisfied, the Issuers may (i) refuse to accept any Old Notes and return all tendered Old Notes to the tendering Holders, (ii) extend the Exchange Offer and retain all Old Notes tendered prior to the expiration of the Exchange Offer, subject, however, to the rights of Holders to withdraw such Old Notes (see "--Withdrawals of Tenders") or (iii) waive such unsatisfied conditions with respect to the Exchange Offer and accept all properly tendered Notes which have not been withdrawn. If such waiver constitutes a material change to the Exchange Offer, the Issuers will promptly disclose such waiver by means of a prospectus supplement that will be distributed to the registered Holders, and, depending upon the significance of the waiver and the manner of disclosure to the registered Holders, the Issuers will extend the Exchange Offer for a period of 5 to 10 business days if the Exchange Offer would otherwise expire during such 5 to 10 business-day period. 28 EXCHANGE AGENT The Bank of New York will act as Exchange Agent for the Exchange Offer with respect to the Old Notes. Questions and requests for assistance, requests for additional copies of this Prospectus or of the Letter of Transmittal for the Old Notes and requests for copies of Notice of Guaranteed Delivery should be directed to the Exchange Agent, addressed as follows: BY HAND: BY OVERNIGHT COURIER: The Bank of New York The Bank of New York 101 Barclay Street--(7 East) 101 Barclay Street--(7 East) Reorganization Section Reorganization Section Corporate Trust Services Window Corporate Trust Services Window New York, New York 10286 New York, New York 10286 Attention: Arwen Gibbons Attention: Arwen Gibbons BY MAIL: BY FACSIMILE: The Bank of New York (212) 815-6339 101 Barclay Street--(7 East) Reorganization Section CONFIRM BY TELEPHONE: New York, New York 10286 (212) 815-5920 Attention: Arwen Gibbons FEES AND EXPENSES The expenses of soliciting Old Notes for exchange will be borne by the Issuers. The principal solicitation is being made by mail by the Exchange Agent who will be paid a reasonable and customary fee for its solicitation services. However, additional solicitation may be made by telephone, facsimile or in person by officers and regular employees of the Issuers and their affiliates and by persons so engaged by the Exchange Agent. The Issuers will pay the Exchange Agent reasonable and customary fees for its services and will reimburse it for its reasonable out-of-pocket expenses in connection therewith and pay other registration expenses, including fees and expenses of the Trustee, filing fees, blue sky fees and printing and distribution expenses. The Issuers will pay all transfer taxes, if any, applicable to the exchange of the Old Notes pursuant to the Exchange Offer. If, however, certificates representing the New Notes or the Old Notes for principal amounts not tendered or accepted for exchange are to be delivered to, or are to be issued in the name of, any person other than the registered Holder of the Old Notes tendered, or if tendered Old Notes are registered in the name of any person other than the person signing the Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of the Old Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder or any other person) will be payable by the tendering Holder. ACCOUNTING TREATMENT The New Notes will be recorded at the same carrying value as the Old Notes, which is the aggregate principal amount of the Old Notes, as reflected in the Issuers' accounting records on the date of exchange. Accordingly, no gain or loss for accounting purposes will be recognized in connection with the Exchange Offer. The expenses of the Exchange Offer will be amortized over the term of the New Notes. RESALE OF NEW NOTES Based on an interpretation by the staff of the Commission set forth in no- action letters issued to third parties, the Issuers believe that New Notes issued pursuant to the Exchange Offer in exchange for Notes may be offered for resale, resold and otherwise transferred by any holder of such New Notes (other than any such holder which 29 is an "affiliate" of the Issuers within the meaning of Rule 405 under the Securities Act) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such New Notes are acquired in the ordinary course of such holder's business and such holder does not intend to participate, and has no arrangement or understanding with any person to participate, in the distribution of such New Notes. Any Holder who tenders in the Exchange Offer with the intention to participate, or for the purpose of participating, in a distribution of the New Notes may not rely on the position of the staff of the Commission enunciated in Exxon Capital Holdings Corporation (available May 13, 1988) and Morgan Stanley & Co., Incorporated (available June 5, 1991), or similar no-action letters, but rather must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. In addition, any such resale transaction should be covered by an effective registration statement containing the selling security holders' information required by Item 507 of Regulation S-K of the Securities Act. Each broker-dealer that receives New Notes for its own account in exchange for Notes, where such Notes were acquired by such broker-dealer as a result of market-making activities or other trading activities, may be a statutory underwriter and must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. By tendering in the Exchange Offer, each Holder will represent to the Issuers that, among other things, (i) the New Notes acquired pursuant to the Exchange Offer are being obtained in the ordinary course of business of the person receiving such New Notes, whether or not such person is the registered Holder, (ii) neither the Holder nor any such other person has an arrangement or understanding with any person to participate in the distribution of such New Notes and (iii) the Holder and such other person acknowledge that if they participate in the Exchange Offer for the purpose of distributing the New Notes (a) they must, in the absence of an exemption therefrom, comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale of the New Notes and cannot rely on the no-action letters referenced above and (b) failure to comply with such requirements in such instance could result in such Holder or such other person incurring liability under the Securities Act for which such Holder or such other person is not indemnified by the Issuers. Further, by tendering in the Exchange Offer, each Holder and such other person that may be deemed an "affiliate" (as defined under Rule 405 of the Securities Act) of either Issuer will represent to the Issuers that such Holder and such other person understand and acknowledge that the New Notes may not be offered for resale, resold or otherwise transferred by that Holder or such other person without registration under the Securities Act or an exemption therefrom. CONSEQUENCES OF FAILURE TO EXCHANGE As a result of the making of this Exchange Offer, the Issuers will have fulfilled certain of their obligations under the Registration Rights Agreement, and Holders of Old Notes who do not tender their Notes, except for certain instances involving the Initial Purchasers or Holders who are not eligible to participate in the Exchange Offer, will not have any further registration rights under the Registration Rights Agreement or otherwise or rights to receive liquidated damages for failure to register. Accordingly, any Holder of Old Notes that does not exchange that Holder's Old Notes for New Notes will continue to hold the untendered Old Notes and will be entitled to all the rights and subject to all the limitations applicable thereto under the Indenture, except to the extent that such rights or limitations, by their terms, terminate or cease to have further effectiveness as a result of the Exchange Offer. The Old Notes that are not exchanged for New Notes pursuant to the Exchange Offer will remain restricted securities. Accordingly, such Old Notes may be resold only (i) to a person who the seller reasonably believes is a qualified institutional buyer in a transaction meeting the requirements of Rule 144A, in a transaction meeting the requirements of Rule 144 under the Securities Act, outside the United States to a foreign person in a transaction meeting the requirements of Rule 904 under the Securities Act or in accordance with another exemption from the registration requirements of the Securities Act (and based upon an opinion of counsel if either Issuer so requests), (ii) to either Issuer or (iii) pursuant to an effective registration statement, and, in each case, in accordance with any applicable securities laws of any State of the United States or any other applicable jurisdiction. See "Risk Factors-- Restrictions on Transfer." 30 OTHER Participation in the Exchange Offer is voluntary and holders should carefully consider whether to accept. Holders of the Old Notes are urged to consult their financial and tax advisors in making their own decision on what action to take. The Issuers may in the future seek to acquire untendered Old Notes in open market or privately negotiated transactions, through subsequent exchange offers or otherwise. The Issuers have no present plans to acquire any Old Notes that are not tendered in the Exchange Offer or to file a registration statement to permit resales of any untendered Old Notes. CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following sets forth a summary of the material anticipated federal income tax consequences expected to result to holders from the Exchange Offer and from the purchase, ownership and disposition of the New Notes. The following summary is based upon current provisions of the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations, judicial authority and administrative rulings and practice. Holders should note that this summary is not binding on the Internal Revenue Service (the "Service") and there can be no assurance that the Service will take a similar view with respect to the tax consequences described below. No ruling has been or will be requested by the Issuers from the Service on any tax matters relating to the Exchange Offer or the New Notes. Legislative, judicial or administrative changes or interpretations may be forthcoming that could alter or modify the statements and conclusions set forth herein. Any such changes or interpretations may or may not be retroactive and could affect the tax consequences to holders. The following summary is for general information only. The tax treatment of a holder of the New Notes may vary depending upon such holder's particular situation. Certain holders (including insurance companies, tax-exempt organizations, financial institutions or broker-dealers, foreign corporations and persons who are not citizens or residents of the United States) may be subject to special rules not discussed below. EACH HOLDER OF OLD NOTES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR AS TO THE PARTICULAR TAX CONSEQUENCES OF PURCHASING, HOLDING, EXCHANGING AND DISPOSING OF THE NEW NOTES, INCLUDING THE APPLICABILITY AND EFFECT OF ANY FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS. EXCHANGE OF OLD NOTES FOR NEW NOTES The exchange of the New Notes for the Old Notes pursuant to the Exchange Offer should not be taxable to the Holders thereof for federal income tax purposes. An exchanging Holder should continue such Holder's holding period and basis in the New Notes as if no exchange had occurred. ORIGINAL ISSUE DISCOUNT AND STATED INTEREST The New Notes will be issued without original issue discount. Stated interest on the Old and New Notes will be includable in the holder's income under such holder's method of accounting. BOND PREMIUM ON THE NEW NOTES If the New Notes are purchased, or if the Old Notes were purchased, for an amount in excess of the amount payable at the maturity date (or a call date, if appropriate) of the New Notes, such excess will be deductible by the holder of the New Notes as amortizable bond premium over the term of the New Notes (taking into account earlier call dates, as appropriate), under a yield-to- maturity formula, only if an election by the holder under Section 171 of the Code is made or is already in effect. An election under Section 171 is available only if the New Notes are held as capital assets. This election is revocable only with the consent of the Service and applies to all obligations owned or subsequently acquired by the holder. To the extent the excess is deducted as amortizable bond premium, the holder's adjusted tax basis in the New Notes will be reduced. Except as may otherwise be provided in Treasury regulations, under the Code the amortizable bond premium will be treated as an offset to interest income on the New Notes rather than as a separate deduction item. 31 MARKET DISCOUNT ON THE NEW NOTES Holders of the New Notes should be aware that a disposition of the New Notes may be affected by the market discount provisions of Sections 1276-1278 of the Code. These rules generally provide that if a holder acquired the Old Notes or acquires the New Notes (other than in an original issue, which may not include the issuance of the New Notes pursuant to the Exchange Offer) at a market discount which equals or exceeds 1/4 of 1% of the stated redemption price of the New Notes at maturity multiplied by the number of remaining complete years to maturity and thereafter recognizes gain upon a disposition (or makes a gift) of the New Notes, the lesser of (i) such gain (or appreciation, in the case of a gift) or (ii) the portion of the market discount which accrued while the Old Notes or New Notes were held by such holder will be treated as ordinary income at the time of the disposition (or gift). For these purposes, market discount means the excess (if any) of the stated redemption price at maturity over the basis of such Old Notes or New Notes immediately after their acquisition by the holder. A holder of the New Notes may elect to include any market discount (whether accrued under the Old Notes or the New Notes) in income currently rather than upon disposition of the New Notes. This election once made applies to all market discount obligations acquired on or after the first taxable year to which the election applies, and may not be revoked without the consent of the Service. A holder of any New Note who acquired the Old Note or New Note at a market discount generally will be required to defer the deduction of a portion of the interest on any indebtedness incurred or maintained to purchase or carry such Old Note or New Note until the market discount is recognized upon a subsequent disposition of such New Note. Such a deferral is not required, however, if the holder elects to include accrued market discount in income currently. REDEMPTION OR SALE OF THE NEW NOTES Generally, any redemption or sale of the New Notes by a holder would result in taxable gain or loss equal to the difference between the amount of cash and the fair market value of property received (except to the extent that such cash or property received is attributable to accrued, but previously untaxed, interest) and the holder's tax basis in the New Notes. The tax basis of a holder of the New Notes will generally be equal to the price paid for such New Notes or the Old Notes exchanged therefor, plus any accrued market discount on the New Notes (and the Old Notes exchanged therefor) included in the holder's income prior to sale or redemption of the New Notes, or reduced by any amortizable bond premium applied against the holder's income prior to sale or redemption of the New Notes. Such gain or loss generally would be long-term capital gain or loss if the holding period exceeded one year and the holder holds the New Notes as capital assets, (with the applicable tax rates for an individual taxpayer generally depending, under the Taxpayer Relief Act of 1997, on whether or not the taxpayer's holding period exceeds eighteen months), except to the extent such gain constitutes accrued market discount. BACKUP WITHHOLDING A holder of the New Notes may be subject to backup withholding at a rate of 31% with respect to interest paid or accrued on, and gross proceeds of a sale of, the New Notes unless (i) such holder is a corporation or comes within certain other exempt categories and, when required, demonstrates this fact or (ii) provides a correct taxpayer identification number, certifies as to no loss of exemption from backup withholding and otherwise complies with applicable requirements of the backup withholding rules. A holder of the New Notes who does not provide the Company with such holder's correct taxpayer identification number may be subject to penalties imposed by the Service. The Issuers will report to the holders of the New Notes and to the Service the amount of any "reportable payments" and any amount withheld with respect to the Old Notes and New Notes during the calendar year. THE FOREGOING DISCUSSION OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES IS FOR GENERAL INFORMATION ONLY AND IS NOT TAX ADVICE. ACCORDINGLY, EACH HOLDER OF THE OLD NOTES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE TAX CONSEQUENCES TO SUCH HOLDER OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE NEW NOTES INCLUDING THE APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. 32 CAPITALIZATION The following table sets forth the pro forma, unaudited cash and cash equivalents, debt and capitalization of Hollywood Park as of June 30, 1997, after giving effect to the sale of the Notes and the application of the net proceeds therefrom. This table should be read in conjunction with "Unaudited Pro Forma Financial Statements," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and Hollywood Park's and Boomtown's consolidated financial statements and notes thereto, all included elsewhere in this Prospectus.
AS OF JUNE 30, 1997 ------------------------ ACTUAL PRO FORMA(1)(2) -------- --------------- (IN THOUSANDS, UNAUDITED) Cash and cash equivalents..................... $ 38,409 $ 46,012 ======== ======== Current maturities of long term debt and capital lease obligations.................... $ 6,222 $ 6,222 Long term debt: Senior Subordinated Notes due 2007.......... 0 125,000 Boomtown Notes.............................. 114,879 505 Other....................................... 1,517 4,959 -------- -------- Total long term debt, including current maturities................................ 122,618 136,686 Total stockholders' equity................ 216,607 216,607 -------- -------- Total capitalization...................... $339,225 $353,293 ======== ========
- -------- (1) Represents pro forma unaudited amounts after giving effect to the sale of the Notes and the application of the net proceeds therefrom. (2) The Bank Credit Facility permits maximum aggregate borrowings of approximately $100 million, approximately $78 million of which is currently available under certain covenant limitations. 33 SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA The following selected historical financial information of Hollywood Park and Boomtown has been derived from their respective historical financial statements and should be read in conjunction with such consolidated financial statements and the notes thereto included herein. The Hollywood Park and Boomtown historical financial statement data as of and for the six months ended June 30, 1997 and 1996 has been prepared on the same basis as the historical information derived from the audited financial statements and, in the opinion of management, contains all adjustments, consisting only of normal recurring accruals, necessary for the fair presentation of the results of operations for such periods and financial position as of such dates. Historically, Boomtown has reported operating results on a fiscal year end of September 30. For comparison purposes, Boomtown's operating results have been presented on a December 31 year end for 1995 and 1996, and have been prepared on the same basis as the historical information derived from the audited financial statements and, in the opinion of management, contains all adjustments, consisting only of normal recurring accruals, necessary for the fair presentation of the results of operations for such periods. The unaudited selected pro forma combined consolidated condensed financial data is derived from the unaudited pro forma combined consolidated condensed financial statements, appearing elsewhere herein, which give effect to the Merger as a purchase and the Blue Diamond Swap, shown also as adjusted to reflect the issuance of the Notes and the application of the proceeds therefrom, and should be read in conjunction with such pro forma statements and the notes thereto. For comparison purposes, the pro forma combined consolidated statements of operations are presented for both Hollywood Park and Boomtown with a year end of December 31. Certain amounts from the Hollywood Park and Boomtown Historical Selected Financial Data have been reclassified to conform with the selected presentation hereto. The pro forma information is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred had the Merger and the issuance of the Notes been consummated in an earlier period, nor is it necessarily indicative of future operating results or financial position. 34 HOLLYWOOD PARK, INC. SELECTED HISTORICAL FINANCIAL DATA
YEARS ENDED SIX MONTHS DECEMBER 31, ENDED JUNE 30, ------------------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 ------- -------- -------- -------- -------- -------- -------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS) STATEMENT OF OPERATIONS DATA: REVENUES: Gaming................. $ 0 $ 0 $ 11,745 $ 26,656 $ 50,717 $ 24,803 $ 26,847 Racing................. 66,983 63,850 78,719 79,862 71,308 38,353 35,868 Food and beverage...... 10,957 10,908 20,540 19,783 13,947 7,637 6,860 Other.................. 3,004 4,227 6,320 4,271 7,253 3,487 3,564 ------- -------- -------- -------- -------- -------- -------- 80,944 78,985 117,324 130,572 143,225 74,280 73,139 ------- -------- -------- -------- -------- -------- -------- EXPENSES: Gaming................. 0 0 0 5,291 27,249 14,489 15,161 Racing................. 21,097 20,860 23,393 30,960 30,167 15,996 15,409 Food and beverage...... 8,922 9,400 21,852 24,749 19,573 9,082 8,819 Administrative and other................. 33,480 32,538 51,151 48,647 43,962 22,688 19,970 Depreciation and amortization.......... 5,899 6,402 9,563 11,384 10,695 5,400 5,780 Non-recurring expenses. 0 850 2,964 6,088 11,412 11,412 0 ------- -------- -------- -------- -------- -------- -------- 69,398 70,050 108,923 127,119 143,058 79,067 65,139 ------- -------- -------- -------- -------- -------- -------- Operating income (loss). 11,546 8,935 8,401 3,453 167 (4,787) 8,000 Interest expense....... 4,883 1,517 3,061 3,922 942 898 129 ------- -------- -------- -------- -------- -------- -------- Income (loss) before mi- nority interests and income taxes........... 6,663 7,418 5,340 (469) (775) (5,685) 7,871 Minority interest...... 0 0 0 0 15 0 63 ------- -------- -------- -------- -------- -------- -------- Income (loss) before in- come taxes and extraor- dinary item............ 6,663 7,418 5,340 (469) (790) (5,685) 7,808 Income tax expense..... 3,135 1,025 1,568 693 3,459 2,444 3,100 ------- -------- -------- -------- -------- -------- -------- Income (loss) before ex- traordinary item....... 3,528 6,393 3,772 (1,162) (4,249) (8,129) 4,708 Extraordinary item--Uti- lization of tax benefits from net operating loss carryforwards.......... 1,894 0 0 0 0 0 0 ------- -------- -------- -------- -------- -------- -------- Net income (loss)....... $ 5,422 $ 6,393 $ 3,772 $ (1,162) $ (4,249) $ (8,129) $ 4,708 ======= ======== ======== ======== ======== ======== ======== Dividend requirements on convertible preferred stock.................. $ 0 $ 1,718 $ 1,925 $ 1,925 $ 1,925 $ 962 $ 962 Net income (loss) at- tributable to (allo- cated to) common share- holders................ $ 5,422 $ 4,675 $ 1,847 $ (3,087) $ (6,174) $ (9,091) $ 3,746 ======= ======== ======== ======== ======== ======== ======== PER COMMON SHARE: Income (loss) before extraordinary item.... $ 0.27 $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ (0.49) $ 0.20 Net income (loss)--pri- mary.................. $ 0.41 $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ (0.49) $ 0.20 Net income (loss)-- fully diluted......... $ 0.41 $ 0.30 $ 0.10 $ (0.17) $ (0.33) $ (0.49) $ 0.20 Cash dividends......... $ 0.04 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 $ 0.00 Number of common shares--primary........ 13,084 15,418 18,224 18,399 18,505 18,613 18,366 Number of common shares--fully diluted.. 13,084 17,465 20,516 20,691 20,797 20,904 20,657 OTHER DATA: Adjusted EBITDA (a)..... $17,445 $ 16,187 $ 20,928 $ 20,925 $ 22,274 $ 12,025 $ 13,780 Cash flows provided by (used in): Operating activities... 11,262 13,280 (7,287) 20,291 13,137 15,504 14,486 Investing activities... (5,250) (32,677) (7,331) (31,322) (19,893) (6,118) 11,846 Financing activities... (4,416) 74,391 (8,877) (3,685) (3,728) (962) 155 Capital expenditures... 5,319 12,902 27,584 25,150 23,786 9,132 3,927 Ratio of earnings to fixed charges (b)...... 2.36x 5.89x 2.74x -- (c) -- (c) -- (c) 21.56x BALANCE SHEET DATA: (D) Total assets........... $90,219 $176,424 $246,573 $283,303 $205,886 $223,801 $426,098 Other liabilities...... 34,494 21,876 36,518 101,928 47,444 66,897 93,095 Long term obligations.. 45,538 348 42,800 15,629 282 256 116,396 Stockholders' equity... 10,187 154,200 167,255 165,746 158,160 156,648 216,607
- ------- (a) Calculation of adjusted earnings before interest, taxes, depreciation, amortization and non-recurring expenses ("Adjusted EBITDA"): Operating income (loss) as presented above................ $11,546 $ 8,935 $ 8,401 $ 3,453 $ 167 $ (4,787) $ 8,000 Add back depreciation and amortization..... 5,899 6,402 9,563 11,384 10,695 5,400 5,780 Add back casino pre- opening and training expenses............. 0 850 2,337 0 0 0 0 Add back Turf Paradise acquisition costs.... 0 0 627 0 0 0 0 Add back lawsuit set- tlement.............. 0 0 0 6,088 0 0 0 Add back write off of investment in a busi- ness................. 0 0 0 0 11,412 11,412 0 ------- -------- -------- -------- -------- -------- -------- Adjusted EBITDA....... $17,445 $ 16,187 $ 20,928 $ 20,925 $ 22,274 $ 12,025 $ 13,780 ======= ======== ======== ======== ======== ======== ========
EBITDA should not be construed as an alternative to income from operations (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance, or as an alternative to cash flow from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (b) In computing the ratio of earnings to fixed charges: (i) earnings have been based on income from continuing operations before income taxes and fixed charges (exclusive of capitalized interest), and (ii) fixed charges consist of interest expense and amortization of debt discount and issuance costs (including amounts capitalized), and the estimated interest portion of rental expense. (c) Hollywood Park's earnings were not sufficient to cover its fixed charge requirements by $1.1 million and $2.2 million for the years ended December 31, 1995 and 1996, respectively, and by $8.8 million for the fixed charge requirements for the six months ended June 30, 1996. (d) Balance sheet data as of June 30, 1997, includes the accounts of Boomtown. 35 BOOMTOWN, INC. SELECTED HISTORICAL FINANCIAL DATA
YEARS ENDED SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, SEPTEMBER 30, (UNAUDITED) (UNAUDITED) --------------------------- -------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 ------- -------- -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS) STATEMENT OF OPERATIONS DATA: Revenues: Gaming................. $42,009 $ 42,416 $ 76,326 $189,523 $188,942 $ 97,428 $101,580 Food and beverage...... 3,785 3,877 7,973 16,556 16,677 8,376 9,379 Hotel, truck stop and other................. 10,059 12,780 21,700 30,510 35,699 14,306 13,007 ------- -------- -------- -------- -------- -------- -------- 55,853 59,073 105,999 236,589 241,318 120,110 123,966 ------- -------- -------- -------- -------- -------- -------- EXPENSES: Gaming................. 20,677 21,732 38,753 110,938 111,364 41,599 43,356 Food and beverage...... 3,170 3,349 8,179 18,935 20,015 9,718 11,930 General and administra- tive and other........ 18,750 21,133 41,019 86,867 83,725 54,045 51,583 Depreciation and amor- tization.............. 3,528 3,839 5,891 10,438 10,880 5,578 8,820 Compensation stock ap- preciation rights and stock options......... 2,229 0 0 0 0 -- Pre-opening expenses... 0 0 15,787 0 0 -- -- Loss on marketable se- curities.............. 0 0 1,691 0 0 -- -- Hollywood Park/Boomtown merger costs.......... 0 0 0 0 1,291 712 1,487 Loss on sale of a busi- ness.................. 0 0 0 0 36,563 36,563 1,271 ------- -------- -------- -------- -------- -------- -------- 48,354 50,053 111,320 227,178 263,838 148,215 118,447 ------- -------- -------- -------- -------- -------- -------- Operating income (loss). 7,499 9,020 (5,321) 9,411 (22,520) (28,105) 5,519 Interest expense....... 3,369 1,033 5,632 13,967 13,988 7,021 6,951 ------- -------- -------- -------- -------- -------- -------- Income (loss) before mi- nority interests and income taxes........... 4,130 7,987 (10,953) (4,556) (36,508) (35,126) (1,432) Minority interest...... 0 0 (351) (1,444) (164) 493 -- ------- -------- -------- -------- -------- -------- -------- Income (loss) before in- come taxes and extraor- dinary item............ 4,130 7,987 (10,602) (3,112) (36,344) (34,633) (1,432) Income tax expense (ben- efit).................. 1,669 3,035 (2,779) 358 (320) 293 (587) ------- -------- -------- -------- -------- -------- -------- Income (loss) before ex- traordinary item....... 2,461 4,952 (7,823) (3,470) (36,024) (34,926) (845) Extraordinary item (a).. 0 (370) (229) 0 (44) 0 (8,330) ------- -------- -------- -------- -------- -------- -------- Net income (loss)....... $ 2,461 $ 4,582 $ (8,052) $ (3,470) $(36,068) $(34,926) $ (9,175) ======= ======== ======== ======== ======== ======== ======== Dividend requirements on preferred stock........ $ 200 $ 50 $ 0 $ 0 $ 0 -- -- Net income (loss) at- tributable to (allo- cated to) common shareholders........... $ 2,261 $ 4,532 $ (8,052) $ (3,470) $(36,068) $(34,926) $ (9,175) ======= ======== ======== ======== ======== ======== ======== PER COMMON SHARE: Income (loss) before extraordinary item.... $ (0.61) $ 0.65 $ (0.90) $ (0.38) $ (3.89) $ (3.78) $ (0.09) Net income (loss)...... $ (0.61) $ 0.60 $ (0.93) $ (0.38) $ (3.89) $ (3.78) $ (0.93) Number of common shares. 3,708 7,503 8,690 9,238 9,271 9,251 9,830 OTHER DATA: Adjusted EBITDA (b)..... $13,256 $ 12,859 $ 18,048 $ 19,849 $ 26,214 $ 14,748 $ 17,097 Ratio of earnings to fixed charges (c)...... 2.18x 7.86x --(d) --(d) --(d) --(d) --(d) BALANCE SHEET DATA: Total assets........... $55,916 $108,616 $238,467 $235,314 $207,289 $204,186 $204,407 Other liabilities...... 10,632 7,581 25,309 24,758 34,900 29,352 30,983 Long term obligations.. 31,973 0 105,140 105,632 103,316 104,732 113,392 Stockholders' equity... 13,311 101,035 108,018 104,924 69,073 70,103 60,032 - ------- (a) Write off of unamortized loan fees associated with the early repayment of a $15 million senior note, net of tax effect of approximately $226,000 and $140,000, for the years ended September 30, 1993 and 1994, respectively. Tender and consent costs associated with early extinguishment of First Mortgage Notes for the year ended September 30, 1996 and the six months ended June 30, 1997, net of tax effect of approximately $5.9 million for the six months ended June 30, 1997. (b) Calculation of adjusted earnings before interest, taxes, depreciation, amortization and non-recurring expenses ("Adjusted EBITDA"): Operating income (loss) as presented above..... $ 7,499 $ 9,020 $ (5,321) $ 9,411 $(22,520) $(28,105) $ 5,519 Add back depreciation and amortization....... 3,528 3,839 5,891 10,438 10,880 5,578 8,820 Add back compensation stock appreciation rights and stock options................ 2,229 0 0 0 0 0 0 Add back pre-opening ex- penses................. 0 0 15,787 0 0 0 0 Add back loss on market- able securities........ 0 0 1,691 0 0 0 0 Add back Hollywood Park/Boomtown merger costs.................. 0 0 0 0 1,291 712 1,487 Add back loss on sale of a business............. 0 0 0 0 36,563 36,563 1,271 ------- -------- -------- -------- -------- -------- -------- Adjusted EBITDA......... $13,256 $ 12,859 $ 18,048 $ 19,849 $ 26,214 $ 14,748 $ 17,097 ======= ======== ======== ======== ======== ======== ========
(c) In computing the ratio of earnings to fixed charges: (i) earnings have been based on income from continuing operations before income taxes and fixed charges (exclusive of capitalized interest), and (ii) fixed charges consist of interest expense and amortization of debt discount and issuance costs (including amounts capitalized), and the estimated interest portion of rental expense. (d) Boomtown's earnings were not sufficient to cover the fixed charge requirements by $16.1 million, $3.1 million and $36.4 million for the years ended September 30, 1994, and December 31, 1995 and 1996, respectively, and $34.6 million and $1.4 million for the six months ended June 30, 1996 and June 30, 1997, respectively. 36 HOLLYWOOD PARK, INC. SELECTED UNAUDITED PRO FORMA FINANCIAL DATA
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ----------- (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS) STATEMENT OF OPERATIONS DATA: REVENUES: Gaming....................................... $208,699 $110,196 Racing....................................... 71,308 35,868 Food and beverage............................ 22,737 11,781 Hotel, truck stop and other.................. 34,134 16,398 -------- -------- 336,878 174,243 -------- -------- EXPENSES: Gaming....................................... 116,969 58,047 Racing....................................... 30,167 15,409 Food and beverage............................ 29,728 15,402 Administrative and other..................... 107,718 51,762 Depreciation and amortization................ 20,818 14,558 Non-recurring expenses....................... 49,266 1,844 -------- -------- 354,666 157,022 -------- -------- Operating income (loss)....................... (17,788) 17,221 Interest expense............................. 15,468 7,398 -------- -------- Income (loss) before minority interests and income taxes................................. (33,256) 9,823 Minority interest (benefit).................. (149) 63 -------- -------- Income (loss) before income taxes and extraor- dinary item.................................. (33,107) 9,760 Income tax expense........................... 4,239 4,367 -------- -------- Income (loss) before extraordinary item....... $(37,346) $ 5,393 ======== ======== Dividend requirements on convertible preferred stock........................................ $ 1,925 $ 962 Income (loss) before extraordinary item at- tributable to (allocated to) common share- holders...................................... $(39,271) $ 4,431 ======== ======== PER COMMON SHARE: Income (loss) before extraordinary item-- primary..................................... $ (1.65) $ 0.19 Income (loss) before extraordinary item-- fully diluted............................... $ (1.65) $ 0.19 Cash dividends............................... $ 0.00 $ 0.00 Number of common shares--primary.............. 23,868 23,794 Number of common shares--fully diluted........ 26,160 26,085 OTHER DATA: Adjusted EBITDA (a)........................... $ 52,296 $ 33,623 Ratio of earnings to fixed charges (b)........ -- (c) 2.09x AS OF JUNE 30, 1997 ---------- PRO FORMA ---------- BALANCE SHEET DATA: Total assets................................. $438,139 Other liabilities............................ 88,038 Minority interests........................... 3,030 Long term obligations........................ 130,464 Stockholders' equity......................... 216,607
- ------- (a) Calculation of adjusted earnings before interest, taxes, depreciation, amortization and non-recurring expenses ("Adjusted EBITDA"): Operating income (loss) as presented above.. $(17,788) $ 17,221 Add back depreciation and amortization...... 20,818 14,558 Add back Hollywood Park/Boomtown Merger costs...................................... 1,291 1,487 Add back write off of investment in a business................................... 11,412 0 Add back loss on sale of a business......... 36,563 357 -------- -------- Adjusted EBITDA............................. $ 52,296 $ 33,623 ======== ========
EBITDA should not be construed as an alternative to income from operations (as determined in accordance with generally accepted accounting principles) as an indicator of the Company's operating performance, or as an alternative to cash flow from operating activities (as determined in accordance with generally accepted accounting principles) as a measure of liquidity. (b) In computing the ratio of earnings to fixed charges: (i) earnings have been based on income from continuing operations before income taxes and fixed charges (exclusive of capitalized interest), and (ii) fixed charges consist of interest expense and amortization of debt discount and issuance cots (including amounts capitalized), and the estimated interest portion of rental expense. (c) Hollywood Park's earnings were not sufficient to cover its pro forma fixed charge requirement by $34.6 million for the year ended December 31, 1996. Included in the calculation for the year ended December 31, 1996 was the one time, non-cash $11.4 million write off of Hollywood Park's investment in Sunflower Racing, Inc. Also included in the calculation for the year ended December 31, 1996 was the $36.6 million loss on sale of Boomtown Las Vegas. 37 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with, and is qualified in its entirety by, Hollywood Park's and Boomtown's financial statements, including the notes thereto, and the other financial information appearing elsewhere in this Prospectus, as well as the discussion under "Risk Factors." The discussion herein reflects the historical operations of Hollywood Park and Boomtown which, prior to the Merger, had been operated separately by Hollywood Park and Boomtown, respectively. See "Prospectus Summary--Recent Developments." OVERVIEW Historically, Hollywood Park's primary business was the operation of thoroughbred racing facilities. Hollywood Park is the successor to the Hollywood Park Turf Club, which was originally organized in 1938 and incorporated in 1981 under the name Hollywood Park Realty Enterprises, Inc. The Company's principal business was owning and operating the Hollywood Park Race Track, located in the Los Angeles metropolitan area, one of the premier thoroughbred racing facilities in the United States. Since 1991, Hollywood Park has continuously diversified itself from an owner and operator of a single horse racing property into a multi-jurisdictional gaming, sports and entertainment company. Hollywood Park has implemented this strategic plan through internal development of properties and a series of selective acquisitions with a particular focus on middle-market operations which could benefit from improved management and the access to Hollywood Park's financial resources. Since 1991, Hollywood Park's strategic plan has been to maximize the revenue and cash flow of its core businesses through expansion and increased utilization of those properties, to continue to diversify its gaming operations, to broaden the scope of its activities to include other sports and entertainment attractions and to maximize the revenue of its horse racing business through selective acquisitions and, as opportunities arise, through continued expansion and technological improvements in off-track wagering. In late 1993 and early 1994, Hollywood Park attempted to take advantage of the trend toward legalizing gaming in new jurisdictions by acquiring race tracks in jurisdictions where expanded gaming legislation appeared reasonably likely. In 1994, Hollywood Park acquired Turf Paradise, a thoroughbred racing facility located in Phoenix, Arizona, and Sunflower, a greyhound and thoroughbred racing facility located in Kansas City, Kansas. In Arizona, Native American casinos have opened, at least one in close proximity to Turf Paradise, and off-track wagering is permitted in bars. However, to date, the Arizona legislature has not authorized expanded forms of gaming at race tracks. In Kansas, though several legislative proposals to expand gaming were made, none has been enacted, and competition from riverboat gaming in nearby Missouri has resulted in Sunflower filing for reorganization under Chapter 11 of the Bankruptcy Code. Hollywood Park's racing operations (including racing related concessions) generated approximately $84.1 million in revenues for the year ended December 31, 1996. Following the acquisitions of Turf Paradise and Sunflower, Hollywood Park has focused its expansion efforts on California card club casinos and other casino operations, as well as on expanding its pari-mutuel operations at its existing facilities. Since 1994, Hollywood Park has opened two California card club casino facilities. The Hollywood Park-Casino, which opened in July 1994 and is located on the premises of the Hollywood Park Race Track, has a total of 145 gaming tables which offer Poker, Pai Gow and California Blackjack. Hollywood Park assumed operational control over the Hollywood Park-Casino effective November 1995, following an amendment to California law to permit any publicly-traded pari-mutuel racing association to operate card club casinos on its race track premises. Until that time, the Hollywood Park-Casino was operated under a lease arrangement by an unaffiliated operator with Hollywood Park receiving a fixed lease payment. In late 1996, the Crystal Park Hotel & Casino, located in the Los Angeles metropolitan area, opened with 100 table games and 282 hotel rooms. Crystal Park offers the same games as the Hollywood Park-Casino. Hollywood Park has an 89.8% interest in the facility which (since Crystal Park is not on any race track premises) is operated under a five-year lease by an unaffiliated operator with Hollywood Park receiving monthly lease payments of 38 approximately $200,000 for the first six months, $350,000 for the months 7 through 12 and $759,000 for months 13 through 60. Hollywood Park significantly expanded its gaming operations when it completed its strategic combination with Boomtown on June 30, 1997. Hollywood Park now owns and operates, through its subsidiaries, land-based, dockside and riverboat gaming operations in or near Reno, Nevada, New Orleans, Louisiana and Biloxi, Mississippi, respectively. The Boomtown properties offer full casino gaming, hotel accommodations (at Boomtown Reno), and other entertainment amenities to primarily middle income, value-oriented customers. On July 1, 1997, Boomtown and its subsidiaries divested their interests in Boomtown Las Vegas, Nevada, which had consistently performed below projections and generated significant losses. Together with its California card club casino operations, as of June 30, 1997, the Company's casino operations consist of 3,269 slot machines, 379 table games and 404 hotel rooms at its gaming properties. Hollywood Park is the only company that currently owns and operates casinos in Nevada and other states and card club casinos in California. Hollywood Park's efforts to expand its gaming operations are now focused on expanding its existing core gaming facilities and on new opportunities in jurisdictions (other than Las Vegas and Atlantic City) in which gaming has already been legalized. In connection with the Merger, Hollywood Park supplied Boomtown with the funds necessary to repurchase approximately $103 million in aggregate principal amount of the Boomtown Notes. In addition, Hollywood Park intends to utilize its financial resources to reduce or repurchase the financial interests of third parties in Boomtown's operations, such as the repurchase of minority interests in Boomtown New Orleans and National Gaming's participation in the EBITDA of Boomtown Biloxi and the restructuring of certain Boomtown equipment operating leases into capital leases. See "Prospectus Summary-- Recent Developments-- Improvements to Boomtown's Financial Condition" and "Description of Other Indebtedness--Boomtown Notes." During 1996 and 1997, Boomtown restructured several operating leases into capital leases through negotiated payments on the operating lease residual purchase options, with a corresponding reduction in operating expenses. For a discussion of Hollywood Park's efforts to continue this strategic expansion of its gaming, sports and entertainment business, see "Business." RESULTS OF OPERATIONS The following discussion relates to historical results of operations for the Company (excluding Boomtown) and for Boomtown separately. The Company's revenues consist primarily of pari-mutuel wagering revenues and gaming revenues from Hollywood Park-Casino table games, and operator lease payments for Crystal Park and (for applicable periods) the Hollywood Park-Casino. In fiscal 1996, pari-mutuel wagering and casino table game operations contributed approximately 37.6% and 35.1%, respectively, of the Company's total revenues. Boomtown's revenues consist primarily of gaming revenues from slot and video poker machines ("slot machines"), table games and keno as well as non-gaming revenues generated from the properties' family entertainment centers, food and beverage sales, hotel room sales (at Boomtown Reno) and from recreational vehicle parks. Gaming operations have historically contributed a significant portion of Boomtown's total revenues and substantially all of its income from operations. In fiscal 1996, gaming operations contributed approximately 80% of Boomtown's total revenues, and gaming revenues from slot machines provided approximately 80% of Boomtown's gaming revenues. Boomtown's non-gaming operations are designed primarily to enhance the gaming operations and contribute a relatively small percentage of Boomtown's income from operations after deducting promotional allowances and operating costs. Boomtown's historical financial data includes results of operations at Boomtown Las Vegas, which has since been divested pursuant to the Blue Diamond Swap. See "--Boomtown--Disposition of Boomtown 39 Las Vegas." Boomtown Las Vegas consistently generated losses and reduced the overall profitability of Boomtown for the periods described herein. Hollywood Park Six Months Ended June 30, 1997 Compared to the Six Months Ended June 30, 1996 As of April 1, 1996, Sunflower's results of operations were no longer consolidated with Hollywood Park's results; therefore, the results of operations for the six months ended June 30, 1997, are exclusive of Sunflower's results of operations and the financial results for the six months ended June 30, 1996, included Sunflower's results of operations through March 31, 1996. Total revenues for the six months ended June 30, 1997, decreased by $1,141,000, or 1.5%, as compared to the six months ended June 30, 1996, due primarily to the inclusion of $1,782,000 of Sunflower revenues in 1996 with no corresponding revenues in the 1997 results. Gaming revenues increased by $2,044,000, or 8.2%, primarily due to $1,500,000 of Crystal Park lease rent revenue during the six months ended June 30, 1997, with no corresponding revenue during the six months ended June 30, 1996. Crystal Park opened on October 25, 1996, under a triple net lease between Crystal Park LLC and CEI (the lessee/operator of Crystal Park). Racing revenues decreased by $2,485,000, or 6.5%, due primarily to one fewer live race day at Hollywood Park, on-track attendance declines, and the inclusion of $1,317,000 of racing revenues attributable to Sunflower in 1996 and no corresponding revenues in 1997. Food and beverage revenues declined by $777,000, or 10.2%, due primarily to the inclusion of Sunflower revenues in 1996, and no corresponding revenues in 1997. Total operating expenses decreased by $2,896,000, or 4.7%, primarily due to the inclusion of $1,703,000 of Sunflower expenses in 1996 with no corresponding expenses in 1997. Gaming expenses increased by $672,000, or 4.6%, due primarily to increased marketing expenses related to tournament play. Racing expenses decreased by $587,000, or 3.7%, due primarily to fewer live race days in 1997 as compared to 1996, and cost saving programs implemented at all of Hollywood Park's properties. Administrative expenses decreased by $3,058,000, or 14.2%, due primarily to decreased expansion disbursements in 1997, and the inclusion of Sunflower's expenses in 1996 with no corresponding expenses in 1997. Depreciation and amortization increased by $380,000, or 7.0%, primarily due to depreciation and amortization associated with Crystal Park recorded in 1997 with no corresponding expense in 1996, offset by the inclusion of Sunflower's depreciation and amortization expenses in 1996 and not in 1997. Interest expense decreased by $769,000, or 85.6%, due to the inclusion of Sunflower's interest expense in 1996 and no corresponding expense in 1997. Year Ended December 31, 1996 Compared to the Year Ended December 31, 1995 The results of operations for the year ended December 31, 1996, included the results of Hollywood Park operating all aspects of the Hollywood Park-Casino, including the Casino gaming floors. Hollywood Park acquired the Hollywood Park-Casino gaming floor business from Pacific Casino Management ("PCM") on November 17, 1995; therefore, the results of operations for the year ended December 31, 1995, do not include the operating results of the Hollywood Park- Casino gaming floor business prior to November 17, 1995, but rather are reflective of the lease arrangement then in place. The results of operations for the year ended December 31, 1996, included Sunflower's results of operations for the three months ended March 31, 1996, only. As of March 31, 1996, Sunflower's results of operations were no longer consolidated with Hollywood Park's due to Sunflower's May 17, 1996, filing for reorganization under Chapter 11 of the Bankruptcy Code. Sunflower's results of operations are consolidated in the financial statements for the year ended December 31, 1995. Total revenues increased by $12,653,000, or 9.7%, for the year ended December 31, 1996, as compared to the year ended December 31,1995, primarily due to Hollywood Park-Casino gaming revenues. Lease and management fee-- Sunflower, decreased by $4,337,000, or 80.2%, due to the exclusion of Sunflower's operating 40 results for the nine months ended December 31, 1996. Gaming--Casino revenues of $50,272,000 were generated from the Hollywood Park-Casino gaming activities, which Hollywood Park acquired from PCM on November 17, 1995. During the year ended December 31, 1995, Hollywood Park recorded $20,624,000 of Casino--Lease revenues, $6,032,000 of Gaming--Casino revenues (covering the period November 17, 1995, through December 31, 1995), and concession sales to PCM of approximately $2,773,000, or total 1995 Hollywood Park-Casino gaming and lease related revenues of $29,429,000. On October 25, 1996, Crystal Park opened under a triple net lease between Hollywood Park and CEI (the operator of Crystal Park). Monthly lease rent is fixed at $200,000 per month for months one through six; $350,000 per month for months seven through twelve, and approximately $759,000 per month for the remaining 48 months of the lease. CEI made all rent payments in 1996. Admissions, programs and other racing income decreased by $1,978,000, or 10.8%, due primarily to the exclusion of Sunflower's operating results for the nine months ended December 31, 1996, and on-track attendance declines at Hollywood Park. Concession sales decreased by $5,836,000, or 29.5%, due primarily to (i) the exclusion of Sunflower's concession sales for the nine months ended December 31, 1996, (ii) the inclusion of concession sales to PCM in 1995 with no corresponding revenues in the 1996, and (iii) on-track attendance declines at Hollywood Park. Total operating expenses increased by $11,304,000, or 10.3%, for the year ended December 31, 1996, compared to the year ended December 31, 1995, primarily due to the inclusion of Hollywood Park-Casino gaming floor expenses (with no corresponding gaming floor expenses in the 1995 financial results for the period prior to the November 17, 1995, acquisition of PCM), which more than offset the exclusion of Sunflower's expenses for the nine months ended December 31, 1996. Salaries, wages and employee benefits increased by $13,081,000, or 30.3%, primarily because of wages and benefits associated with the gaming floor staff, for which there were no corresponding expenses in the 1995 results of operations prior to the November 17, 1995, acquisition of PCM; union wage increases, and six additional live race days at Hollywood Park in 1996 as compared to 1995. Operations of facilities expense decreased by $1,915,000, or 17.6%, primarily a result of the exclusion of Sunflower's expenses for the nine months ended December 31, 1996, and decreased property tax expense at Hollywood Park. Cost of concession sales decreased by $4,338,000, or 17.2%, due primarily to the exclusion of Sunflower's results for the nine months ended December 31, 1996, wages and benefit savings realized at the Hollywood Park-Casino, and lower on-track attendance at Hollywood Park. Professional services increased by $445,000, or 5.7%, due primarily to gaming floor costs at the Hollywood Park-Casino, with no corresponding costs in the 1995 financial results, prior to the November 17, 1995, acquisition of PCM, and the 1995 reclassification of legal fees related to the class action settlement from professional services to the lawsuit settlement expense. Utilities expense decreased by $656,000, or 13.5%, primarily due to the exclusion of Sunflower's costs for the nine months ended December 31, 1996, and cost savings programs implemented at Hollywood Park. Marketing expenses increased by $2,165,000, or 39.0%, due primarily to Hollywood Park-Casino marketing costs. Administrative expenses increased by $2,554,000, or 23.4%, primarily a result of costs associated with the operation of the Hollywood Park-Casino gaming floors, including the city of Inglewood gaming license fees, netted with reduced Hollywood Park expansion costs in 1996. Included in the 1996 results of operations was the $11,412,000 one time, non-cash write off of Hollywood Park's investment in Sunflower. On May 2, 1996, the Kansas Legislature adjourned without passing legislation that would have allowed additional gaming at Sunflower, and thereby, allowing Sunflower to compete with Missouri riverboat gaming. On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the Bankruptcy Code. Management is currently evaluating all options available to Sunflower, and will continue to operate Sunflower, at least through the middle of August, 1997. Included in the 1995 results of operations was $6,088,000 of expenses (with no corresponding expenses in 1996) related to the settlement of certain claims in connection with a shareholder class action and related shareholder derivative suit, as more fully described in the Company's 1996 Annual Report on Form 10-K. Depreciation and amortization expenses decreased by $689,000, or 6.1%, primarily due to the exclusion of Sunflower's expenses for the nine months ended December 31, 1996, netted against the amortization of the 41 goodwill associated with the November 17, 1995, acquisition of PCM. Interest expense decreased by $2,980,000, or 76.0%, due to the exclusion of Sunflower's interest expense for the nine months ended December 31, 1996. Income tax expense increased by $2,766,000, due primarily to the establishment of certain tax reserves. Year Ended December 31, 1995 Compared to the Year Ended December 31, 1994 The 1995 consolidated financial statements include the results of operations at Hollywood Park, the Hollywood Park-Casino, Sunflower, and Turf Paradise. From July 1, 1994 until November 17, 1995, the Hollywood Park-Casino was operated under a lease by an unaffiliated operator who operated the gaming floor business and Hollywood Park operated all other activities. After a change in California law permitting Hollywood Park to operate the casino directly, the gaming floor business was acquired from the operator as of November 17, 1995, accounted for under the purchase method of accounting. The 1995 Hollywood Park-Casino operating results included ten and a half months of operations under the lease, and one and a half months under Hollywood Park's direct ownership and control. 1994's operating results include the six months of Hollywood Park-Casino activities under the lease arrangement. Sunflower was acquired as of March 31, 1994, in a transaction accounted for under the purchase method of accounting. Therefore, the 1994 statement of operations does not include Sunflower's first quarter results. Turf Paradise was acquired as of August 11, 1994, accounted for under the pooling of interests method of accounting. Accordingly, the 1994 results have been restated to include the operating results of Turf Paradise for the full year. Total revenues increased by $13,249,000, or 11.3%, during 1995, as compared to the year ended December 31, 1994. Included in 1995 revenues was $20,624,000 of Hollywood Park-Casino fixed lease rent revenue (of which the operator paid $12,000,000 in 1995 plus $4,377,000 for food and beverage and interest on accrued and unpaid rent) and $6,032,000 of gaming floor revenue, compared to $11,745,000 of Hollywood Park-Casino fixed lease rent revenue in 1994, covering six months of casino operations. Pari-mutuel commissions increased by $1,527,000, or 3.0%, primarily due to increased simulcast racing at both Hollywood Park and Turf Paradise, despite five fewer live race days at Hollywood Park and thirteen fewer live race days at Turf Paradise. Sunflower revenues continued to be severely negatively impacted by riverboat gaming in Missouri. For the year ended December 31, 1995, as compared to the year ended December 31, 1994, Sunflower's total live pari-mutuel handle decreased by $60,385,000, or 54.6%. From November 17, 1995, until the end of 1995, Hollywood Park generated $6,032,000 of casino-gaming revenues. Admissions, programs and other racing income decreased by $758,000, or 4.0% due primarily to a 37.1% decline in on-track attendance at Sunflower, and fewer live race days at Hollywood Park and Turf Paradise. Concession sales declined by $757,000 or 3.7%, mainly due to a 31.9% decrease in Sunflower's concession sales, and five fewer live race days at Hollywood Park, and thirteen fewer live race days at Turf Paradise. Other income increased by $777,000, or 12.3%. Other non-casino income increased by $940,000, or 15.0%. Revenue declines at Hollywood Park due to the cancellation of the Forum Parking Agreement were offset primarily due to Hollywood Park-Casino gift shop and health club sales. A new Forum Parking Agreement was executed on October 24, 1995, covering the one year from October 1, 1995. Total operating expenses, inclusive of $29,819,000 of Hollywood Park-Casino operating expenses (representing a month and a half of gaming floor operations and twelve months of other Hollywood Park-Casino operations, for which there were no gaming floor expenses and just six months of comparable other Hollywood Park-Casino operations activity in 1994) increased by $13,251,000, or 13.7%, during the year ended December 31, 1995, as compared to the year ended December 31, 1994. Salaries, wages and employee benefits increased by $5,874,000, or 15.8%, principally because of wages and benefits associated with the gaming floor staff (hired November 17, 1995) and the six additional months of other Hollywood Park-Casino operations wages in 1995 as compared to the same period in 1994. Operations of facilities increased by $770,000, or 7.6%, primarily related to increased insurance costs and Hollywood Park-Casino operations. Cost of concession sales increased by $3,311,000, or 15.2%, essentially due to Hollywood Park-Casino operations. Professional services increased by $213,000, or 2.8%, primarily due to legal costs incurred related to Hollywood Park's expansion projects, including a proposed stadium. Rent expense decreased by $517,000, or 28.4%, mainly due to the conclusion of Hollywood Park's lease on the infield message board. Utilities increased by $215,000, or 4.6%, 42 due to the full year of Hollywood Park-Casino operations in 1995 as compared to just six months of activity in 1994. Marketing costs decreased by $515,000, or 8.5%, due primarily to savings related to reductions in advertising for Friday night racing and five fewer live race days at Hollywood Park. Administrative costs increased by $3,902,000, or 55.5%, principally because of costs incurred related to two card club casino initiative campaigns, which were defeated in September and November, and costs for other expansion endeavors, including a proposed stadium and other card club casinos. All costs associated with projects in the evaluation stages are expensed as incurred. As previously reported, on February 26, 1996, the District Court approved the settlement of the Class Actions and entered a judgment dismissing them in their entirety. On April 3, 1996, the State Court entered an order approving the settlement of the Derivative Action. Hollywood Park also separately settled all purported claims against Hollywood Park and its officers and directors by the former controlling stockholder of Turf Paradise in connection with Hollywood Park's acquisition of Turf Paradise. After giving effect to the amounts to be received by Hollywood Park in settlement of the Derivative Action and from its insurance carrier, Hollywood Park's net settlement payment in the Class Actions, the Derivative Action and in resolving the claims of the former controlling stockholder of Turf Paradise, was approximately $6,100,000 (inclusive of all related costs and expenses), which was expensed in the fourth quarter of 1995. The 1994 Hollywood Park-Casino pre-opening and training costs of $2,337,000 were primarily related to wages paid during the on-the-job training of staff hired to open the Hollywood Park-Casino on July 1, 1994. There were no similar costs in 1995. The Turf Paradise acquisition costs were a result of the August 11, 1994, acquisition of Turf Paradise by Hollywood Park; there were no similar costs in 1995. Depreciation and amortization increased by $1,821,000, or 19.0%, for the year ended December 31, 1995, as compared to the year ended December 31, 1994. The increase was mainly due to Hollywood Park-Casino operations, and costs associated with the first quarter of 1995 at Sunflower with no corresponding amount in 1994. Interest expense increased by $860,000, or 28.1%, principally due to an additional three months of Sunflower interest expense in the 1995 results. Sunflower's 1994 results are exclusive of the first quarter. Income tax expense decreased by $875,000, due primarily to the decrease in pre-tax income in the year ended December 31, 1995 as compared to the year ended December 31, 1994. Boomtown Disposition of Boomtown Las Vegas On July 1, 1997, Boomtown and its subsidiaries exchanged substantially all of their interest in Boomtown Las Vegas (including substantially all of the operating assets and the notes receivable of approximately $27.3 million from the landowner/lessor of the Boomtown Las Vegas property, IVAC, a California general partnership of which Edward P. Roski, Jr. ("Roski"), a former Boomtown director, is a general partner) with Majestic Resorts, LLC ("Majestic") for two notes aggregating approximately $8.5 million in principal amount issued by IVAC, cash, assumption by Majestic (guaranteed by Roski) of the note and lease obligations of Boomtown Las Vegas, and relief from the real estate lease obligations of Boomtown Las Vegas payable to IVAC (such transactions being collectively referred to as the "Blue Diamond Swap"). Boomtown Las Vegas was divested by Boomtown because it had generated significant operating losses since it opened, and had reduced the overall profitability of Boomtown. As a result of the Blue Diamond Swap, IVAC was relieved of the obligation to repay Boomtown the aforementioned loans of $27.3 million. In addition, concurrently with the consummation of the Blue Diamond Swap, Hollywood Park purchased 446,491 shares of Hollywood Park common stock received by Roski in the Merger for a purchase price of approximately $3.5 million, paid in the form of a Hollywood Park promissory note. 43 Nine Months Ended June 30, 1997 Compared to Nine Months Ended June 30, 1996 For the nine months ended June 30, 1997, total revenues increased by $4.9 million, or 2.8%, as compared total revenues for the nine months ended June 30, 1996. Gaming revenues increased by $5.0 million, or 3.6%, primarily a result of increase in gaming revenues at Boomtown Biloxi. Boomtown Biloxi has been able to increase market share in the Gulf Coast region due to enhanced marketing and player promotions. The increase in gaming revenues during the nine months ended June 30, 1997, was offset by a 13.9% decrease in gaming revenues at Boomtown Reno, primarily due to severe winter weather conditions. During the three months ended December 31, 1996, the Pacific Northwest, including Reno and northern California, experienced unusually intense weather conditions, thereby reducing the traffic flow on Interstate 80, upon which Boomtown Reno depends on as a primary source of gaming patrons. Food and beverage sales increased by $1.3 million, or 11.3%, due primarily to quality improvements and marketing programs. Total operating expenses for the nine months ended June 30, 1997, decreased by $27.6 million, or 13.6%, as compared to the nine months ended June 30, 1996. Included in the expenses for the nine months ended June 30, 1996, was the one time $36.6 million loss incurred on the sale of Boomtown's Las Vegas property. Upon the closing of the sale of the Las Vegas property, Boomtown incurred an additional $1.2 million of expenses that were reflected in the results of operations for the nine months ended June 30, 1997. The one time charge of $14.2 million related to Boomtown's consent and tender of its First Mortgage Notes was treated as an extraordinary loss for the nine months ended June 30, 1997. There was no comparable charge for the nine months ended June 30, 1996. Boomtown recorded non-recurring costs of $1.6 million related to the Merger during the nine months ended June 30, 1997, compared to $0.7 million of Merger costs during the corresponding period in 1996. Operating expenses, adjusted for the various one time/non-recurring charges discussed above, for the nine months ended June 30, 1997, increased by $6.8 million, or 4.1%, as compared to similarly adjusted operating expenses for the nine months ended June 30, 1996. Marketing expenses increased by $2.5 million, or 15.1%, primarily related to enhanced marketing efforts at Boomtown Biloxi. Administrative expenses increased by $1.1 million, or 2.6%, primarily due to increased employee heath insurance costs, and increased security staff at Boomtown New Orleans, as required under Louisiana gaming regulations. Depreciation and amortization expenses increased by $3.5 million, or 43.0%, primarily due to reductions in the estimated useful lives of existing assets to conform to changes in Boomtown's depreciation policy, and due to the restructuring of several operating leases to capital leases during the nine months ended June 30, 1997. Fiscal Year 1996 Compared to Fiscal Year 1995 During the fiscal year ended September 30, 1996 total revenues were $236.0 million compared to $231.8 million in the prior year. The improvement in revenues resulted from higher gaming revenues at Boomtown Reno and Boomtown Biloxi, offset by lower gaming revenues at Boomtown New Orleans and Boomtown's former resort in Las Vegas, Nevada ("Boomtown Las Vegas"). Gaming revenues primarily consist of revenues from slot machines, table games and Keno. Boomtown Reno's revenues grew 5.2% over the prior year primarily as a result of increased attendance due to higher traffic volume on Interstate 80, on which Boomtown Reno is heavily dependent for customers. Boomtown Biloxi's revenues have improved due to expansion of the gaming market in the Gulf Coast region combined with increased marketing and promotional efforts. Boomtown Biloxi revenues increased by 10.0% over the prior year. Boomtown New Orleans revenues were negatively affected by additional cruising of its riverboat casino as mandated by law. Gaming revenues at Boomtown Las Vegas continued to be less than expected and lower than the prior year resulting from increased competition with other casino operators for the local customer market. Non-gaming revenues primarily consist of revenues generated from food and beverage, hotel, recreational vehicle park, family entertainment center, truckstop, service station, mini-mart and other. Non-gaming revenues for the years ended September 30, 1996 and 1995 were $47.7 million and $42.5 million, respectively. Increases in non-gaming revenues were recorded at all four of the Boomtown properties, with the majority of the consolidated improvement due to higher fuel sales at the Boomtown Reno truckstop as well as the expansion of the cabaret show at Boomtown New Orleans. 44 The consolidated gaming margin was 57.4% for fiscal 1996, compared to 58.2% in the prior year. The decline is primarily a result of a change in the calculation of gaming taxes at Boomtown New Orleans resulting in the taxes being reclassified and charged as a gaming expense in the current year. During the prior year, the taxes were calculated based on a flat charge per admission and recorded as general and administrative expenses. Additionally, Boomtown's consolidated gaming margin was negatively affected by additional gaming leases entered into in April 1995 resulting in higher gaming equipment lease expense during the period. This decline in the consolidated gaming margin was offset by improvements from Boomtown Biloxi resulting from the discontinuance of the property's FunFlight program in October 1995. Marketing, general and administrative expenses primarily consist of advertising and promotional costs, salaries and wages and related benefits, non-gaming taxes and licenses, professional fees and other overhead expenses. Marketing expenses were $22.4 million for the year ended September 30, 1996, a 14.3% increase over the prior year's expense of $19.6 million. Marketing expenses consist of costs associated with printed advertising, outdoor signs, media advertising, promotional events, Boomtown's bus tour and FunFlight programs and other marketing and administrative expenses. The increase in marketing expenses during fiscal 1996 resulted from additional advertising at Boomtown Biloxi and Boomtown Las Vegas in order to promote the Boomtown brand and compete for the local customer market in those areas. Higher promotional events and player's club redemption costs at all Boomtown casinos also contributed to the increase. General and administrative ("G&A") expenses were $70.6 million for the year ended September 30, 1996, a 6.2% decline from the $75.3 million recorded during the prior year. G&A expenses were less at Boomtown Las Vegas and Boomtown New Orleans, offset by higher expenses at Boomtown Biloxi. The reduction at Boomtown New Orleans primarily resulted from a reclassification of gaming taxes from G&A to gaming operating expenses during the current year. Lower expenses at Boomtown Las Vegas resulted from a reduction of costs in most overhead departments due to cost control efforts. The increase in Boomtown Biloxi's G&A expenses was attributable to higher property rent as well as building and grounds maintenance costs associated with the aging of the building and barge. Boomtown continues to concentrate on aggressive cost reduction programs for all of its properties. During the year ended September 30, 1996 Boomtown incurred charges of approximately $1.1 million related to the Merger, as well as $500,000 associated with its license application in the state of Indiana. Depreciation and amortization expense rose 1.9% to $10.6 million for the year ended September 30, 1996, a result of ordinary course capital improvements and additions and the restructuring of certain operating leases to capital leases at Boomtown Biloxi and Boomtown New Orleans, thereby capitalizing the equipment and depreciating the costs over the remaining estimated useful lives. During the year ended September 30, 1996, Boomtown took a non-cash charge of $36.6 million related to the Blue Diamond Swap. The charge included the write- off of Boomtown's investment in lease of $12.7 million, an $18.9 million write-down of the related party notes receivable to $8.5 million, and the write-off of the remaining net assets less the liabilities assumed by Roski of $5.0 million (approximate value at June 30, 1996). The after-tax loss amounted to $35.7 million, or $3.86 per share. The recorded provision for income taxes for the year ended September 30, 1996, does not reflect the anticipated benefit from the write-off associated with the Blue Diamond Swap. The write-off of the $12.7 million investment in lease is not deductible for income tax purposes. In addition, the remaining income tax benefit arising from the Blue Diamond Swap has been offset by a valuation allowance because of the uncertainty regarding the future realization of the related deferred tax asset. Fiscal Year 1995 Compared to Fiscal Year 1994 Gaming revenues as a percent of total revenues increased from 73.8% to 81.7% from fiscal 1994 to fiscal 1995. This was due to the opening of the three new gaming properties, particularly Boomtown Biloxi and Boomtown New Orleans. Boomtown Biloxi's and Boomtown New Orleans' gaming revenues provide 45 approximately 90% and 97% of each partnership's total revenues, respectively. Gaming revenues increased 148% or $113 million, primarily due to the opening of the three new gaming properties in the third and fourth quarters of fiscal 1994. Boomtown Reno's gaming revenue decreased 3%, from $43.8 million to $42.6 million due to severe winter weather conditions in the first two fiscal quarters. The new properties, Boomtown Las Vegas, Boomtown Biloxi and Boomtown New Orleans, contributed $32.9 million, $41.7 million and $72.2 million, respectively, to casino revenues. Non-gaming revenues increased $15.5 million from $27.0 million to $42.5 million. The increases were primarily related to the opening of the new gaming properties. Boomtown Biloxi contributed an increase of $1.9 million and $1.6 million from its food and beverage operation and its family entertainment center, respectively in addition to other income of $223,000; Boomtown New Orleans contributed increases of $789,000 and $548,000 from its family entertainment center, its food and beverage operation and the cabaret, respectively, in addition to other income of $374,000; and Boomtown Las Vegas contributed increases of $4.9 million, $2.2 million and $1.2 million from its food and beverage, hotel operations and recreational vehicle park, respectively, in addition to other income of $581,000. Boomtown Reno's non- gaming revenues increased by $717,000 of which $314,000 was due to the opening of a steakhouse in May 1994. The remainder of the increases at Boomtown Reno were related to the family entertainment center, hotel, recreational vehicle park, and entry fees for gaming and golf tournaments. Gaming expenses increased $47.8 million or 153% from fiscal 1994 to fiscal 1995 and as a percent of revenues from 30.2% to 34.1%. Gaming expenses as a percent of total revenues were 29.6%, 31.9%, 41.9% and 34.5% at Boomtown Reno, Boomtown Las Vegas, Boomtown Biloxi, and Boomtown New Orleans, respectively. Except for Boomtown Biloxi, the variance is due primarily to the difference in gaming tax rates. Boomtown Biloxi's variance is primarily due to the addition of the FunFlight program in fiscal 1995 which had operating expenses of $3.1 million and revenues of $1.4 million. In addition, an increase of $5.4 million was related to gaming equipment lease expenses due to the sale and leaseback of certain furniture, fixtures and equipment at the various properties that occurred during the end of the 1994 fiscal year and at the beginning of the 1995 fiscal year. Non-gaming operating expenses consist of costs incurred for food and beverage, hotel, recreational vehicle park, family entertainment center, truckstop, service station, mini-mart and other. Non-gaming operating expenses increased $10.7 million. The increases were primarily related to the opening of the three new gaming properties in fiscal 1994. Marketing, general and administrative expenses increased from $33.3 million in fiscal 1994 to $94.9 million in fiscal 1995, an increase of $61.6 million. This increase was primarily due to the opening of the three new gaming properties ($59.9 million) in fiscal 1994. The remainder of the increase is due to the addition of the player's slot club and promotions related to bus tour programs at Boomtown Reno. Discontinued projects primarily consists of write-offs and accruals for development costs associated with Boomtown's research and pursuit into various gaming jurisdictions for the purpose of applying for gaming licenses. Significant write-offs in the third quarter included development costs related to the following projects; Lawrenceburg, Indiana (approximately $4.3 million), the state of Missouri ($727,000), the state of Iowa ($335,000) and other miscellaneous projects ($220,000). In addition, Boomtown terminated a merger and related agreements with National Gaming Corporation, Inc. in April 1995. As a result, Boomtown wrote-off $450,000 of accumulated expenses related to the transaction. Depreciation and amortization expense increased $4.5 million or 77% but decreased as a percent of revenues. The increase primarily reflects a full years depreciation on the new assets purchased and constructed for Boomtown Las Vegas, Boomtown Biloxi and Boomtown New Orleans during fiscal 1994. The decrease as a percent of total revenues is due to the sale and leaseback of certain furniture, fixtures and gaming equipment at the end of the second quarter totalling approximately $5.2 million. Income from operations improved from a loss from operations of $6.3 million in fiscal 1994 to income from operations of $7.2 million in fiscal 1995, for the reasons set forth above. 46 Interest expense, net of capitalized interest increased by $7.8 million. This was due to a decrease in capitalized interest of $5.2 million offset by an increase in interest expense of $2.6 million. Capitalized interest was significantly higher in the prior fiscal year due to the construction of Boomtown Biloxi, Boomtown Las Vegas and Boomtown New Orleans. Interest expense is higher for fiscal 1995 compared to fiscal 1994 primarily due to the additions of $3.1 million of long-term debt during the end of the fourth quarter of fiscal 1994 and additions of $5.9 million in the second quarter of fiscal 1995. The weighted average long-term debt outstanding and the related interest rate for the year ended September 30, 1995 was $111.9 million and 11.7%, respectively, as compared to $109.1 million and 12.7%, respectively, for the year ended September 30, 1994. Loss on marketable securities was $1.7 million in fiscal 1994 due to a decline in the market value of investments in two short-term government bond funds purchased for approximately $50.0 million. The minority partners' share of operations of the consolidated partnership of Mississippi-I Gaming, L.P. and Louisiana-I Gaming, L.P. are reported as "minority interest." The $1.1 million of loss related to minority interests in fiscal 1995 is comprised of $2.0 million loss related to Mississippi-I Gaming, L.P. offset by $.9 million of income related to Louisiana-I Gaming, L.P. The $352,000 of minority interest in fiscal 1994 is related primarily to the minority interest in Mississippi-I Gaming, L.P. Boomtown has a state income tax provision of $1.1 million related to net income generated from Boomtown New Orleans and a federal income tax benefit of approximately $300,000 during fiscal 1995. Boomtown's federal income tax benefit (effective rate of 15%) is lower than the federal statutory rate due to amortization of goodwill and an increase in nondeductible items as a result of a change in deductibility of meals and entertainment from 80% to 50%. At September 30, 1995, Boomtown had deferred tax assets and deferred tax liabilities of approximately $7.1 million and $8.2 million respectively. The Company believes that the future benefits from the deferred tax assets will be realized in full. As a result of the factors discussed above, the net loss decreased $5.2 million from a loss of $8.1 million in fiscal 1994 to a loss of $2.9 million in fiscal 1995. LIQUIDITY AND CAPITAL RESOURCES Hollywood Park's principal source of liquidity as of June 30, 1997, was cash and cash equivalents of $38,409,000. Cash and cash equivalents increased by $26,487,000 during the six months ended June 30, 1997, primarily due to cash acquired in the acquisition of Boomtown and normal operating cash flows. Cash and cash equivalents increased by $8,424,000, during the six months ended June 30, 1996, primarily due to normal operating cash flows, netted against capital expenditures related to the construction of Crystal Park. Hollywood Park. On June 30, 1997, Hollywood Park and a bank syndicate led by Bank of America finalized a reducing revolving credit facility (the "Bank Credit Facility") allowing for drawings up to $225,000,000. On August 7, 1997, the Bank Credit Facility was reduced by $125 million (the aggregate principal amount of the Old Notes issued) to approximately $100 million, of which approximately $78 million is currently available under certain covenant limitations. The Bank Credit Facility is secured by substantially all of the assets of Hollywood Park and its significant subsidiaries, and imposes certain customary affirmative and negative covenants. The Bank Credit Facility has been amended twice. The first amendment, among other things, reduced the availability of the facility until the Bank Credit Facility was approved by the Louisiana Gaming Control Board. The Company received this approval on July 10, 1997. The second amendment, among other things, allowed the co-issuance of the Notes by HPOC with the Company. Debt service requirements on the Bank Credit Facility consist of current interest payments on outstanding indebtedness through September 30, 1999. As of September 30, 1999, and on the last day of each third calendar month thereafter, through June 30, 2001, the Bank Credit Facility will decrease by 7.5% of the commitment in effect on September 30, 1999. As of September 30, 2001, and on the last day of each third calendar month 47 thereafter, the Bank Credit Facility will decrease by 10% of the commitment in effect on September 30, 1999. Any principal amounts outstanding in excess of the Bank Credit Facility commitment, as so reduced, will be payable on such quarterly reduction dates. The Bank Credit Facility provides for a letter of credit sub-facility of $10,000,000, of which $2,035,000 was outstanding as of August 15, 1997 for the benefit of Hollywood Park's California self insured workers' compensation program. The facility also provides for a swing sub-facility of up to $10,000,000. Borrowings under the Bank Credit Facility bear interest at an annual rate determined, at the election of the Company, by reference to the "Eurodollar Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate", as such terms are respectively defined in the Bank Credit Facility, plus margins which vary depending upon Hollywood Park's ratio of funded debt to earnings before interest, taxes deprecation and amortization ("EBITDA"). The margins start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans, at funded debt to EBITDA ratio of less than 1.50%. Thereafter, the margins for each type of loan increase by 25 basis points for each increase in the ratio of funded debt to EBITDA of 50 basis points or more, up to 2.625% for Eurodollar loans and 1.625% for Base Rate loans. However, if the ratio of senior funded debt to EBITDA exceeds 2.50, the applicable margins will increase to 3.25% for Eurodollar loans, and 2.25% for Bass Rate loans. Thereafter, the margins would increase by 25 basis points for each increase in the ratio of senior funded debt to EBITDA of 50 basis points or more, up to a maximum of 4.25% for Eurodollar loans and 3.25% for Base Rate loans. The applicable margins as of June 30, 1997, were 1.75% with respect to the Eurodollar Rate based interest rate and 0.75% with respect to the Base Rate interest rate. Hollywood Park pays a quarterly commitment fee for the average daily amount of unused portions of the Bank Credit Facility. The commitment fee is also dependent upon the Company's ratio of funded debt to EBITDA. The commitment fee for the Bank Credit Facility starts at 31.25 basis points when the ratio is less than 1.00, and increases by 6.25 basis points for each increase in the ratio of 0.50, up to a maximum of 50 basis points. For the quarter beginning July 1, 1997, this fee is 43.75 basis points. On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit Facility to fund Boomtown's offer to purchase its First Mortgage Notes, and repaid this amount on August 7, 1997, with a portion of the proceeds from the issuance of the Notes. The balance of the proceeds are expected to be used primarily for expansion projects. On July 1, 1997, in connection with the Blue Diamond Swap, Hollywood Park issued an unsecured promissory note of approximately $3,465,000 to purchase the Hollywood Park common stock issuable to Roski in the Merger. The promissory note bears interest equal to the Bank of America reference rate plus 1.0%. Interest is payable quarterly with five annual principal payments of approximately $693,000 commencing July 1, 1998. During the six months ended June 30, 1997, the Company paid dividends of $962,000 on its convertible preferred stock, representing $70.00 per share, or $0.70 per depositary share. On July 1, 1997, the Company declared the regular quarterly preferred stock dividend of $481,000, payable on August 15, 1997. Effective August 28, 1997, the Company will exercise its option to covert all 2,749,900 of its outstanding depositary shares into approximately 2,291,492 shares of its common stock; thereby eliminating the annual preferred cash dividend payment of approximately $1,924,000. As of June 30, 1997, the Company had invested $1,275,000 in corporate bonds, with Moody's ratings of B3 to BA3, and Standard and Poors ratings of B to BB-, though some of the bonds are not rated by either agency. Investments in corporate bonds carry a greater amount of principal risk than other investments made by the Company, and yield a corresponding higher return. The corporate bond investment as of June 30, 1997, had a weighted average maturity of 1.2 years, and because the Company reasonably expects to liquidate these 48 investments in its normal operating cycle, the investments are classified as short term, are held as available for sale, and recorded in the accompanying financial statements at their fair value, as determined by the quoted market price. Boomtown. In November 1993, Boomtown sold $103,500,000 of Boomtown Notes. On July 3, 1997, pursuant to a tender offer, Boomtown repurchased and retired approximately $102,142,000 in principal amount of the Boomtown Notes, at a purchase price of $1,085 per $1,000 in principal amount, along with accrued interest thereon. As a result of the Merger, Boomtown, as required under the indenture governing the Boomtown Notes, initiated a change in control purchase offer at a price of $1,010 for each $1,000 for the remaining approximately $1,358,000 aggregate principal amount of Boomtown Notes outstanding. This change in control purchase offer was completed on August 12, 1997, and only approximately $100,000 in principal amount of the remaining Boomtown Notes were tendered. On August 4, 1997, Hollywood Park executed a purchase agreement pursuant to which one of the Hollywood Park entities repurchased the barge and the building shell at Boomtown Biloxi for at total cost of $5,250,000. A payment of $1,500,000 was made on August 4, 1997, with the balance payable in three equal annual installments of $1,250,000. As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company. Previously, Boomtown New Orleans was owned and operated by the Louisiana Partnership, of which 92.5% was owned by Hollywood Park with the remaining 7.5% owned by Skrmetta. On November 18, 1996, Boomtown entered into an agreement with Skrmetta under which it would pay approximately $5,700,000 in return for Skrmetta's interest in the Louisiana Partnership. Under the terms of the agreement, Boomtown made a down payment of $500,000, and the Company paid the remaining approximately $5,200,000 on August 8, 1997. As of June 30, 1997, Boomtown had four outstanding notes payable totaling approximately $2,704,000. Two of the notes, which total $223,000, are secured by furniture, fixtures and equipment, bear interest at 11.5% and mature in September 1997. One note, in the amount of $2,294,000, was secured by the Boomtown New Orleans riverboat, bore interest at 13.0% and was set to mature in January 1999. On August 7, 1997, Boomtown elected to pre-pay this note and incurred a 1.0% penalty. The remaining note, in the amount of $189,000, is secured by gaming equipment, bears interest at 12.25% and matures December 1997. In addition to the notes payable, Boomtown also has capital lease obligations for equipment with a total balance of approximately $3,994.000. In connection with the Blue Diamond Swap, Boomtown took back two notes receivable from IVAC, the former lessor of the Las Vegas property, totaling approximately $8,465,000. The first note receivable is for $5,000,000, bearing interest at Bank of America's reference rate plus 1.5% per year, with annual principal receipts of $1,000,000 plus accrued interest commencing on July 1, 1998. The second note is for approximately $3,465,000, bearing interest at Bank of America's reference rate plus 0.5% per year, with the principal and accrued interest payable, in full, on July 1, 2000. Sunflower. On March 24, 1994, an Amended and Restated Credit and Security Agreement (the "Sunflower Senior Credit") was executed between Sunflower and five banks in connection with the Company's acquisition of Sunflower. As of June 30, 1997, the outstanding balance of the Sunflower Senior Credit was $28,667,000. The Sunflower Senior Credit is non-recourse to Hollywood Park. On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the Bankruptcy Code. The Cash Collateral Agreement suspended any interest or principal payments on the Sunflower Senior Credit until August 12, 1997. On August 12, 1997, the Bankruptcy Court issued an order extending the Cash Collateral Agreement through September 17, 1997, subject to an obligation of Sunflower to make certain payments to Wyandotte County, the creditors group and the third party operator of the Woodlands Race Track. On July 15, 49 1997, Sunflower presented to the Bankruptcy Court a plan of reorganization (the "Plan") which provides for the sale of Sunflower's property to the Wyandotte Indians of Oklahoma (the "Wyandotte Indians"). Under the Plan, the land would be held by the United States Government in trust for the Wyandotte Indians, and a casino would be built on the property. Upon completion of the casino, Hollywood Park and a partner (North American Sports Management) would operate the facility in return for 30% of the profits. The Company would guarantee certain bank debt of Sunflower of up to $28,667,000 to allow the property to be released as collateral and then transferred to the Wyandotte Indians. The Company's guaranty would not go into effect unless, and until, all material regulatory approvals have been obtained for operation of the casino, and approval has been obtained under the Bank Credit Facility, as well. In 1995, under a promissory note executed in December 1994, between Hollywood Park and Sunflower, Hollywood Park advanced $2,500,000 to Sunflower to make certain payments due on the Sunflower Senior Credit. The amounts borrowed under the promissory note, along with accrued interest, are subordinate to the Sunflower Senior Credit. Although the Company will continue to pursue payment of the promissory note, for financial reporting purposes the outstanding balance of the promissory note was written off as of March 31, 1996. Expansion. In addition to the financing needs discussed above, Hollywood Park has other capital needs with respect to the $25,000,000 Boomtown Reno expansion and the $10,000,000 Boomtown New Orleans expansion. Longer term capital needs may include such projects as development of the excess land at Hollywood Park and/or Turf Paradise, and if awarded, the Indiana riverboat project. General. Hollywood Park is continually evaluating future growth opportunities in the gaming, sports and entertainment industries. The Company expects that funding for growth opportunities, payment of interest on the Notes, payments on notes payable and capital expenditure needs will come from existing cash balances, cash generated from operating activities and borrowings from the credit facilities. In the opinion of management, these resources will be sufficient to meet the Company's anticipated cash requirements for the foreseeable future and in any event for at least the next twelve months. 50 UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The following unaudited pro forma combined consolidated condensed statements of operations have been prepared by combining the audited consolidated statements of operations of Hollywood Park for the year ended December 31, 1996, with the unaudited consolidated statements of operations of Boomtown, also for the year ended December 31, 1996, and by combining the unaudited statements of operations of the Company and Boomtown for the six months ended June 30, 1997. Historically, Boomtown reported results on a fiscal year end of September 30. The acquisition of Boomtown was accounted for using the purchase method of accounting for business combinations. The following unaudited pro forma combined consolidated condensed balance sheet as of June 30, 1997 includes the accounts of both Hollywood Park and Boomtown. These pro forma financial statements should be read in conjunction with the accompanying notes. The following unaudited pro forma combined consolidated condensed financial statements are also presented with Boomtown Las Vegas' results excluded, because this property was divested in connection with the Merger. Finally, unaudited pro forma combined consolidated financial statements are then presented giving effect to the issuance of the Notes and the application of the proceeds therefrom. The pro forma information is presented for illustrative purposes only, and is not necessarily indicative of the operating results or financial position that would have occurred if the Merger and the issuance of the Notes had been consummated in an earlier period, nor is it necessarily indicative of the future operating results or financial position. These pro forma financial statements are based on, and should be read in conjunction with, the historical consolidated financial statements and the related notes thereto of Hollywood Park and Boomtown. 51 HOLLYWOOD PARK, INC. UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996
PRO FORMA ADJUSTMENTS TO PRO FORMA HOLLYWOOD ELIMINATE ADJUSTED PRO FORMA PARK, BOOMTOWN, BOOMTOWN BOOMTOWN, PRO FORMA COMBINED INC. INC. LAS VEGAS INC. ADJUSTMENTS CONSOLIDATED --------- --------- ----------- --------- ----------- ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues: Gaming................. $ 50,717 $188,942 $(30,960) $157,982 $ 0 $ 208,699 Racing................. 71,308 0 0 0 0 71,308 Food and beverage...... 13,947 16,677 (7,887) 8,790 0 22,737 Hotel and recreational vehicle park.......... 0 7,427 (5,744) 1,683 0 1,683 Truck stop and service station............... 0 14,859 (159) 14,700 0 14,700 Other income........... 7,253 13,413 (3,210) 10,203 295(a) 17,751 -------- -------- -------- -------- -------- --------- 143,225 241,318 (47,960) 193,358 295 336,878 -------- -------- -------- -------- -------- --------- Expenses: Gaming................. 27,249 111,364 (21,644) 89,720 0 116,969 Racing................. 30,167 0 0 0 0 30,167 Food and beverage...... 19,573 20,015 (9,860) 10,155 0 29,728 Hotel and recreational vehicle park.......... 0 3,110 (2,471) 639 0 639 Truck stop and service station............... 0 13,462 (83) 13,379 0 13,379 Administrative......... 41,477 63,021 (17,272) 45,749 0 87,226 Other.................. 2,485 4,132 (143) 3,989 0 6,474 Depreciation and amortization.......... 10,695 10,880 (956) 9,924 (312)(b) 20,818 -- -- -- -- 444 (c) -- -- -- -- -- 67 (d) -- Hollywood Park/Boomtown Merger costs.......... 0 1,291 0 1,291 0 1,291 Write off of investment in a business......... 11,412 0 0 0 0 11,412 Loss on sale of business.............. 0 36,563 0 36,563 0 36,563 -------- -------- -------- -------- -------- --------- 143,058 263,838 (52,429) 211,409 199 354,666 -------- -------- -------- -------- -------- --------- Operating income (loss)................. 167 (22,520) 4,469 (18,051) 96 (17,788) Interest expense ...... 942 13,988 (299) 13,689 (216)(e) 15,468 -- -- -- -- 329 (f) -- -- -- -- -- (11,843)(g) -- -- -- -- -- 692 (h) -- -- -- -- -- 11,875 (i) -- -------- -------- -------- -------- -------- --------- Income (loss) before minority interests and income taxes........... (775) (36,508) 4,768 (31,740) (741) (33,256) Minority interest ..... 15 (164) 0 (164) 0 (149) -------- -------- -------- -------- -------- --------- Income (loss) before income taxes........... (790) (36,344) 4,768 (31,576) (741) (33,107) Income tax expense (benefit)............. 3,459 (320) 1,370 1,050 (270)(j) 4,239 -------- -------- -------- -------- -------- --------- Income (loss) before extraordinary item..... $ (4,249) $(36,024) $ 3,398 $(32,626) $ (471) $ (37,346) ======== ======== ======== ======== ======== ========= Dividend requirement on convertible preferred stock.................. $ 1,925 Loss before extraordinary item allocated to common shareholders........... $ (39,271) ========= Per common share: Loss before extraordinary item-- primary............... $ (1.65) Loss before extraordinary item-- fully diluted......... $ (1.65) Number of common shares-primary........ 23,868 Number of common shares-fully diluted.. 26,160 Calculation of adjusted earnings before interest, taxes, depreciation, amortization and non- recurring expenses ("Adjusted EBITDA") Operating income (loss) as presented above..... $ 167 $(22,520) $ 4,469 $(18,051) $ 96 $ (17,788) Add back depreciation and amortization....... 10,695 10,880 (956) 9,924 199 20,818 Add back Hollywood Park/Boomtown Merger costs.................. 0 1,291 0 1,291 0 1,291 Add back write off of investment in a business............... 11,412 0 0 0 0 11,412 Add back loss on sale of business............... 0 36,563 0 36,563 0 36,563 -------- -------- -------- -------- -------- --------- Adjusted EBITDA......... $ 22,274 $ 26,214 $ 3,513 $ 29,727 $ 295 $ 52,296 ======== ======== ======== ======== ======== =========
52 HOLLYWOOD PARK, INC. UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997
PRO FORMA ADJUSTMENTS TO PRO FORMA HOLLYWOOD ELIMINATE ADJUSTED PRO FORMA PARK, BOOMTOWN, BOOMTOWN BOOMTOWN, PRO FORMA COMBINED INC. INC. LAS VEGAS INC. ADJUSTMENTS CONSOLIDATED --------- --------- ----------- --------- ----------- ------------ (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues: Gaming................. $26,847 $ 98,787 $(15,438) $ 83,349 $ 0 $110,196 Racing................. 35,868 0 0 0 0 35,868 Food and beverage...... 6,860 9,028 (4,107) 4,921 0 11,781 Hotel and recreational vehicle park.......... 0 3,768 (2,973) 795 0 795 Truck stop and service station............... 0 6,646 (76) 6,570 0 6,570 Other income........... 3,564 5,737 (416) 5,321 148 (a) 9,033 ------- -------- -------- -------- ------- -------- 73,139 123,966 (23,010) 100,956 148 174,243 ------- -------- -------- -------- ------- -------- Expenses: Gaming................. 15,161 54,804 (11,918) 42,886 0 58,047 Racing................. 15,409 0 0 0 0 15,409 Food and beverage...... 8,819 11,698 (5,115) 6,583 0 15,402 Hotel and recreational vehicle park.......... 0 1,714 (1,380) 334 0 334 Truck stop and service station............... 0 6,093 (47) 6,046 0 6,046 Administrative......... 18,531 30,678 (7,082) 23,596 0 42,127 Other.................. 1,439 1,882 (66) 1,816 0 3,255 Depreciation and amortization.......... 5,780 8,820 (298) 8,522 222 (c) 14,558 -- -- -- -- 34 (d) -- Hollywood Park/Boomtown Merger costs.......... 0 1,487 0 1,487 0 1,487 Write off of investment in a business......... 0 0 0 0 0 0 Loss on sale of business.............. 0 1,271 (914) 357 0 357 ------- -------- -------- -------- ------- -------- 65,139 118,447 (26,820) 91,627 256 157,022 ------- -------- -------- -------- ------- -------- Operating income (loss). 8,000 5,519 3,810 9,329 (108) 17,221 Interest expense....... 129 6,951 (101) 6,850 (108)(e) 7,398 -- -- -- -- 165 (f) -- -- -- -- -- (5,922)(g) -- -- -- -- -- 346 (h) -- -- -- -- -- 5,938 (i) -- ------- -------- -------- -------- ------- -------- Income (loss) before minority interests and income taxes........... 7,871 (1,432) 3,911 2,479 (527) 9,823 Minority interest...... 63 0 0 0 0 63 ------- -------- -------- -------- ------- -------- Income (loss) before income taxes........... 7,808 (1,432) 3,911 2,479 (527) 9,760 Income tax expense (benefit)............. 3,100 (587) 2,051 1,464 (197)(j) 4,367 ------- -------- -------- -------- ------- -------- Income (loss) before extraordinary item..... $ 4,708 $ (845) $ 1,860 $ 1,015 $ (330) $ 5,393 ======= ======== ======== ======== ======= ======== Dividend requirement on convertible preferred stock.................. $ 962 Income before extraordinary item available to common shareholders........... $ 4,431 ======== Per common share: Loss before extraordinary item-- primary............... $ 0.19 Loss before extraordinary item-- fully diluted......... $ 0.19 Number of common shares--primary....... 23,794 Number of common shares--fully diluted. 26,085 Calculation of adjusted earnings before interest, taxes, depreciation, amortization and non- recurring expenses ("Adjusted EBITDA") Operating income (loss) as presented above.... $ 8,000 $ 5,519 $ 3,810 $ 9,329 $ (108) $ 17,221 Add back depreciation and amortization...... 5,780 8,820 (298) 8,522 256 14,558 Add back Hollywood Park/Boomtown Merger costs................. 0 1,487 0 1,487 1,487 Add back write off of investment in a business.............. 0 0 0 0 0 0 Add back loss on sale of business........... 0 1,271 (914) 357 0 357 ------- -------- -------- -------- ------- -------- Adjusted EBITDA........ $13,780 $ 17,097 $ 2,598 $ 19,695 $ 148 $ 33,623 ======= ======== ======== ======== ======= ========
53 HOLLYWOOD PARK, INC. UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED BALANCE SHEET AS OF JUNE 30, 1997
HOLLYWOOD PRO FORMA PARK, PRO FORMA COMBINED INC. ADJUSTMENTS CONSOLIDATED --------- ----------- ------------ (IN THOUSANDS) ASSETS ------ Current Assets: Cash and cash equivalents.............. $ 38,409 $(112,959)(a) $ 46,012 -- 120,562 (b) -- Restricted cash........................ 11,096 0 11,096 Short term investments................. 1,275 0 1,275 Other receivables...................... 10,625 0 10,625 Deferred tax assets.................... 6,587 0 6,587 Prepaid expenses and other assets...... 21,726 4,438 (b) 26,164 -------- --------- -------- Total current assets.................. 89,718 12,041 101,759 Notes receivable......................... 9,464 0 9,464 Property, plant and equipment, net....... 277,084 0 277,084 Goodwill, net............................ 32,685 0 32,685 Other assets............................. 17,147 0 17,147 -------- --------- -------- $426,098 $ 12,041 $438,139 ======== ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY -------------------- Current Liabilities: Accounts payable....................... $ 13,163 $ 0 $ 13,163 Accrued liabilities.................... 61,269 (2,027)(a) 59,242 Current portion of notes payable....... 6,222 0 6,222 -------- --------- -------- Total current liabilities............. 80,654 (2,027) 78,627 Notes payable............................ 116,396 (110,932)(a) 130,464 -- 125,000 (b) -- Deferred tax liabilities................. 9,411 0 9,411 -------- --------- -------- Total liabilities..................... 206,461 12,041 218,502 Minority interest........................ 3,030 0 3,030 Stockholders' equity: Capital stock-- Preferred.............................. 28 0 28 Common................................. 2,380 0 2,380 Capital in excess of par............... 221,222 0 221,222 Retained earnings (accumulated deficit).............................. (7,023) 0 (7,023) -------- --------- -------- Total stockholders' equity............ 216,607 0 216,607 -------- --------- -------- $426,098 $ 12,041 $438,139 ======== ========= ========
54 HOLLYWOOD PARK, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS ASSUMPTIONS. The unaudited pro forma combined consolidated condensed statements of operations for the year ended December 31, 1996, and for the six months ended June 30, 1997, are presented as if the Boomtown acquisition, and the divestiture of Boomtown Las Vegas had taken place on January 1, 1996 and 1997, respectively. The unaudited pro forma combined consolidated condensed statements of operations have been prepared by combining the audited consolidated statements of operations of the Company for the year ended December 31, 1996, with the unaudited consolidated statements of operations of Boomtown for the year ended December 31, 1996, and for the six months ended June 30, 1997 for both the Company and Boomtown. (Historically, Boomtown reported results on a fiscal year end of September 30.) PRO FORMA ADJUSTMENTS. The unaudited pro forma combined consolidated condensed statements of operations have been prepared on the basis that the acquisition was consummated as set forth in the Notes to the Unaudited Pro Forma Combined Consolidated Condensed Balance Sheet included herein. The following adjustments have been made to the unaudited pro forma combined consolidated condensed statements of operations: (a) To record the estimated interest income on the excess net proceeds from the Notes at 4.0%. (b) To eliminate the amortization of the issuance costs associated with the Boomtown Notes. (c) To record the amortization of the issuance costs associated with the Notes. (d) To record the amortization of the excess purchase price over net assets acquired. Total estimated excess purchase price of approximately $2.7 million will be amortized over 40 years on a straight line basis. (e) To eliminate the amortization of the discount associated with the Boomtown Notes. (f) To record the interest expense associated with the promissory note from the Company to the lessor of Boomtown Las Vegas as required by the agreement to divest this property. (g) To eliminate the interest expense associated with the Boomtown Notes. (h) To amortize the up-front loan fees associated with the Bank Credit Facility. (i) To record the interest expense associated with the Notes at 9.5%. (j) To record the estimated 40% tax benefit associated with the pro forma expenses, after adding back the amortization of goodwill (see (d)) which is not deductible for income tax purposes. RECLASSIFICATIONS. Certain reclassifications have been made to the Company's and Boomtown's historical consolidated statements of operations to conform to the pro forma combined consolidated condensed statements of operations. PRO FORMA PER SHARE DATA. The pro forma per share amounts, as presented in the unaudited pro forma combined consolidated condensed statements of operations, were based on the weighted average number of shares outstanding during the period, inclusive of the effect, when dilutive, of the exercise of stock options. Included were approximately 5.4 million shares of Company common stock issued in the Merger (after giving effect to the retirement of the approximately 446,000 shares of Company common stock that were issued in the Merger but then repurchased by the Company from the lessor of Boomtown's Las Vegas property concurrently with the disposition of that property). COMBINATION COSTS. The Company recorded costs of approximately $5.6 million related to the Merger. These costs were incorporated into the price of the acquisition under the purchase method of accounting for a business combination. Costs incurred by Boomtown were expensed as incurred. 55 HOLLYWOOD PARK, INC. NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED CONDENSED BALANCE SHEET ASSUMPTIONS. The Merger was accounted for under the purchase method of accounting for a business combination. The total purchase price was based on the issuance of approximately 5,809,000 shares of Company common stock at a price of $9.8125 per share. PRO FORMA ADJUSTMENTS. The following adjustments have been made to the unaudited pro forma combined consolidated condensed balance sheet: (a) To record the redemption of approximately 99% of the $103.5 million aggregate principal amount of the Boomtown Notes at 108.5%, including the payment of two months of accrued interest, and the write-up to 101% of the remaining approximately $1 million aggregate principal amount of the Boomtown Notes. (b) To record the issuance of the Notes, issued at face value, with issuance costs of approximately $4.4 million, to be amortized on a straight line basis over ten years. 56 BUSINESS GENERAL Hollywood Park is a diversified gaming, sports and entertainment company engaged in the ownership and operation of casinos (including card club casinos) and pari-mutuel racing facilities, and the development of related opportunities. Hollywood Park owns and operates land-based, dockside and riverboat gaming operations in Verdi, Nevada, Biloxi, Mississippi and Harvey, Louisiana. Hollywood Park also owns two card club casinos in California, the Hollywood Park-Casino, operated by Hollywood Park on the premises of the Hollywood Park Race Track, and Crystal Park, located in the Los Angeles metropolitan area, in which Hollywood Park holds a majority interest and which is leased by Hollywood Park to an unaffiliated operator. The Hollywood Park-Casino and Crystal Park offer a variety of card games, including Poker, Pai Gow, and California Blackjack. Hollywood Park's gaming properties have an aggregate of 3,269 slot machines and 379 table games. Hollywood Park is the only company that currently owns and operates both California card club casinos and traditional casinos in Nevada and other states. Hollywood Park also owns and, through HPOC, operates the Hollywood Park Race Track, a premier thoroughbred racing facility and the site of the prestigious 1997 Breeders' Cup, located on a 378-acre parcel in the Los Angeles, California metropolitan area within three miles of the Los Angeles International Airport, and the Turf Paradise Race Track, a thoroughbred racing facility located in Phoenix, Arizona, and, through its subsidiary Sunflower, operates The Woodlands Race Track, a greyhound and thoroughbred racing facility located in Kansas City, Kansas. Sunflower is a debtor in possession under Chapter 11 of the U.S. Bankruptcy Code. As a result of its recent strategic combination with Boomtown, Hollywood Park is a company with diversified revenues as well as improved cash flow and significant real estate assets available for future development. For the year ended December 31, 1996, on a pro forma basis giving effect to the Transactions, Hollywood Park had total revenues of approximately $336.9 million and Adjusted EBITDA of approximately $52.3 million. In addition, on a pro forma basis, as of June 30, 1997, Hollywood Park had total assets (book value) of approximately $433.4 million (including the land on which the Hollywood Park Race Track sits, a majority of which was acquired in the 1930s which the Company believes has a fair market value of approximately $200 million) and had Net Debt of approximately $88.8 million. See "Prospectus Summary--Summary Historical and Pro Forma Financial and Operating Data." HISTORY Since 1991, Hollywood Park has transformed itself from an operator of a single horse racing property into a multi-jurisdictional gaming, sports and entertainment property operator. Hollywood Park has implemented its strategic plan through internal development of properties and a series of selective acquisitions, with a particular focus on middle-market gaming operations which could, in Hollywood Park's opinion, benefit from improved management and the access to Hollywood Park's financial resources. Hollywood Park and its predecessors have operated the Hollywood Park Race Track since 1938. In late 1993 and early 1994, Hollywood Park attempted to take advantage of the trend toward legalizing gaming in new jurisdictions by acquiring race tracks in jurisdictions where expanded gaming legislation appeared reasonably likely. In 1994, Hollywood Park acquired Turf Paradise in Phoenix, Arizona and Sunflower (the operator of The Woodlands Race Track) in Kansas City, Kansas. However, in both Arizona and Kansas, the respective legislatures have not authorized expanded forms of gaming at race tracks. Following the acquisitions of Turf Paradise and Sunflower, Hollywood Park focused its expansion efforts on California card club casinos and other casino operations, as well as on expanding its pari-mutuel operations 57 at its existing facilities. In mid-1994, Hollywood Park opened the Hollywood Park-Casino on the premises of the Hollywood Park Race Track. Crystal Park, in which Hollywood Park holds an 89.8% interest, but which is operated by an unaffiliated party, opened in late 1996 in the metropolitan Los Angeles area. On June 30, 1997, the Company completed its strategic combination with Boomtown, pursuant to which Boomtown became a wholly-owned subsidiary of Hollywood Park. The Company was incorporated in Delaware in 1981 and is the successor to the Hollywood Park Turf Club, which was organized in 1938. HPOC was incorporated in Delaware in 1981. The mailing address of the Issuers' principal executive offices is 1050 South Prairie Avenue, Inglewood, California 90301, and their telephone number is (310) 419-1500. BUSINESS STRATEGY Hollywood Park's strategic plan is to grow its gaming, sports and entertainment businesses by (i) expanding its existing properties, (ii) developing unimproved real estate at its existing sites and developing projects at new sites, and (iii) making selected acquisitions, principally in the gaming industry, to diversify its operations and to achieve economies of scale. Expansion of Existing Properties Hollywood Park's strategic plan for the existing properties is to continue to expand its operations at these sites by adding more hotel rooms, gaming floor space, restaurants, meeting and retail space and other amenities. Hollywood Park generally seeks, through its expansions at these properties, to add attractions intended to increase customer traffic (and therefore enhance gaming revenues) and to refurbish and enhance the amenities available at Boomtown Reno and Boomtown New Orleans. Specifically, Hollywood Park's current expansion plans at its existing properties include the following: . The Company expects to spend approximately $25 million on an expansion and renovation of Boomtown Reno to add approximately 200 hotel rooms, to expand gaming space by 13,000 square feet (including 200 slot machines), to add an entertainment lounge, 10,000 square feet of meeting space, additional parking and other amenities, as well as to refurbish an existing restaurant. In addition, the Company intends to renovate the existing casino space. Hollywood Park believes that this expansion is necessary in order to alleviate capacity constraints caused by the small number of existing hotel rooms, which have consistently had approximately 100% occupancy throughout the summer and year round on weekends and holidays. Additionally, this expansion is expected to make Boomtown Reno more attractive to small groups and conventions. The Company has decided to spread this expansion work over 18 months to minimize construction disruption and anticipates that such expansion will be completed by the end of 1998. . The Company expects to spend approximately $10 million on an expansion and upgrade of the Boomtown New Orleans land-based facility to refurbish the existing gaming area and to build out the second floor by adding meeting space, additional food and beverage and other entertainment amenities. The Company anticipates that such expansion will be completed by mid-1998. . The Company is considering, subject to further market analysis and the acquisition of additional land, a possible expansion of Boomtown Biloxi to add hotel rooms and/or to expand the undeveloped portion of the barge. Potential New Development Opportunities Hollywood Park is considering several potential new development opportunities relating to its existing undeveloped real estate as well as projects at new sites. 58 Additional Uses of Hollywood Park Property. Hollywood Park is exploring the development of its 378-acre Hollywood Park Race Track property and its 275- acre Turf Paradise Race Track property, and continues to have discussions with developers regarding proposed retail, entertainment and other projects for both of these properties. The Hollywood Park Race Track property has 150 undeveloped acres, and Turf Paradise has 100 undeveloped acres on which Hollywood Park seeks to develop such multi-use retail, entertainment and/or sports venues. Hollywood Park has not entered into any definitive agreements concerning any of these projects, and the ultimate uses have not yet been determined. Any decisions to begin these projects would be dependent upon, among other things, the execution of definitive agreements, the availability of project financing with acceptable terms, and the attainment of the necessary permits and certifications, for which there can be no assurance. Indiana Project. In December 1995, Boomtown (through a wholly-owned subsidiary), Hilton Gaming (Switzerland County) Corporation ("Hilton Switzerland") and a local minority investor, formed a joint venture which currently has a pending application for the only remaining riverboat gaming license to be awarded for operations on the Ohio River in Indiana. As amended, the application is for a license in Switzerland County, Indiana which is located approximately 35 miles south of Cincinnati, Ohio. If a license is received, the parties plan to construct a facility which would include a cruising riverboat with 38,000 square feet of casino space and supporting land-based facilities that will incorporate a "western river-town" themed entertainment complex with up to 300 hotel rooms, a 700 seat multi-purpose special events room, several restaurants and significant retail space (the "Indiana Project"). The joint venture further owns options to lease and purchase real property in Switzerland County where Hollywood Park plans to construct land-based facilities. Hollywood Park currently anticipates that the aggregate cost of the facility, if constructed, would be approximately $120 million, of which Hollywood Park's share would be 50%, or approximately $60 million. Pursuant to the terms of the joint venture agreement, Hollywood Park and Hilton Switzerland each own 48.5% of the joint venture entity, with the remaining interests held by a non-voting local minority partner. So long as Hilton Switzerland and Hollywood Park hold their original percentages, they will share management control of the project. In the event the parties no longer hold their original percentages, the party with the larger interest will have management control of the project subject to certain minority protections. There can be no assurance that the joint venture entity will receive the necessary license and other governmental approvals and environmental permits to proceed with the Indiana Project. California Card Club Casino Venues. Hollywood Park continues to seek to identify and to capitalize on opportunities to own properties within California on which card club casinos have or may be authorized; however, unless existing California law is amended, a public company such as Hollywood Park may only operate a card club casino on the grounds of a race track that it owns. Hollywood Park may also seek to add additional tables at its existing card club casinos if business conditions justify such an expansion. Potential Selected Acquisitions Hollywood Park believes that significant opportunities currently exist in the gaming industry as a result of consolidation trends and the inability of certain gaming companies to expand or maximize their opportunities due to capital constraints. Accordingly, Hollywood Park seeks to capitalize on these opportunities to geographically diversify its operations and achieve the benefits of economies of scale and synergy. The Company is exploring acquisition opportunities in emerging gaming markets (other than Las Vegas or Atlantic City) in which gaming has already been legalized. The Company believes that this represents its greatest opportunity to expand its gaming operations significantly over the next several years. GAMING OPERATIONS Hollywood Park's gaming establishments consist of Boomtown's western-themed casinos acquired in the Merger located in or near Reno, Nevada, New Orleans, Louisiana and Biloxi, Mississippi, as well as the two card club casinos located in the metropolitan Los Angeles, California area. Properties operated by Hollywood 59 Park's Boomtown subsidiary offer gaming, hotel accommodations (at Boomtown Reno), and other entertainment amenities to primarily middle income, value- oriented customers. Hollywood Park believes its Boomtown properties distinguish themselves from other casinos by their emphasis on the "old west" and their casual, friendly atmosphere. At all of the Boomtown properties, Hollywood Park reinforces this theme throughout the customers' visit with the use of western memorabilia in its interior decor, country/western music and the western dress of its employees. Hollywood Park believes this western theme and relaxed environment provide for customer loyalty and a high rate of repeat business. Boomtown Reno Boomtown Reno has been operating for over 30 years (and has been operated by current Boomtown management since 1987) on 569 acres in Verdi, Nevada (seven miles west of Reno, Nevada and two miles from the California border) on Interstate 80, the major highway connecting Northern California and Reno. Hollywood Park believes Boomtown Reno has established a loyal customer base primarily drawn from Interstate 80 traffic. Boomtown Reno caters to middle- income customers and markets itself as a gaming and entertainment property complete with amenities for the entire family. Boomtown Reno offers its guests a 40,000-square foot casino, including 1,320 slot machines and 44 table games and two Keno games. Boomtown Reno also offers a 122-room hotel, a 35,000-square foot entertainment center featuring a theater, an indoor miniature golf course, a restaurant and a ferris wheel, a 16-acre truck stop with approximately 200 parking spaces, a 203-space full- service recreational vehicle park, a service station, a mini-mart and other related amenities. Reno's primary visitor attraction is gaming. The greater Reno area accounts for substantially all casino gaming which occurs in Washoe County, Nevada. Reno continues to promote itself as a major entertainment destination center and remains among the four largest gaming regions in the United States behind Las Vegas, Atlantic City and the Mississippi Gulf Coast. Reno is a popular resort area which attracts tourists from throughout the country by offering gaming as well as numerous other summer and winter recreational activities. Reno is located approximately 50 miles from Lake Tahoe, another popular recreational area. The continued popularity of Reno is evidenced in the increase in the number of visitors traveling to Reno. According to the Reno/Lake Tahoe Convention and Visitors Authority, over 5.2 million tourists visited Washoe County in 1996. Casino gaming has grown steadily in the greater Reno area over the past decade and, in 1996, gaming revenues totaled $743 million. Boomtown Biloxi Boomtown Biloxi commenced operations in July 1994 and occupies nineteen acres on Biloxi, Mississippi's historic Back Bay, one-half mile from Interstate 110, the main highway connecting Interstate 10 and the Gulf of Mexico. Boomtown's "old west" theme is the first of its kind in the Gulf Coast area, and management believes the casual atmosphere and western theme distinguishes Boomtown Biloxi from competing casinos. The dockside property consists of a land-based facility which houses all non-gaming activities and a 33,632-square foot casino constructed on a 400 x 110 foot barge permanently moored to the land-based building. The casino offers 1,038 slot machines, 35 table games and various restaurants and other non-gaming amenities. Boomtown Biloxi is operated by a Mississippi limited partnership (the "Mississippi Partnership"), of which 85% is owned and controlled by Hollywood Park and 15% is owned by Eric Skrmetta ("Skrmetta"). The Mississippi Partnership leases the Boomtown Biloxi site under a 99 year lease from Skrmetta's father. Both Hollywood Park and Skrmetta have an option, exercisable over the four-year period commencing July 1997, to exchange Skrmetta's interest in the Mississippi Partnership for, at Skrmetta's option, cash and/or shares of Hollywood Park common stock with an aggregate value equal to the value of Skrmetta's 15% interest in the Mississippi Partnership, with such value determined by a formula set forth in the relevant partnership agreements. The Company has delivered a notice to Skrmetta to exercise this option. Certain approvals of the Mississippi Gaming Commission may be required in order to complete the transaction. 60 The Boomtown Biloxi barge and building shell were owned by National Gaming Mississippi, Inc., a subsidiary of Chartwell Leisure, Inc. ("National Gaming"). Boomtown Biloxi leased the assets from National Gaming under a 25- year lease with a 25-year renewal option. National Gaming received 16% of the adjusted earnings before interest, taxes, depreciation, and amortization ("EBITDA"), as defined in the related contract. National Gaming also provided marketing services to Boomtown Biloxi. On August 4, 1997, the Company executed an agreement pursuant to which one of the Hollywood Park entities repurchased the barge for approximately $5.25 million, payable through a down payment of approximately $1.5 million made on August 4, 1997, and the balance in three annual installments of $1.25 million. The EBITDA participation and other related agreements terminated upon repurchase of the barge. As of June 30, 1997, dockside gaming was permissible in nine of the 14 eligible counties in the State of Mississippi, and gaming operations had commenced in seven of these counties. The law permits unlimited stakes gaming on permanently moored vessels on a 24-hour basis. The Mississippi Gulf Coast has a long tradition as a vacation destination. Biloxi is within a one and one-half hour drive from New Orleans and a one hour drive from Mobile, Alabama. Boomtown Biloxi caters to the over 250,000 local residents of the Biloxi area and to the employees of other casinos in the area. In addition, the Gulf Coast area draws an estimated two million visitors annually, primarily from Louisiana, Mississippi, Alabama, Florida and Georgia. Boomtown New Orleans Boomtown New Orleans commenced 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 911 slot machines and 55 table games (including blackjack ("21"), craps, poker, roulette, pai gow poker, let it ride and caribbean stud) in a 30,000 square foot casino. The land-based facility adjacent to the riverboat dock is composed of a western-themed, 88,000-square foot facility. The first floor of the building opened December 1994 and offers patrons a restaurant, a 20,000 square foot family entertainment center and a western saloon/dancehall. Boomtown New Orleans is currently owned and operated by a Louisiana limited partnership (the "Louisiana Partnership"), 100% of which is owned by Hollywood Park. On August 8, 1997, the Company made the final payment to Skrmetta relating to the purchase of Skrmetta's 7.5% interest in the Louisiana Partnership. The purchase price was approximately $5.7 million, $500,000 of which had already been paid by Boomtown. Boomtown New Orleans operates in the greater New Orleans gaming market, in which riverboat gaming was legalized in 1991. Twenty-four hour unlimited stakes gaming is permitted on the riverboats. Fourteen riverboats operate in the state of Louisiana, four of which are currently operational in the New Orleans area (including the Company's riverboat). The New Orleans metropolitan area has a local resident population of over 1.3 million people and attracts over 9 million tourists annually. The "West Bank," which is located in Jefferson Parish, and is the site of Boomtown New Orleans, has approximately 300,000 local residents. A large majority of the Boomtown New Orleans customers are local residents of the West Bank. Studies have indicated that, in general, these customers are loyal to the West Bank and do not like to travel into the downtown New Orleans urban area. The Hollywood Park-Casino The Hollywood Park-Casino opened in July 1994 on the same premises as the Hollywood Park Race Track and offers a total of 145 table games in 30,000- square feet of gaming space. By law, California card club casinos may neither bank card games nor offer certain of the familiar games permitted in Nevada and other traditional gaming jurisdictions. Instead, the Hollywood Park-Casino offers only certain forms of card games, including Poker, Pai Gow and California Blackjack. Patrons of the Hollywood Park-Casino pay a fee for seats at gaming 61 tables or for each hand played. Players bet solely against each other, and the Hollywood Park-Casino does not participate in the wagers made or in the outcome of any of the games played. Per hour collection rates per table for conventional poker are approximately $75 for low limit and $240 for high limit, and for the California games, $140 for low limit and $500 for high limit. Until October 1995, when California law was amended to permit publicly- traded pari-mutuel racing associations to operate card club casinos on race track premises, the Hollywood Park-Casino was operated under a lease arrangement by an unaffiliated operator with Hollywood Park receiving a fixed lease payment for the facility. Hollywood Park assumed operational control over the Hollywood Park-Casino effective November 1995. There are a number of card club casinos in the greater Los Angeles area, including two card clubs of similar size to the Hollywood Park-Casino located within 12 miles of Hollywood Park. Certain clubs have a geographical advantage over the Hollywood Park-Casino in that they are in closer proximity to large American-Asian populations who comprise a large percentage of card club casino patrons. However, the Hollywood Park-Casino has been able to attract a significant portion of the Southern California High-End Poker market ($15 to $30 limit and above). In 1996, the Hollywood Park-Casino's expanded tournament schedule attracted some of poker's most famous championship players, while the introduction of new user-friendly games, such as L.A. Blackjack, and new promotions helped to expand the Hollywood Park-Casino's player base. The Hollywood Park-Casino is the only non-Indian facility in California that offers pari-mutuel wagering complete with bet runners, which allows card players to place pari-mutuel wagers without interruption of their games, including wagering on simulcast racing from the Royal Hong Kong Jockey Club. The Casino also sponsors special entertainment events, including live concerts and championship Thai Kick Boxing. Other California municipalities may, in the future, propose ballot initiatives similar to the card club initiative passed in Inglewood, California which, if approved by voters, could lead to the establishment of additional card clubs in direct competition with the Hollywood Park-Casino. Currently, under California Senate Bill 100, as of January 1, 1996, there is a three-year moratorium on public votes or referendums to approve the enactment of any city ordinance to allow additional card clubs, and prohibits the amendment of any existing ordinances. Crystal Park Crystal Park, which is Southern California's first major combined hotel and casino property, opened in late 1996 with 100 table games (but with the ability to substantially increase that number) and 282 hotel rooms. Games offered are similar to those offered at the Hollywood Park-Casino. The hotel operates under a Radisson Hotels International, Inc. ("Radisson") flag, under a 20 year license agreement between Hollywood Park and Radisson. Hollywood Park can terminate the Radisson license agreement, at no cost, at the end of the third, fifth or tenth year. Hollywood Park has an 89.8% interest in Crystal Park Hotel and Casino Development Company, LLC, the entity that owns the facility, and certain minority investors own the remaining 10.2% of the facility. In order to comply with California law, which does not allow publicly traded companies such as Hollywood Park to operate a card club casino (other than on the same property as a race track, such as the Hollywood Park-Casino), Crystal Park is operated under a five year triple-net lease by an unaffiliated operator who is licensed by the State of California and the City of Compton. Under the terms of the lease, the operator pays a monthly rent of approximately $200,000 for the first six months, $350,000 for the months 7 through 12 and $759,000 for months 13 through 60. Hollywood Park has an option for five years to purchase the operator's gaming license and intends to do so if California law is changed to allow publicly traded companies to operate card club casinos. If, at the end of the option, Hollywood Park is not able to operate the card club casino, the operator can either negotiate a new lease or acquire the card club casino site at its then fair market value. If there is a change in California law, allowing Hollywood Park to operate card club casinos at sites other than its race track property, Hollywood Park and the minority investors would operate the card club casino in partnership with the former operator, with Hollywood Park and such minority investors owning 67% of the business. See "--Regulation and Licensing." 62 RACING OPERATIONS Hollywood Park's strategy for its racing operations is to continue to enhance revenues at its existing facilities through marketing improvements and, as opportunities arise, through continued expansion and technological improvements in off-track wagering. Hollywood Park has recently revised and improved its marketing efforts to include a focus on a younger target audience, particularly those under thirty years old, through special promotions, give-aways and holding races on days and at hours appealing to this group (such as Hollywood Park's "Friday Night Racing" program). Hollywood Park believes that these efforts will develop a new source of long-term racing patrons to supplement and, eventually, replace the existing racing customer base, the average age of which has increased steadily over recent decades. In addition, since 1994, Hollywood Park has increased its direct and indirect off-track simulcast transmission sites for all of its race tracks from 240 to 929. The total pari-mutuel handle at Hollywood Park's racing properties for live (on-track and off-track) and simulcast racing was approximately $1.3 billion in 1996, an increase of approximately 6% from approximately $1.2 billion for the year ended December 31, 1995. Total pari-mutuel commissions were approximately $53.8million in 1996, an increase of approximately 1% from approximately $53.3 million in 1995. Hollywood Park Race Track The Hollywood Park Race Track is located on 378 acres (of which approximately 150 acres are undeveloped) in the Los Angeles metropolitan area, which has a population base of approximately 14 million. Since 1938, the Hollywood Park Race Track has been ranked among the country's most distinguished thoroughbred racing facilities and in 1997 will be hosting the Breeders' Cup championship racing series for the third time. Hollywood Park, through HPOC, conducts two live on-track thoroughbred horse race meets per year, totalling approximately 95 to 100 race days per year and has one of the nation's largest combined live and simulcast single-track gross handles (approximately $1.1 billion). Race dates must be applied for on an annual basis from the California Horse Racing Board. Live races run Wednesday through Sunday, usually with nine live races a day. Hollywood Park also sends the signal of its live races off-track to other locations including fairgrounds, other race tracks, hotels and casinos. In total, Hollywood Park simulcasts its live races, directly or indirectly through retransmissions, to 861 locations in 40 states and four countries. Hollywood Park also accepts the simulcast signal from live races conducted at other race tracks, including Southern and Northern California tracks, which has helped to mitigate the seasonality of Hollywood Park's horse racing business by allowing for year round operations. Although Hollywood Park has seen a shift from wagers placed on its live races, both on-track and off-track, to wagers placed on Northern California simulcast races running on the same days as live racing at Hollywood Park, for which Hollywood Park receives a lower commission rate, the net effect of expanded simulcasting upon wagering commissions to date has been positive. Given Hollywood Park's limited operating experience simulcasting Northern California races on live race days, there can be no assurance that this effect will continue to be positive. Wagering on live racing is pari-mutuel, meaning that patrons bet against each other in a pool rather than against the operator of the facility or with pre-set odds. Hollywood Park derives revenues from a share of the pari-mutuel handle at rates fixed by the State of California, admission fees and concession sales. The approximate pari-mutuel commission rates are as follows: Pari-mutuel commission rates on live Hollywood Park races range from 6.4% of wagers placed at Hollywood Park to 1.25% of wagers placed off-track on Hollywood Park races simulcast out-of-state. Pari-mutuel commission rates on wagers placed on races simulcast at Hollywood Park range from 5.6% for Northern California races to 2.0% for races conducted at other sites. Turf Paradise Turf Paradise, organized in 1954 and acquired by Hollywood Park in 1994, is situated on approximately 275 acres in the northwest section of Phoenix, Arizona, approximately 100 of which acres are undeveloped. Turf Paradise conducts one live thoroughbred meet that starts in September and runs through May and also offers 63 limited quarter horse and Arabian horse racing during certain periods of the year. Live racing is primarily conducted Friday through Tuesday, with live races sent to 34 off-track sites in Arizona and 34 out-of-state hubs, from which the signal is further disseminated to sites in New York, New Jersey, Pennsylvania, Nevada and Canada, among others. On Wednesday and Thursday and during the off-season, Turf Paradise generally operates as a simulcast facility. At Turf Paradise, the state of Arizona fixes the pari-mutuel commissions on wagers for on-track racing and off-track racing within the state as follows: between 7.5% and 11.5% for on-track wagers depending on the total amount of the handle and whether the wager is for win, place or show or two- or three- or-more-horse pools, and between 9% and 17% for off-track wagers depending on the same factors. Sunflower Hollywood Park acquired Sunflower, which operates the Woodlands greyhound and horse racing track on 393 acres located in Kansas City, Kansas, in March, 1994. Sunflower conducts live greyhound and horse racing and accepts simulcasts of both. Live greyhound racing runs almost continuously year round and horse racing is generally conducted in the fall. Sunflower was acquired with the expectation that the Kansas Legislature would legalize slot machines or other forms of gaming in Kansas generally, or at Sunflower specifically, which would have allowed Sunflower to compete more effectively with riverboat gaming operations in Missouri. However, the Kansas Legislature has not taken such action, and Sunflower's operating results dramatically worsened following legalization of gaming in nearby jurisdictions. As a result, Hollywood Park recorded a non-cash write off of its approximately $11.4 million investment in Sunflower in the quarter ended March 31, 1996 and, on May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the Bankruptcy Code. Sunflower continues to operate the facility as debtor in possession. Currently, the credit facility under which Sunflower is in default is non-recourse to Hollywood Park, and, as of March 31, 1996, Hollywood Park's consolidated financial statements no longer include the assets, liabilities or operating results of Sunflower; however, the proposed plan of reorganization provides for a limited guaranty by the Company upon receipt of various gaming approvals. Sunflower filed its plan of reorganization with the bankruptcy court on July 15, 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations-- Liquidity and Capital Resources." POSSIBLE RESTORATION OF REIT/PAIRED-SHARE STRUCTURE; POTENTIAL REIT PROPERTIES From 1982 to 1991, the Company was operated as a REIT known as Hollywood Park Realty Enterprises, Inc. ("HPRE"), and its stock was paired with, or stapled to, that of HPOC. HPRE was primarily an owner and lessor of real property. HPOC was primarily engaged in the active conduct of operations and, in connection with conducting those operations, leased a significant amount of real property from HPRE. Generally, a REIT is required to distribute as dividends to its stockholders 95% of its taxable income (other than net capital gains), and such amounts distributed are not subject to federal income tax at the corporate level. Effective as of January 1, 1992, as part of a corporate reorganization, HPRE and HPOC ceased operating in a paired- share/REIT structure, HPOC became a wholly-owned subsidiary of HPRE, and HPRE was renamed "Hollywood Park, Inc." In May 1997, the Company announced that it is exploring the Possible REIT Restructuring. Any decision to proceed with the Possible REIT Restructuring will depend on a variety of factors, including tax consequences and receipt of board, stockholder, regulatory and other required approvals. There can be no assurance that the Company will elect to proceed with the Possible REIT Restructuring, or that the Possible REIT Restructuring or its expected benefits will be achieved. The Company, subject to completing its evaluation, has begun taking the steps necessary to reinstitute such a structure over the next few months, with the objective of eventually reorganizing its assets and operations into a REIT and an operating company. In connection therewith, the Company has submitted a ruling request to the Internal Revenue Service on certain aspects of the Possible REIT Restructuring and, unless the Company chooses 64 to implement the Possible REIT Restructuring before the Internal Revenue Service has made a determination on that ruling request, the results of that ruling request may have an impact on whether, and in what form, the Possible REIT Restructuring is implemented. There are a number of alternative transactions for effectuating the Possible REIT Restructuring, and the Company has not determined which alternative, if any, it would use to implement the Possible REIT Restructuring. However, under any such alternative, the Company would become the REIT, HPOC would become the operating company, and the common stock of the Company and the common stock of HPOC would be paired so that they would be transferable and tradeable only in combination as units (with each unit consisting of one share of the Company's common stock and one share of HPOC's common stock). Although no final decision has been made about whether to implement the Possible REIT Restructuring, and, if so, under what alternative, if the Possible REIT Restructuring is implemented, then the Company, as the REIT, would be expected to be primarily an owner and lessor of real property and to lease a portion of that real property to HPOC and its subsidiaries. As the operating company, HPOC, along with its subsidiaries, would be expected to be engaged primarily in the active conduct of gaming, sports, and entertainment operations and to conduct such operations, at least in part, on real property leased from the Company. The Company has determined that, in the event it effects the Possible REIT Restructuring, the 378-acre parcel on which are located the Hollywood Park Race Track and the Hollywood Park-Casino would become part of the REIT, and a substantial portion of that parcel would be leased to HPOC and its subsidiaries for their use in conducting such racing and casino operations. Hollywood Park currently has other significant real property holdings, including the real property associated with the operations of the Turf Paradise Race Track and the three Boomtown casinos. Although it is possible that some or all of those other holdings would become part of the REIT (with a lease from the REIT to HPOC or its subsidiaries of some or all of such holdings), the Company has not yet determined whether any of such other holdings would become part of the REIT or would become part of the operating company. The amount of rent that would be paid to the Company by HPOC and its subsidiaries under any of the leases described above would be determined on a fair market value basis. Certain approvals of Gaming Authorities may be required in order to effect the Possible REIT Restructuring. The Indenture governing the Notes permits the Issuers, without the consent of the holders of the Notes, to amend the Indenture covenants to implement the Possible REIT Restructuring and to make required rent and dividend payments, to modify the financial covenants to accommodate the allocation of assets and liabilities between the Company and HPOC resulting from the Possible REIT Restructuring and otherwise to operate within the paired share/REIT structure thereafter, subject to the obligation of the Issuers to offer to repurchase the Notes upon the occurrence of a Change of Control (as defined). See "Description of Notes--Redemption at the Option of the Holders--Change of Control". The Old Notes are, and the New Notes will be, co-issued by the Company and HPOC, each of which are, and will be, absolutely and unconditionally obligated for the payment of the Notes. The Company and HPOC have entered into an agreement that, as between the Company and HPOC, HPOC would be primarily responsible for the payments on the Notes. However, such agreement in no way limits the obligations of the Company under the Notes, and each Issuer would continue to be a co-obligor following implementation of the Possible REIT Restructuring. The Company believes that the amendment of the Indenture covenants in connection with any Possible REIT Restructuring should be nontaxable for federal income tax purposes for those holders who do not accept the Company's offer to repurchase the Notes in connection with such restructuring. If the restructuring and amendments were treated as causing a "significant modification" of the Notes, then they would be treated as a deemed exchange of the Notes for new notes. Such a modification would either be a taxable event causing the recognition of gain or loss and the possible creation of original issue discount or bond premium, or a nontaxable recapitalization. However, the Company believes, based on current expectations, that the restructuring and amendments would not be treated as such a significant modification under current federal income tax law. Accordingly, the Company expects that the amendment would not be taxable for holders. Since that determination depends on the facts and circumstances at the time of the modification, the Company will include in the Change of Control offer to holders a summary of the anticipated federal income tax consequences of the actual modification to the holders of the Notes. 65 PROPERTIES The following describes Hollywood Park's principal real estate Properties. Hollywood Park owns approximately 378 acres in Inglewood, California, which is located in the heart of the Los Angeles metropolitan area. The property houses the 60,000 square foot Hollywood Park-Casino, the Hollywood Park Race Track and the executive offices of Hollywood Park. The Hollywood Park Race Track, Hollywood Park-Casino and required parking covers approximately 228 acres, leaving approximately 150 acres available for immediate development. Hollywood Park believes that the current fair market value of the Inglewood property is approximately $200 million. Crystal Park LLC (89.8% owned by Hollywood Park) owns approximately six acres, upon which sits a parking structure, and owns the ground floor of Crystal Park, which houses the approximately 40,000 square feet of gaming floor space. Turf Paradise, located in the northwest section of Phoenix, Arizona, covers approximately 275 acres, 100 of which are undeveloped. Sunflower is located in Kansas City, Kansas. Boomtown Reno sits on 569 acres of land in Verdi, Nevada. Boomtown also owns all of the improvements and facilities on this property, including the casino, hotel, fun center, truck stop and recreational vehicle park. Current operations are located on approximately 61 acres. Of the remaining acreage, approximately 60 acres are zoned commercial and 444 acres are noncommercial. Boomtown Reno also owns the related water rights. In addition, Boomtown Reno maintains and operates its own sewage treatment facility at the site. During November 1993, the Mississippi Partnership entered into a 99-year lease for an 8.9 acre site in Biloxi, Mississippi. This land is being used to operate the land-based amenities and parking for its dockside casino at Boomtown Biloxi. The Mississippi Partnership has also entered into several leases from 10 to 25 years for additional land being used for additional parking. Upon commencement of operations on July 18, 1994, the Mississippi Partnership sold its casino barge and building to Hospitality Franchise Systems, Inc. ("HFS") and immediately leased them back for 25 years for a rental amount based on adjusted earnings before interest, taxes, depreciation and amortization, as defined in the relevant contract. The purchase price paid by HFS consisted of approximately $8.6 million in cash, plus a contingent payment of approximately $2.4 million, the contingent portion to be disbursed solely to finance construction of a hotel, which never commenced. HFS subsequently transferred the contract to National Gaming Corporation, Inc. (recently renamed National Gaming Mississippi, Inc.). On August 4, 1997, the Company executed an agreement to repurchase the barge for approximately $5.25 million. All land-based facilities, including restaurants, bars, fun center, and entertainment facility, are owned by Boomtown Biloxi. Boomtown Biloxi also leases submerged tidelands at the casino site from the State of Mississippi. The term of the lease is ten years with a five-year option to renew. Annual rent is set forth in the lease. Boomtown New Orleans owns approximately 50 acres located in Jefferson Parish, 10 miles from downtown New Orleans, Louisiana. This property is used for land-based amenities related to the riverboat casino at Boomtown New Orleans. Boomtown New Orleans owns all improvements to and facilities on this property, including the riverboat restaurants, bars, fun center and entertainment facility. REGULATION AND LICENSING Gaming Operations Nevada. The ownership and operation of casino gaming facilities in Nevada are subject to: (i) the Nevada Gaming Control Act and the regulations promulgated thereunder (collectively, "Nevada Act"); and (ii) various local regulations. The Company's gaming operations are subject to the licensing and regulatory control of the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming Control Board ("Nevada Board") and Washoe County. The Nevada Commission, the Nevada Board, and Washoe County are collectively referred to as the "Nevada Gaming Authorities." 66 The laws, regulations and supervisory procedures of the Nevada Gaming Authorities are based upon declarations of public policy which are concerned with, among other things: (i) the prevention of unsavory or unsuitable persons from having a direct or indirect involvement with gaming at any time or in any capacity; (ii) the establishment and maintenance of responsible accounting practices and procedures; (iii) the maintenance of effective controls over the financial practices of licensees, including the establishment of minimum procedures for internal fiscal affairs and the safeguarding of assets and revenues, providing reliable record keeping and requiring the filing of periodic reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and fraudulent practices; and (v) providing a source of state and local revenues through taxation and licensing fees. Changes in such laws, regulations and procedures could have an adverse effect on Boomtown's gaming operations. Boomtown Hotel and Casino, Inc. (the "Gaming Subsidiary"), which operates Boomtown Reno and two other gaming operations with slot machines only, is required to be licensed by the Nevada Gaming Authorities. The gaming licenses require the periodic payment of fees and taxes and are not transferable. The Company is currently registered by the Nevada Commission as publicly traded corporation (a "Registered Corporation") and has been found suitable to own the stock of Boomtown which is registered as an intermediary company ("Intermediary Company"). Boomtown has been found suitable to own the stock of the Gaming Subsidiary, which is a corporate licensee (a "Corporate Licensee") under the terms of the Nevada Act. As a Registered Corporation, the Company is required periodically to submit detailed financial and operating reports to the Nevada Commission and furnish any other information which the Nevada Commission may require. No person may become a stockholder of, or holder of an interest of, or receive any percentage of profits from an Intermediary Company or a Corporate Licensee without first obtaining licenses and approvals from the Nevada Gaming Authorities. The Company, Boomtown and the Gaming Subsidiary have obtained from the Nevada Gaming Authorities the various registrations, findings of suitability, approvals, permits and licenses required in order to engage in gaming activities in Nevada. The Nevada Gaming Authorities may investigate any individual who has a material relationship to, or material involvement with, the Company, Boomtown or the Gaming Subsidiary in order to determine whether such individual is suitable or should be licensed as a business associate of a gaming licensee. Officers, directors and certain key employees of the Company, Boomtown and the Gaming Subsidiary must file applications with the Nevada Gaming Authorities and may be required to be licensed or found suitable by the Nevada Gaming Authorities. Officers, directors and key employees of the Company and Boomtown who are actively and directly involved in gaming activities of the Gaming Subsidiary may be required to be licensed or found suitable by the Nevada Gaming Authorities. The Nevada Gaming Authorities may deny an application for licensing for any cause which they deem reasonable. A finding of suitability is comparable to licensing, and both require submission of detailed personal and financial information followed by a thorough investigation. The applicant for licensing or a finding of suitability must pay all the costs of the investigation. Changes in licensed positions must be reported to the Nevada Gaming Authorities and in addition to their authority to deny an application for a finding of suitability or licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a change in a corporate position. If the Nevada Gaming Authorities were to find an officer, director or key employee unsuitable for licensing or unsuitable to continue having a relationship with the Company, Boomtown or the Gaming Subsidiary, the companies involved would have to sever all relationships with such person. In addition, the Nevada Commission may require the Company, Boomtown or the Gaming Subsidiary to terminate the employment of any person who refuses to file appropriate applications. Determinations of suitability or of questions pertaining to licensing are not subject to judicial review in Nevada. The Company and the Gaming Subsidiary are required to submit detailed financial and operating reports to the Nevada Commission. Substantially all material loans, leases, sales of securities and similar financing transactions by the Gaming Subsidiary must be reported to or approved by the Nevada Commission. If it were determined that the Nevada Act was violated by the Gaming Subsidiary, the gaming licenses it holds could be limited, conditioned, suspended or revoked, subject to compliance with certain statutory and 67 regulatory procedures. In addition, the Company, Boomtown and the Gaming Subsidiary and the persons involved could be subject to substantial fines for each separate violation of the Nevada Act at the discretion of the Nevada Commission. Further, a supervisor could be appointed by the Nevada Commission to operate Boomtown Reno and, under certain circumstances, earnings generated during the supervisor's appointment (except for reasonable rental value of the casino) could be forfeited to the State of Nevada. Limitation, conditioning or suspension of the gaming licenses of the Gaming Subsidiary or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the Company's gaming operations. Any beneficial holder of the Company's voting securities, regardless of the number of shares owned, may be required to file an application, be investigated, and have his suitability as a beneficial holder of the Company's voting securities determined if the Nevada Commission has reason to believe that such ownership would otherwise be inconsistent with the declared policies of the state of Nevada. The applicant must pay all costs of investigation incurred by the Nevada Gaming Authorities in conducting any such investigation. The Nevada Act requires any person who acquires more than 5% of a Registered Corporation's voting securities to report the acquisition to the Nevada Commission. The Nevada Act requires that beneficial owners of more than 10% of a Registered Corporation's voting securities apply to the Nevada Commission for a finding of suitability within thirty days after the Chairman of the Nevada Board mails the written notice requiring such filing. Under certain circumstances, an "institutional investor," as defined in the Nevada Act, which acquires more than 10%, but not more than 15%, of a Registered Corporation's voting securities may apply to the Nevada Commission for a waiver of such finding of suitability if such institutional investor holds the voting securities for investment purposes only. An institutional investor shall not be deemed to hold voting securities for investment purposes unless the voting securities were acquired and are held in the ordinary course of business as an institutional investor and not for the purpose of causing, directly or indirectly, the election of a majority of the members of the board of directors of the Registered Corporation, any change in the Registered Corporation's corporate charter, bylaws, management, policies or operations of the Registered Corporation, or any of its gaming affiliates, or any other action which the Nevada Commission finds to be inconsistent with holding the Registered Corporation's voting securities for investment purposes only. Activities which are not deemed to be inconsistent with holding voting securities for investment purposes only include: (i) voting on all matters voted on by stockholders; (ii) making financial and other inquiries of management of the type normally made by securities analysts for informational purposes and not to cause a change in its management, policies or operations; and (iii) such other activities as the Nevada Commission may determine to be consistent with such investment intent. If the beneficial holder of voting securities who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information including a list of beneficial owners. The applicant is required to pay all costs of investigation. Any person who fails or refuses to apply for a finding of suitability or a license within thirty days after being ordered to do so by the Nevada Commission or the Chairman of the Nevada Board, may be found unsuitable. The same restrictions apply to a record owner if the record owner, after request, fails to identify the beneficial owner. Any stockholder found unsuitable and who holds, directly or indirectly, any beneficial ownership of the common stock beyond such period of time as may be prescribed by the Nevada Commission may be guilty of a criminal offense. The Company is subject to disciplinary action if, after it receives notice that a person is unsuitable to be a stockholder or to have any other relationship with the Company, Boomtown or the Gaming Subsidiary, the Company (i) pays that person any dividend or interest upon voting securities of the Company, (ii) allows that person to exercise, directly or indirectly, any voting right conferred through securities held by that person, (iii) pays remuneration in any form to that person for services rendered or otherwise, or (iv) fails to pursue all lawful efforts to require such unsuitable person to relinquish his voting securities including, if necessary, the immediate purchase of said voting securities for cash at fair market value. The Nevada Commission may, in its discretion, require the holder of any debt security (such as the Notes or the New Notes) of a Registered Corporation to file applications, be investigated and be found suitable to own the debt security of a Registered Corporation. If the Nevada Commission determines that a person is unsuitable 68 to own such security, then pursuant to the Nevada Act, the Registered Corporation can be sanctioned, including the loss of its approvals, if without the prior approval of the Nevada Commission, it (i) pays to the unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. The Company is required to maintain a current stock ledger in Nevada which may be examined by the Nevada Gaming Authorities at any time. If any securities are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Nevada Gaming Authorities. A failure to make such disclosure may be grounds for finding the record holder unsuitable. The Company is also required to render maximum assistance in determining the identity of the beneficial owner. The Nevada Commission has the power to require that the Company's stock certificates bear a legend indicating that the securities are subject to the Nevada Act. However, to date the Nevada Commission has not imposed such a requirement on the Company. The Company may not make a public offering of its securities without the prior approval of the Nevada Commission if the securities or proceeds therefrom are intended to be used to construct, acquire or finance gaming facilities in Nevada, or to retire or extend obligations incurred for such purposes. The Exchange Offer will constitute a public offering (as defined in the Nevada Act) and will require the prior approval of the Nevada Commission upon the recommendation of the Nevada Board. In addition, (i) a Corporate Licensee may not guarantee a security issued by a Registered Corporation pursuant to a public offering without the prior approval of the Nevada Commission; and (ii) restrictions upon the transfer of an equity security issued by a Corporate Licensee or an Intermediary Company, and agreements not to encumber such securities (collectively, "Stock Restrictions") are ineffective without the prior approval of the Nevada Commission. The Stock Restrictions in respect of the Notes require the prior approval of the Nevada Commission to be effective. In connection with the approval of the Exchange Offer, the Guaranties of the Gaming Subsidiary and Boomtown and the Stock Restrictions will also require the prior approval of the Nevada Commission. However, there can be no assurances that such approval will be granted. Furthermore, any such approval, if granted, does not constitute a finding, recommendation or approval by the Nevada Commission or the Nevada Board as to the accuracy or adequacy of the prospectus or the investment merits of the securities offered. Any representation to the contrary is unlawful. Changes in control of a Registered Corporation through merger, consolidation, stock or asset acquisitions, management or consulting agreements, or any act or conduct by a person whereby he obtains control, may not occur without the prior approval of the Nevada Commission. Entities seeking to acquire control of a Registered Corporation must satisfy the Nevada Board and Nevada Commission in a variety of stringent standards prior to assuming control of such Registered Corporation. The Nevada Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control to be investigated and licensed as part of the approval process relating to the transaction. The Nevada legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and corporate defense tactics affecting Nevada corporate gaming licensees, and Registered Corporations that are affiliated with those operations, may be injurious to stable and productive corporate gaming. The Nevada Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Nevada's gaming industry and to further Nevada's policy to: (i) assure the financial stability of corporate gaming licensees and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Nevada Commission before the Registered Corporation can make exceptional repurchases of voting securities above the current market price thereof and before a corporate acquisition opposed by management can be consummated. The Nevada Act also requires prior approval of a plan of recapitalization proposed by the Registered Corporation's Board of Directors in response to a tender offer made directly to the Registered Corporation's stockholders for the purposes of acquiring control of the Registered Corporation. 69 License fees and taxes, computed in various ways depending on the type of gaming or activity involved, are payable to the state of Nevada and to Washoe County, in which the Gaming Subsidiary's operations are conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon either: (i) a percentage of the gross revenues received; (ii) the number of gaming devices operated; or (iii) the number of table games operated. A casino entertainment tax is also paid by casino operations where entertainment is furnished in connection with the selling of food or refreshments or the selling of any merchandise. Any person who is licensed, required to be licensed, registered, required to be registered, or is under common control with such persons (collectively, "Licensees"), and who proposes to become involved in a gaming venture outside of Nevada, is required to deposit with the Nevada Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay the expenses of investigation by the Nevada Board of such Licensee's participation in such foreign gaming. The revolving fund is subject to increase or decrease in the discretion of the Nevada Commission. Thereafter, Licensees are required to comply with certain reporting requirements imposed by the Nevada Act. Licensees are also subject to disciplinary action by the Nevada Commission if they knowingly violate any laws of the foreign jurisdiction pertaining to the foreign gaming operation, fail to conduct the foreign gaming operation in accordance with the standards of honesty and integrity required of Nevada gaming operations, engage in activities that are harmful to the state of Nevada or its ability to collect gaming taxes and fees, or employ a person in the foreign operation who has been denied a license or finding of suitability in Nevada on the ground of personal unsuitability. Mississippi. The ownership and operation of casino facilities in Mississippi are subject to extensive state and local regulation. Regulation is primarily effected through the licensing and regulatory control of the Mississippi Gaming Commission and the Mississippi State Tax Commission (the "Mississippi Gaming Authorities"). The Mississippi Gaming Control Act (the "Mississippi Act"), which legalized dockside casino gaming in Mississippi, is similar to the Nevada Gaming Control Act. The Mississippi Gaming Commission has adopted regulations which are also similar in many respects to the Nevada gaming regulations. The laws, regulations and supervisory procedures of Mississippi and the Mississippi Gaming Commission seek to: (i) prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity; (ii) establish and maintain responsible accounting practices and procedures; (iii) maintain effective control over the financial practices of licensees, including establishing minimum procedures for internal fiscal affairs and safeguarding of assets and revenues, providing reliable record keeping and making periodic reports to the Mississippi Gaming Commission; (iv) prevent cheating and fraudulent practices; (v) provide a source of state and local revenues through taxation and licensing fees; and (vi) ensure that gaming licensees, to the extent practicable, employ Mississippi residents. The regulations are subject to amendment and interpretation by the Mississippi Gaming Commission. Changes in Mississippi laws or regulations could have an adverse effect on the Company and the Company's Biloxi, Mississippi gaming operations. The Mississippi Act provides for legalized dockside gaming at the discretion of the 14 counties that either border the Gulf Coast or the Mississippi River, but only if the voters in such counties have not voted to prohibit gaming in that county. As of August 1, 1997, dockside gaming was permissible in nine of the fourteen eligible counties in the State and gaming operations had commenced in Adams, Coahoma, Hancock, Harrison, Tunica, Warren and Washington counties. Under Mississippi law, gaming vessels must be located on the Mississippi River or on navigable waters in eligible counties along the Mississippi River or in the waters lying south of the counties along the Mississippi Gulf Coast. The law permits unlimited stakes gaming on permanently moored vessels on a 24-hour basis and does not restrict the percentage of space which may be utilized for gaming. The Mississippi Act permits substantially all traditional casino games and gaming devices and, on August 11, 1997, a Mississippi lower court ruled that the Mississippi Act also permits race books on the premises of licensed casinos. The Mississippi Gaming Commission has not yet determined whether it will appeal that decision. 70 The Company and any subsidiary of the Company (or partnership in which the subsidiary is a partner) that operates a casino in Mississippi (a "Mississippi Gaming Subsidiary"), is subject to the licensing and regulatory control of the Mississippi Gaming Authorities. Hollywood Park is currently registered with the Mississippi Gaming Commission as a publicly traded corporation and has been found suitable to own the stock of Boomtown, which is currently registered with the Mississippi Gaming Commission as an intermediary company. Boomtown has been found suitable to own the limited partnership interests of Mississippi-I Gaming, L.P., the operator of Boomtown Biloxi and a licensee of the Mississippi Gaming Commission, and to own the stock of the corporate general partner of the partnership. Hollywood Park is required periodically to submit detailed financial and operating reports to the Mississippi Gaming Commission and furnish any other information which the Mississippi Gaming Commission may require. If the Company is unable to continue to satisfy the registration requirements of the Mississippi Act, the Company and its Mississippi Gaming Subsidiaries cannot own or operate gaming facilities in Mississippi. Each Mississippi Gaming Subsidiary must obtain gaming licenses from the Mississippi Gaming Commission to operate casinos in Mississippi. A gaming license is issued by the Mississippi Gaming Commission subject to certain conditions, including continued compliance with all applicable state laws and regulations and physical inspection of the casinos prior to opening. There are no limitations on the number of gaming licenses which may be issued in Mississippi. Gaming licenses are not transferable, are initially issued for a two-year period and must be renewed periodically thereafter. Boomtown Biloxi's gaming license was renewed in 1996 for a two-year period expiring June 20, 1998. No person may become a shareholder of or receive any percentage of profits from an intermediary company or a gaming licensee subsidiary of a holding company without first obtaining licenses and approvals from the Mississippi Gaming Commission. The Company has obtained such approvals in connection with the licensing of Boomtown Biloxi and the registration of Hollywood Park as a publicly-traded holding company. Certain officers and employees of Hollywood Park and the officers, directors and certain key employees of the Company's Mississippi Gaming Subsidiary must be found suitable or be investigated by the Mississippi Gaming Commission. The Company believes that findings of suitability with respect to such persons associated with Boomtown Biloxi have been applied for or obtained. However, the Mississippi Gaming Commission in its discretion may require additional persons to file applications for suitability. Employees associated with gaming must obtain work permits that are subject to immediate suspension under certain circumstances. In addition, any person having a material relationship or involvement with the Company may be required to be found suitable or licensed, in which case those persons must pay the costs and fees associated with such investigation. The Mississippi Gaming Commission may deny an application for a license for any cause that it deems reasonable. Changes in licensed positions must be reported to the Mississippi Gaming Commission. In addition to its authority to deny an application for a license, the Mississippi Gaming Commission has jurisdiction to disapprove a change in corporate position which changes must be reported to the Mississippi Gaming Commission. The Mississippi Gaming Commission has the power to require any Mississippi Gaming Subsidiary and the Company to suspend or dismiss officers, directors and other key employees or sever relationships with other persons who refuse to file appropriate applications or whom the authorities find unsuitable to act in such capacities. At any time, the Mississippi Gaming Commission has the power to investigate and require the finding of suitability of any record or beneficial shareholder of the Company. Mississippi law requires any person who acquires more than 5% of the common stock of a registered publicly-traded holding company to report the acquisition to the Mississippi Gaming Commission, and such person may be required to be found suitable. Also, any person who becomes a beneficial owner of more than 10% of a registered publicly-traded holding company's common stock, as reported to the Securities and Exchange Commission, must apply for a finding of suitability by the Mississippi Gaming Commission and must pay the costs and fees that the Mississippi Gaming Commission incurs in conducting the investigation. The Mississippi Gaming Commission has generally exercised its discretion to require a finding of suitability of any beneficial owner of more than 5% of a registered publicly-traded holding company's common stock. However, the Mississippi Gaming Commission has adopted a policy that could permit certain institutional investors to beneficially own up to 10% of a public company's stock without a finding of suitability. If a shareholder who must be found suitable is a corporation, partnership or trust, it must submit detailed business and financial information, including a list of beneficial owners. 71 Any person who fails or refuses to apply for a finding of suitability or a license within 30 days after being ordered to do so by the Mississippi Gaming Commission may be found unsuitable. The same restrictions apply to a record owner, if the record owner, after request, fails to identify the beneficial owner. Any person found unsuitable and who holds, directly or indirectly, any beneficial ownership of the securities of the Company beyond such time as the Mississippi Gaming Commission prescribes, may be guilty of a misdemeanor. The Company is subject to disciplinary action if, after receiving notice that a person is unsuitable to be a shareholder or to have any other relationship with the Company or its Mississippi Gaming Subsidiaries, the Company: (i) pays the unsuitable person any dividend or other distribution upon the voting securities of the Company; (ii) recognizes the exercise, directly or indirectly, of any voting rights conferred by securities of the Company held by the unsuitable person; (iii) pays the unsuitable person any remuneration in any form for services rendered or otherwise, except in certain limited and specific circumstances; or (iv) fails to pursue all lawful efforts to require the unsuitable person to divest himself of the securities, including, if necessary, the immediate purchase of the securities for cash at a fair market value. The Company may be required to disclose to the Mississippi Gaming Commission upon request the identities of the holders of any of the Company's debt securities. In addition, the Mississippi Gaming Commission under the Mississippi Act may, in its discretion, (i) require holders of securities of registered corporations, including debt securities such as the Notes, to file applications, (ii) investigate such holders, and (iii) require such holders to be found suitable to own such securities or receive distributions thereon. If the Mississippi Gaming Commission determines that a person is unsuitable to own such security, then the issuer may be sanctioned, including the loss of its approvals, if without the prior approval of the Mississippi Gaming Commission, it (i) pays to unsuitable person any dividend, interest, or any distribution whatsoever; (ii) recognizes any voting right by such unsuitable person in connection with such securities; (iii) pays the unsuitable person remuneration in any form; or (iv) makes any payment to the unsuitable person by way of principal, redemption, conversion, exchange, liquidation, or similar transaction. Although the Mississippi Gaming Commission generally does not require the individual holders of obligations such as the Notes to be investigated and found suitable, the Mississippi Gaming Commission retains the discretion to do so for any reason, including but not limited to a default, or where the holder of the debt instrument exercises a material influence over the gaming operations of the entity in question. Any holder of debt securities required to apply for a finding of suitability must pay all investigative fees and costs of the Mississippi Gaming Commission in connection with such an investigation. The Mississippi Gaming Subsidiary must maintain a current stock ledger in its principal office in Mississippi and the Company must maintain a current list of stockholders in the principal offices of the Mississippi Gaming Subsidiary which must reflect the record ownership of each outstanding share of any class of equity security issued by Hollywood Park. The stockholder list may thereafter be maintained by adding reports regarding the ownership of such securities that it receives from Hollywood Park's transfer agent. The ledger and stockholder lists must be available for inspection by the Mississippi Gaming Commission at any time. If any securities of Hollywood Park are held in trust by an agent or by a nominee, the record holder may be required to disclose the identity of the beneficial owner to the Mississippi Gaming Commission. A failure to make such disclosure may be grounds for finding the record holder unsuitable. Hollywood Park must also render maximum assistance in determining the identity of the beneficial owners. The Mississippi Act requires that the certificates representing securities of a publicly-traded corporation (as defined in the Mississippi Act) bear a legend to the general effect that such securities are subject to the Mississippi Act and the regulations of the Mississippi Gaming Commission. The Mississippi Gaming Commission has the power to impose additional restrictions on the holders of the Company's securities at any time. The Company has received a waiver from this legend requirement from the Mississippi Gaming Commission. Substantially all loans, leases, sales of securities and similar financing transactions by a Mississippi Gaming Subsidiary must be reported to or approved by the Mississippi Gaming Commission. A Mississippi Gaming Subsidiary may not make an issuance or a public offering of its securities. Similarly, the equity interests of the 72 Mississippi Gaming Subsidiary may not be pledged without the prior approval of the Mississippi Gaming Commission. The Company may not make an issuance or public offering of its securities without the prior approval of the Mississippi Gaming Commission if any part of the proceeds of the offering is to be used to finance the construction, acquisition or operation of gaming facilities in Mississippi or to retire or extend obligations incurred for one or more such purposes. Such approval, if given, does not constitute a recommendation or approval of the investment merits of the securities subject to the offering. Any representation to the contrary is unlawful. The Company has received such approvals as are necessary to engage in the Exchange Offering. Under the regulations of the Mississippi Gaming Commission, the Mississippi Gaming Subsidiary may not guarantee a security issued by an affiliated company pursuant to a public offering, or pledge its assets to secure payment or performance of the obligations evidenced by the security issued by the affiliated company, without the prior approval of the Mississippi Gaming Commission. The guarantee of the Mississippi Gaming Subsidiary with respect to the New Notes has received the prior approval of the Mississippi Gaming Commission. The pledge of the stock of a Mississippi Gaming Subsidiary and the foreclosure of such a pledge is ineffective without the prior approval of the Mississippi Gaming Commission. Moreover, restrictions on the transfer of an equity security issued by a Mississippi Gaming Subsidiary and agreements not to encumber such securities (the "Stock Restrictions") are ineffective without the prior approval of the Mississippi Gaming Commission. The Stock Restrictions with respect to the New Notes have also received the prior approval of the Mississippi Gaming Commission. Change in control of the Company through merger, consolidation, acquisition of assets, management or consulting agreements or any form of takeover, and certain recapitalizations and stock purchases by Hollywood Park, cannot occur without the prior approval of the Mississippi Gaming Commission. Entities seeking to acquire control of a registered corporation must satisfy the Mississippi Gaming Commission in a variety of stringent standards prior to assuming control of such registered corporation. The Mississippi Gaming Commission may also require controlling stockholders, officers, directors and other persons having a material relationship or involvement with the entity proposing to acquire control, to be investigated and licensed as part of the approval process relating to the transaction. The Mississippi legislature has declared that some corporate acquisitions opposed by management, repurchases of voting securities and other corporate defense tactics that affect corporate gaming licensees in Mississippi and corporations whose stock is publicly traded that are affiliated with those licensees, may be injurious to stable and productive corporate gaming. The Mississippi Gaming Commission has established a regulatory scheme to ameliorate the potentially adverse effects of these business practices upon Mississippi's gaming industry and to further Mississippi's policy to: (i) assure the financial stability of corporate gaming operators and their affiliates; (ii) preserve the beneficial aspects of conducting business in the corporate form; and (iii) promote a neutral environment for the orderly governance of corporate affairs. Approvals are, in certain circumstances, required from the Mississippi Gaming Commission before the Company may make exceptional repurchases of voting securities above the current market price of its common stock (commonly called "greenmail") or before a corporate acquisition opposed by management may be consummated. Mississippi's gaming regulations will also require prior approval by the Mississippi Gaming Commission if the Company adopts a plan of recapitalization proposed by its Board of Directors opposing a tender offer made directly to the shareholders for the purpose of acquiring control of the Company. Neither the Company nor any subsidiary may engage in gaming activities in Mississippi while also conducting gaming operations outside of Mississippi without approval of the Mississippi Gaming Commission. The Mississippi Gaming Authorities may require determinations that, among other things, there are means for the Mississippi Gaming Authorities to have access to information concerning the out-of-state gaming operations of the Company and its affiliates. The Mississippi Gaming Commission must approve any future gaming operations of the Company outside Mississippi. The Mississippi Gaming Commission has approved the Company's operations in Nevada, California and Louisiana but must approve the Company's operations in any other jurisdictions. 73 If the Mississippi Gaming Commission decides that a Mississippi Gaming Subsidiary violated a gaming law or regulation, the Mississippi Gaming Commission could limit, condition, suspend or revoke the license of the Mississippi Gaming Subsidiary, subject to compliance with certain statutory and regulatory procedures. In addition, a Mississippi Gaming Subsidiary, the Company and the persons involved could be subject to substantial fines for each separate violation. Because of such a violation, the Mississippi Gaming Commission could seek to appoint a supervisor to operate the casino facilities. Limitation, conditioning or suspension of any gaming license or the appointment of a supervisor could (and revocation of any gaming license would) materially adversely affect the Company and the Mississippi Gaming Subsidiary's gaming operations and the Company's results of operations. License fees and taxes, computed in various ways depending on the type of gaming involved, are payable to the State of Mississippi and to the counties and cities in which a Mississippi Gaming Subsidiary's respective operations will be conducted. Depending upon the particular fee or tax involved, these fees and taxes are payable either monthly, quarterly or annually and are based upon (i) a percentage of the gross gaming revenues received by the casino operation, (ii) the number of slot machines operated by the casino or (iii) the number of table games operated by the casino. The license fee payable to the State of Mississippi is based upon "gaming receipts" (generally defined as gross receipts less pay outs to customers as winnings) and equals 4% of gaming receipts of $50,000 or less per month, 6% of gaming receipts over $50,000 and less than $134,000 per month, and 8% of gaming receipts over $134,000. The foregoing license fees are allowed as a credit against the licensee's Mississippi income tax liability for the year paid. In October 1994, the Mississippi Gaming Commission adopted two new regulations. Under the first regulation, as condition of licensure or license renewal, casino vessels on the Mississippi Gulf Coast that are not self- propelled must be moored to withstand a Category 4 hurricane with 155 mile- per-hour winds and 15-foot tidal surge. Boomtown Biloxi believes that it currently meets this requirement. The second regulation requires as a condition of licensure or license renewal that a gaming establishment's plan include a 500-car parking facility in close proximity to the casino complex and infrastructure facilities, the expenditures for which will amount to at least 25% of the casino cost. Such facilities shall include any of the following: a 250-room hotel of at least a two-star rating as defined by the current edition of the Mobil Travel Guide, a theme park, golf courses, marinas, tennis complex, entertainment facilities, or any other such facility as approved by the Mississippi Gaming Commission as infrastructure. Parking facilities, roads, sewage and water systems, or facilities normally provided by cities and/or counties are excluded. The Mississippi Gaming Commission may in its discretion reduce the number of rooms required, where it is shown to the Commission's satisfaction that sufficient rooms are available to accommodate the anticipated visitor load. The Company believes that Boomtown Biloxi currently meets such requirements and was relicensed by the Mississippi Gaming Commission effective June 20, 1996 for an additional two-year period. In addition, Boomtown Biloxi is planning to construct and operate a hotel to satisfy this requirement; however, there can be no assurance that it will be successful in completing such a hotel or that it would be able to obtain a waiver from such requirement. It is probable that the Mississippi Gaming Commission will require further development on the casino site including hotel rooms and additional parking prior to Boomtown Biloxi being relicensed in June 1998. The sale of food or alcoholic beverages at the Boomtown Biloxi property is subject to licensing, control and regulation by the applicable state and local authorities. The agencies involved have full power to limit, condition, suspend or revoke any such license, and any such disciplinary action could (and revocation would) have a material adverse effect upon the operations of the affected casino or casinos. Certain officers and managers of the Company and Boomtown Biloxi must be investigated by the Alcoholic Beverage Control Division of the State Tax Commission (the "ABC") in connection with Boomtown Biloxi's liquor permits. Changes in licensed positions must be approved by the ABC. Louisiana. The ownership and operation of a riverboat gaming vessel is subject to the Louisiana Riverboat Economic Development and Gaming Control Act (the "Louisiana Act"). As of May 1, 1996, gaming activities are regulated by the Louisiana Gaming Control Board (the "Board"). The Board is responsible for issuing the 74 gaming license and enforcing the laws, rules and regulations relative to riverboat gaming activities. The Board is empowered to issue up to 15 licenses to conduct gaming activities on a riverboat of new construction in accordance with applicable law. However, no more than six licenses may be granted to riverboats operating from any one parish. The laws and regulations of Louisiana seek to (i) prevent unsavory or unsuitable persons from having any direct or indirect involvement with gaming at any time or in any capacity; (ii) establish and maintain responsible accounting practices and procedures; (iii) maintain effective control over the financial practices of licensees, including establishing procedures for reliable record keeping and making periodic reports to the Board; (iv) prevent cheating and fraudulent practices; (v) provide a source of state and local revenues through fees; and (vi) ensure that gaming licensees, to the extent practicable, employ and contract with Louisiana residents, women and minorities. The Louisiana Act specifies certain restrictions and conditions relating to the operation of riverboat gaming, including but not limited to the following: (i) gaming is not permitted while a riverboat is docked, other than for forty- five minutes between excursions, unless dangerous weather or water conditions exist; (ii) each round trip riverboat cruise may not be less than three nor more than eight hours in duration, subject to specified exceptions; (iii) agents of the Board are permitted on board at any time during gaming operations; (iv) gaming devices, equipment and supplies may be purchased or leased from permitted suppliers; (v) gaming may only take place in the designated river or waterway; (vi) gaming equipment may not be possessed, maintained, or exhibited by any person on a riverboat except in the specifically designated gaming area, or a secure area used for inspection, repair, or storage of such equipment; (vii) wagers may be received only from a person present on a licensed riverboat; (viii) persons under 21 are not permitted in designated gaming areas; (ix) except for slot machine play, wagers may be made only with tokens, chips, or electronic cards purchased from the licensee aboard a riverboat, (x) licensees may only use docking facilities and routes for which they are licensed and may only board and discharge passengers at the riverboat's licensed berth; (xi) licensees must have adequate protection and indemnity insurance; (xii) licensees must have all necessary federal and state licenses, certificates and other regulatory approvals prior to operating a riverboat and (xiii) gaming may only be conducted in accordance with the terms of the license and the rules and regulations adopted by the Board. No person may receive any percentage of the profits from Boomtown New Orleans without first being found suitable. In March 1994, Boomtown New Orleans, its officers, key personnel, partners and persons holding a 5% or greater interest in the partnership were found suitable by the predecessor to the Board. A gaming license is deemed to be a privilege under Louisiana law and as such may be denied, revoked, suspended, conditioned or limited at any time by the Board. In issuing a license, the Board must find that the applicant is a person of good character, honesty and integrity and the applicant is a person whose prior activities, criminal record, if any, reputation, habits and associations do not pose a threat to the public interest of the State of Louisiana or to the effective regulation and control of gaming, or create or enhance the dangers of unsuitable, unfair or illegal practices, methods, and activities in the conduct of gaming or the carrying on of business and financial arrangements in connection therewith. The Board will not grant any licenses unless it finds that: (i) the applicant is capable of conducting gaming operations, which means that the applicant can demonstrate the capability, either through training, education, business experience, or a combination of the above to operate a gaming casino; (ii) the proposed financing of the riverboat and the gaming operations is adequate for the nature of the proposed operation and from a source suitable and acceptable to the Board; (iii) the applicant demonstrates a proven ability to operate a vessel of comparable size, capacity and complexity to a riverboat in its application for a license; (v) the applicant designates the docking facilities to be used by the riverboat; (vi) the applicant shows adequate financial ability to construct and maintain a riverboat; (vii) the applicant has a good faith plan to recruit, train and upgrade minorities in all employment classifications; and (viii) the applicant is of good moral character. The Board may not award a license to any applicant who fails to provide information and documentation to reveal any fact material to qualifications or who supplies information which is untrue or misleading as to a material fact pertaining to the qualification criteria; who has been convicted of or pled NOLO CONTENDERE to an offense punishable by imprisonment of more than one year; who is currently being prosecuted for or 75 regarding whom charges are pending in any jurisdiction of an offense punishable by more than one year imprisonment; if any holder of 5% or more in the profits and losses of the applicant has been convicted of or pled guilty or NOLO CONTENDERE to an offense which at the time of conviction is punishable as a felony. The transfer of a license is prohibited. The sale, assignment, transfer, pledge, or disposition of securities which represent 5% or more of the total outstanding shares issued by a holder of a license is subject to prior Board approval. A security issued by a holder of a license must generally disclose these restrictions. Section 2501 of the regulations enacted by the Division pursuant to the Louisiana Act (the "Regulations") requires prior written approval of the Board of all persons involved in the sale, purchase, assignment, lease, grant or foreclosure of a security interest, hypothecation, transfer, conveyance or acquisition of an ownership interest (other than in a corporation) or economic interest of five percent (5%) or more in any licensee. Section 2523 of the Regulations requires notification to and prior approval from the Board of the (a) application for, receipt, acceptance or modification of a loan, or the (b) use of any cash, property, credit, loan or line of credit, or the (c) guarantee or granting of other forms of security for a loan by a licensee or person acting on a licensee's behalf. Exceptions to prior written approval apply to any transaction for less than $2,500,000 in which all of the lending institutions are federally regulated, or if the transaction involves publicly registered debt and securities sold pursuant to a firm underwriting agreement. The failure of a licensee to comply with the requirements set forth above may result in the suspension or revocation of that licensee's gaming license. Additionally, if the Board finds that the individual owner or holder of a security of a corporate license or intermediary company or any person with an economic interest in a licensee is not qualified under the Lousiana Act, the Board may require, under penalty of suspension or revocation of the license, that the person not (a) receive dividends or interest on securities of the corporation, (b) exercise directly or indirectly a right conferred by securities of the corporation, (c) receive remuneration or economic benefit from the licensee, or (d) continue in an ownership or economic interest in the licensee. A licensee must periodically report the following information to the Board, which is not confidential and is to be available for public inspection; the licensee's net gaming proceeds from all authorized games; the amount of net gaming proceeds tax paid; and all quarterly and annual financial statements presenting historical data that are submitted to the Board, including annual financial statements that have been audited by an independent certified public accountant. The Board has adopted rules governing the method for approval of the area of operations, the rules and odds of authorized games and devices permitted, and prescribing grounds and procedures for the revocation, limitation or suspension of licenses and permits. On April 19, 1996, the Louisiana legislature adopted legislation requiring statewide local elections on a parish-by-parish basis to determine whether to prohibit or continue to permit licensed riverboat gaming, licensed video poker gaming, and licensed land-based gaming in Orleans Parish. The applicable local election took place on November 5, 1996, and the voters in the parish of Boomtown New Orleans voted to continue licensed riverboat and video poker gaming. However, it is noteworthy that the current legislation does not provide for any moratorium on future local elections on gaming. California. Operation of California card club casinos such as the Hollywood Park-Casino and Crystal Park is governed by the California Gaming Registration Act (the "CGRA") and is subject to the oversight of the California Attorney General (the "Attorney General"). Under the CGRA, a California card club casino may only offer certain forms of card games, including Poker, Pai Gow, and California Blackjack. A card club casino may not offer many of the card games and other games of chance permitted in Nevada and other jurisdictions where Boomtown conducts business. Although the California Attorney General takes the position that, under the CGRA, only individuals, partnerships or privately-held companies (as opposed to publicly-traded companies such as Hollywood Park) are 76 eligible to operate card club casinos, the 1995 enactment of California Senate Bill 100 ("SB-100") also permits a publicly-owned racing association to own and operate a card club casino if it also owns and operates a race track on the same premises. The provisions of SB-100 expire on January 1, 1999, unless the California legislature enacts a comprehensive scheme for the regulation of gaming under the jurisdiction of a gaming control commission. There can be no assurance that such legislation will be adopted by such date or that the legislature will extend the deadline. See "Risk Factors--Governmental Regulation." SB-100 also imposes a moratorium through 1998 on public votes or referendums to approve the enactment of any city ordinance allowing additional card club casinos in California. Pursuant to the CGRA, the operator of a card club casino, and its officers, directors and certain stockholders are required to be registered by the Attorney General and licensed by the municipality in which it is located. In September 1995, the Attorney General granted Hollywood Park a provisional registration under SB-100 to operate the Hollywood Park-Casino which was renewed on September 1, 1996. A permanent registration will not be granted until the California Department of Justice completes its review of the applications of Hollywood Park and its corporate officers and directors. The Attorney General has broad discretion to deny a gaming registration and may impose reasonably necessary conditions upon the granting of a gaming registration. Grounds for denial include felony convictions, criminal acts, convictions involving dishonesty, illegal gambling activities, and false statements on a gaming application. Such grounds also generally include having a financial interest in a business or organization that engages in gaming activities that are illegal under California law; however, this provision contains an exception for publicly-traded racing associations such as Hollywood Park. In addition, the Attorney General possesses broad authority to suspend or revoke a gaming registration on any of the foregoing grounds, as well as for violation of any federal, state or local gambling law, failure to take reasonable steps to prevent dishonest acts or illegal activities on the premises of the card club casino, failure to cooperate with the Attorney General in its oversight of the card club casino and failure to comply with any condition of the registration. Hollywood Park's operations at the Hollywood Park-Casino are also regulated by a City of Inglewood ordinance (the "Inglewood Ordinance"). The Inglewood Ordinance provides for a single card club casino located on the premises of the Hollywood Park Race Track and requires Hollywood Park, as the operator of the Hollywood Park-Casino, to be licensed by the City of Inglewood and to obtain a card club operations certificate. The Inglewood City Council has approved Hollywood Park's application for a gaming license and on August 21, 1996 Hollywood Park was granted the required card club operations certificate. Hollywood Park's city gaming license and operations certificate are valid for five years unless revoked, suspended or surrendered, and are renewable annually thereafter. In addition to Hollywood Park, the Inglewood Ordinance also requires all employees, each beneficial owner of at least 10% of the outstanding Hollywood Park common stock, and certain key employees of Hollywood Park to have either a permit or a valid registration from the City of Inglewood. The license to operate the card club casino may be suspended or revoked if such a stockholder or employee fails to obtain a permit. Without the prior consent of the City of Inglewood, a 10% stockholder may not transfer or sell its Hollywood Park shares to any person who is, or by reason of such transaction would become, a 10% stockholder. These licensing requirements and transfer restrictions apply to all 10% stockholders of Hollywood Park, and no waiver from such requirements or restrictions are provided for institutional or other investors who purchase for investment purposes only. The City of Compton has granted the operator of Crystal Park all municipal gaming licenses necessary for operation of Crystal Park, and the operator has received a provisional registration from the California Department of Justice. Racing Operations. California. The California Horse Racing Board ("CHRB") has jurisdiction and supervision over all horse race meets in the State of California. Licenses granted by the CHRB must be obtained annually by Hollywood 77 Park in order to conduct both the Spring/Summer and Autumn race meets. The CHRB has the authority, when granting any license, to vary the number of weeks allocated to any applicant and the time of year in which such allocation falls. The CHRB may, at its discretion, refuse to issue a license to a race track operator such as Hollywood Park that has a financial interest in another licensed race track operation or in the conduct of horse racing meets by any other person at any other race track in California. Although no future assurance can be given, Hollywood Park has applied for and received a license to conduct thoroughbred horse race meets every year since 1938, except for 1942 and 1943 due to wartime activities. Arizona. The Arizona Racing Commission ("ARC") has jurisdiction and supervision over all racing activities in the State of Arizona. The ARC issues live racing permits that are valid for three years, and off-track permits are granted on a year to year basis. In 1994, Turf Paradise received a live racing permit from the ARC, which will remain in force through the 1996/1997 race year. The permit specifies that live racing may be conducted between the first week of September through the third week of May and that, so long as there is live racing at Turf Paradise at least five days a week, Turf Paradise may have simulcast wagering on days when there is no live racing. Kansas. The Kansas Racing Commission ("KRC") has jurisdiction and supervision over all racing activity in the State of Kansas. The KRC has granted Sunflower a license to own and manage the Woodlands facility; however, the license to conduct races for all race days until the year 2014 has been granted to TRAK East, an unaffiliated non-profit entity. Sunflower in turn provides management services to TRAK East. Sunflower has an agreement with TRAK East to provide the physical race tracks along with management and consulting services for twenty-five years, with options to renew for one or more successive five year terms. 78 MANAGEMENT DIRECTORS AND EXECUTIVE OFFICERS The Company Each of the executive officers of the Company holds office at the pleasure of the Board of Directors of the Company. The current directors and executive officers of the Company are as follows:
NAME AGE POSITION - ---- --- -------- R.D. Hubbard............. 62 Chairman of the Board, Chief Executive Officer and member of the Office of the Chairman Harry Ornest............. 74 Vice Chairman of the Board Richard Goeglein......... 63 Director Peter L. Harris.......... 53 Director J.R. Johnson............. 77 Director Robert T. Manfuso........ 59 Director Timothy J. Parrott....... 50 Director and Member of the Office of the Chairman for administration of Boomtown Lynn P. Reitnouer........ 64 Director Herman Sarkowsky......... 72 Director Warren B. Williamson..... 69 Director Delbert W. Yocam......... 52 Director Donald M. Robbins........ 49 President of Hollywood Park, Inc., President of Racing and Secretary G. Michael Finnigan...... 49 President, Sports and Entertainment, Executive Vice President, Treasurer, Chief Financial Officer and Member of the Office of the Chairman
Mr. Hubbard has been a Director of the Company since 1990; Chairman of the Board and Chief Executive Officer of the Company since September 1991 and member of the Office of the Chairman since June 1997; Chairman of the Board and Chief Executive Officer of Hollywood Park Operating Company since February 1991; President of Hollywood Park Operating Company from February to July 1991; Chairman, AFG Industries, Inc. and its parent company, Clarity Holdings Corp. (glass manufacturing) and director of AFG Industries, Inc.'s subsidiaries, from 1978 to July 1993; Chairman of the Board (and 60% stockholder until March 1994) of Sunflower (The Woodlands Race Tracks-- greyhound racing and horse racing) from 1988 to March 1994; President, Director, and owner of Ruidoso Downs Racing, Inc. (horse racing) since 1988; Chairman of the Board, Chief Executive Officer and sole stockholder, Multnomah Kennel Club, Inc. (greyhound racing) since December 1991; Owner and breeder of numerous thoroughbreds and quarter horses since 1962. Sunflower, a wholly- owned subsidiary of the Company, filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on May 17, 1996. Mr. Ornest has been a Director of the Company since 1991; Vice Chairman of the Board of the Company since September 1991; Director, Hollywood Park Operating Company since 1988; Vice Chairman of the Board, Hollywood Park Operating Company since February 1991; Owner and Chairman, Toronto Argonauts Football Club (Canadian Football League club) from 1988 to May 1991; Owner, St. Louis Blues (National Hockey League club) 1983 to 1987, Owner, St. Louis Arena, 1983 to 1987; Owner and Founder, Vancouver Canadians (Pacific Coast Baseball League club), 1977 to 1981; Hollywood Park stockholder, 1962 to present. Mr. Goeglein has served as a Director of the Company since June 1997; President of Aladdin Gaming LLC since January 1997; Director of Boomtown, Inc. from October 1992 to June 1997; Director of AST Research, Inc. since May 1987; Director of Platinum Software Corp. since October 1994; President and principal shareholder of Gaming Associates, Inc. since 1990; President and Chief Operating Officer of Holiday Corporation (parent corporation of Holiday Inns and Harrah's Hotels and Casinos) from 1984 to 1987; private investor since 1987. 79 Mr. Harris has served as a Director of the Company since June 1997; Director of Boomtown, Inc. from April 1994 to June 1997; Director of Pacific Sunwear of California, Inc. since 1994; President and Chief Executive Officer of Expressly Portraits, Inc. (a retail chain of portrait photography studios) since August 1995; Reorganization Administrator of American Fashion Jewels (a retail company) and then as Chief Executive Officer of Accolade, Inc. (a video and personal computer games company) from 1993 to 1995; President and Chief Executive Officer of F.A.O. Schwartz from 1985 to 1992. Mr. Johnson has been a Director of the Company since 1991; Director, Hollywood Park Operating Company from February 1991 to January 1992; Chairman, President and Chief Executive Officer, NEWMAR (marine electronics manufacturing) since 1980; Director, Logicon, Inc. (defense oriented intelligence); Trustee, Westminster College. Mr. Manfuso has been a Director of the Company since 1991; Director, Hollywood Park Operating Company from February 1991 to January 1992; Co- Chairman of the Board, Laurel Racing Association (horse race track management) from 1984 to February 1994; Vice Chairman of the Board, The Maryland Jockey Club (horse racing) from 1986 to February 1994; Executive Vice President, Laurel Racing Association from 1984 to May 1990; Executive Vice President, The Maryland Jockey Club from 1986 to June 1990; Director, Maryland Horse Breeders Association from 1984 to 1992 and since 1993; Member, Executive Committee, Maryland Million since 1991. Mr. Parrott has served as a Director of the Company and member of the Office of the Chairman since June 1997; Chairman of the Board and Chief Executive Officer of Boomtown, Inc. since September 1992; President and Treasurer of Boomtown, Inc. from June 1987 to September 1992; Director of Boomtown, Inc. since 1987; Chairman of the Board and Chief Executive Officer of Boomtown Hotel & Casino, Inc. since May 1988; Chief Executive Officer of Parrott Investment Company (a family-held investment company with agricultural interests in California) since April 1995; Director of The Chronicle Publishing Company since April 1995. Mr. Reitnouer has been a Director of the Company since 1991; Director, Hollywood Park Operating Company from September 1991 to January 1992; Partner, Crowell Weedon & Co. (stock brokerage) since 1969; Director (and former Chairman of the Board) of COHR, Inc., since 1986; Director, President and Regent, Forest Lawn Memorial Parks Association since 1975; Trustee, University of California Santa Barbara Foundation since 1992. Mr. Sarkowsky has been a Director of the Company since 1991; Director, Hollywood Park Operating Company from February 1991 to January 1992; Owner, Sarkowsky Investment Corporation and SPF Holding, Inc. (real estate development and investments) since 1980; Director, The Sarkowsky Foundation (charitable foundation) since 1982; thoroughbred horse breeder and owner since 1959; Director, Synetics, Inc. (porous plastic manufacturing); Director, Seafirst Corporation (banking); Director, Eagle Hardware & Garden, since 1990. Mr. Williamson has been a Director of the Company since 1991; Vice President and Secretary of the Company from September 1991 to August 1996; Chairman of the Board and Chief Executive Officer of the Company from 1989 to September 1991; Director, Hollywood Park Operating Company since 1985; Vice President and Secretary, Hollywood Park Operating Company from February 1991 to August 1996; Secretary and Treasurer, Hollywood Park Operating Company from 1985 to November 1990; Chairman and Chief Executive Officer, Chandis Securities Co. (holding company) since 1985; Director, Times Mirror Company; Trustee, Hospital of the Good Samaritan; Trustee, California Thoroughbred Breeders Foundation; Trustee, Claremont McKenna College; Chairman Emeritus, Art Center College of Design; Breeder and racer of thoroughbreds since 1970. Mr. Yocam has served as a Director of the Company since June 1997; Director of Boomtown, Inc. from December 1995 to June 1997; Chairman and Chief Executive Officer of Borland International since December 1996; Director of Adobe Systems, Inc., since February 1991; Director of Oracle Corporation since March 1992; 80 Independent consultant from November 1994 to December 1996; President, Chief Operating Officer and a Director of Tektronix, Inc from September 1992 to November 1994; Independent consultant from November 1989 to September 1992. Mr. Robbins has been the Company's President of Racing since February 1994; President of the Company since September 1991; Secretary of the Company since 1996 (formerly Assistant Secretary since September 1991); General Manager of Hollywood Park Operating Company from 1986 to February 1994; Executive Vice President of Hollywood Park Operating Company since 1988, and President and Secretary of Hollywood Park Operating Company since July 1991. Mr. Finnigan has been the Company's President, Sports and Entertainment, since January 1996 and a member of the Office of the Chairman since June 1997; President, Gaming and Entertainment, from February 1994 to January 1996; Executive Vice President and Chief Financial Officer of the Company and of Hollywood Park Operating Company since March 1989; and Treasurer of the Company and of Hollywood Park Operating Company since March 1992; Chairman of the Board of Southern California Special Olympics since 1996; Chairman of the Board of Centinela Hospital since 1996; and Director of the Shoemaker Foundation since 1993. Mr. Finnigan also serves as Secretary and Treasurer of Sunflower Racing, Inc., a wholly-owned subsidiary of Hollywood Park, which filed for reorganization under Chapter 11 of the U.S. Bankruptcy Code on May 17, 1996. In addition, upon the consummation of the strategic combination with Boomtown, the Company established an Office of the Chairman comprised of Hollywood Park's Chief Executive Officer, Hollywood Park's President of Sports and Entertainment and the Chief Executive Officer of Boomtown. The Office of the Chairman provides advice to the Chief Executive Officer of Hollywood Park on such matters as he may request and undertakes such other responsibilities as he may delegate to the Office of the Chairman from time to time. HPOC Each of the executive officers of HPOC holds office at the pleasure of the Board of Directors of HPOC. The current directors and executive officers of HPOC are as follows:
NAME AGE POSITION ---- --- -------- R.D. Hubbard............ 62 Chairman of the Board and Chief Executive Officer Harry Ornest............ 74 Vice Chairman of the Board Warren B. Williamson.... 68 Director Donald M. Robbins....... 49 President and Secretary G. Michael Finnigan..... 49 Executive Vice President, Treasurer and Chief Financial Officer
81 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the name (address is provided for persons listed as beneficial owners of 5% or more of the outstanding Company common stock (the "Common Stock") or Company depositary shares, each of which represents 1/100th of a share of Company's $70 Convertible Preferred Stock) (the "Depository Shares"), number of shares of Common Stock or Depositary Shares and percent of the outstanding Common Stock or Depositary Shares, respectively, beneficially owned as of July 1, 1997, by each person known to the Board of Directors to be the beneficial owner of 5% or more of the outstanding shares of Common Stock or Depositary Shares, each Director, each named Executive Officer in the Company's Annual Report on Form 10-K and Directors and Executive Officers as a group. All of the outstanding shares of HPOC's Common Stock are held by the Company.
COMMON STOCK DEPOSITARY SHARES(b) -------------------------------------------- ------------------------ AMOUNT AND NATURE OF AMOUNT AND NATURE AMOUNT AND BENEFICIAL OF BENEFICIAL PERCENT OF NATURE OF PERCENT OF NAME AND ADDRESS OF OWNERSHIP OWNERSHIP SHARES BENEFICIAL SHARES BENEFICIAL OWNER (PRIMARY) (FULLY DILUTED)(a) OUTSTANDING(a) OWNERSHIP OUTSTANDING ------------------- ---------- ------------------ -------------- ---------- ----------- R.D. Hubbard........... 2,119,841 2,619,821(c) 10.8% 600,000(d) 21.8% Hollywood Park, Inc. 1050 South Prairie Avenue Inglewood, California 90301 Legg Mason, Inc. ...... 2,474,450 2,474,450(e) 10.4% -- -- 111 South Calvert Street Baltimore, Maryland 21202 State of Wisconsin Investment Board...... 2,323,875 2,323,875(f) 9.8% -- -- P.O. Box 7842 Madison, Wisconsin 53707 Harry Ornest........... 616,925 616,925(g) 2.5% -- -- Timothy J. Parrott..... 214,375 502,652(n) 2.1% -- -- J.R. Johnson........... 189,583 368,743(h) 1.5% 215,000 7.8% Warren B. Williamson... 125,000 147,916(i) * 27,500 1.0% Lynn P. Reitnouer...... 50,000 50,000 * -- -- Robert T. Manfuso...... 20,000 28,333(j) * 10,000 * Herman Sarkowsky....... 10,938 10,938 * -- -- Richard J. Goeglein.... 1,250 6,937(k) * -- -- Peter L. Harris........ -- 4,875(l) * -- -- Delbert W. Yocam....... -- 3,250(m) * -- -- G. Michael Finnigan.... 25,415 88,748(o) * -- -- Donald M. Robbins...... 12,339 75,672(p) * -- -- Directors and Executive Officers as a group (13 persons).............. 3,385,666 4,524,810(q) 18.1% 852,500 30.6%
- -------- * Less than one percent (1%) of the outstanding common or depositary shares. (a) Assumes exercise of stock options or conversion of the Depositary Shares beneficially owned by the named individual or entity into shares of Common Stock. Based on 23,793,636 shares outstanding as of July 1, 1997. (b) The Company has announced that it will exercise its right to cause the conversion of each Depositary Share into 0.8333 shares of Common Stock, which is expected to occur in late August 1997. 82 (c) Includes 499,980 shares of Common Stock issuable upon conversion of 600,000 Depositary Shares, including 300,000 Depositary Shares owned by the R.D. and Joan Dale Hubbard Foundation. (d) Includes 300,000 Depositary Shares owned by the R.D. and Joan Dale Hubbard Foundation. (e) Includes 562,500 shares of Common Stock received by Legg Mason Special Investment Trust, Inc. (an affiliate of Legg Mason, Inc.) in connection with the Merger. The Company has assumed that Legg Mason, Inc. is a beneficial owner of such shares. Based upon information provided by the stockholder in Schedule 13G filed with the Commission on February 10, 1997 and upon information received from Legg Mason Special Investment Trust, Inc. as of August 1996. (f) Based upon information provided by the stockholder in Schedules 13G filed with the Commission on February 1, 1997 and February 14, 1997. The Schedule 13G filed February 1, 1997 related to beneficial ownership of shares of Common Stock of Boomtown, Inc. prior to the Merger. (g) Includes 70,000 shares of Common Stock held by The Ornest Family Foundation, for which Mr. Ornest and his wife Ruth Ornest act as trustees. (Mr. Ornest disclaims any pecuniary interest in these shares.) In addition, as trustees of the Harry and Ruth Ornest Trust, Mr. Ornest and his wife share the power to vote 60% of the interest in the Ornest Family Partnership (the "Partnership"), which in turn has the power to dispose of the 546,925 shares of Common Stock held in the name of the Partnership. (h) Includes 179,160 shares of Common Stock issuable upon conversion of 215,000 Depositary Shares. (i) Includes 22,916 shares of Common Stock issuable upon conversion of 27,500 Depositary Shares. (j) Includes 8,333 shares of Common Stock issuable upon conversion of 10,000 Depositary Shares. (k) Includes 5,687 shares of Common Stock which Mr. Goeglein has the right to acquire pursuant to options assumed by the Company in connection with the Merger which are exercisable within sixty days of July 1, 1997. (l) Includes 4,875 shares of Common Stock which Mr. Harris has the right to acquire pursuant to options assumed by the Company in connection with the Merger which are exercisable within sixty days of July 1, 1997. (m) Includes 3,250 shares of Common Stock which Mr. Yocam has the right to acquire pursuant to options assumed by the Company in connection with the Merger which are exercisable within sixty days of July 1, 1997. (n) Includes 288,277 shares of Common Stock which Mr. Parrott has the right to acquire pursuant to options assumed by the Company in connection with the Merger which are exercisable within sixty days of July 1, 1997. (o) Includes 63,333 shares of Common Stock which Mr. Finnigan has the right to acquire pursuant to options granted under Hollywood Park's 1993 Stock Option Plan which are exercisable within sixty days of July 1, 1997. (p) Includes 63,333 shares of Common Stock which Mr. Robbins has the right to acquire pursuant to options granted under Hollywood Park's 1993 Stock Option Plan which are exercisable within sixty days of July 1, 1997. (q) Includes 1,139,144 shares of Common Stock of which the Directors and Executive Officers may be deemed to have beneficial ownership following (i) conversion of 852,500 Depositary Shares and (ii) the exercise of options to purchase 428,756 shares of Common Stock which are exercisable within sixty days of July 1, 1997. Excluding such shares, the Directors and Executive Officers of Hollywood Park have beneficial ownership of 3,360,041 shares of Common Stock, which represents 14.1% of the shares of Common Stock outstanding as of July 1, 1997. 83 DESCRIPTION OF OTHER INDEBTEDNESS BANK CREDIT FACILITY In connection with the acquisition of Boomtown, the Company entered into a Reducing Revolving Loan Agreement (the "Bank Credit Facility") with a syndicate of banks (the "Banks") for whom Bank of America NT&SA acts as Managing Agent. The Bank Credit Facility provides the Company with a revolving line of credit of up to approximately $100 million, maturing on June 30, 2002. However, upon the occurrence of a Change of Control, as defined in the Bank Credit Facility, the lenders have the right to terminate the Bank Credit Facility. The Bank Credit Facility provides for a letter of credit sub- facility of $10 million and a swing line sub-facility provided by the Managing Agent of up to $10 million. The commitment under the revolving line of credit has been reduced dollar- for-dollar by the aggregate principal amount of the Old Notes issued by the Issuers. Further, commencing September 30, 1999 (the "Initial Reduction Date"), and on the last day of each third calendar month thereafter, the amount available for borrowing under the line of credit will decrease by 7.5% of the commitment in effect on the Initial Reduction Date. Commencing on September 30, 2001, and on the last day of each third calendar month thereafter, the amount available for borrowing under the line of credit will decrease by 10.0% of the commitment in effect on the Initial Reduction Date. Borrowings under the facility bear interest at an annual rate determined, at the election of the Company, by reference to the "Eurodollar Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate", as such terms are respectively defined in the Bank Credit Facility, plus margins which vary depending on the Company's ratio of funded debt to EBITDA. The margins start at 1.250% for LIBOR loans, and at 0.250% for Base Rate loans, in instances where the Company's funded debt to EBITDA ratio is less than 1.50. Thereafter, the margins for each type of loan increases by 25 basis points for each increase in the ratio of funded debt to EBITDA of 50 basis points or more, up to 2.625% for LIBOR loans and 1.625% for Base Rate loans. However, if the ratio of senior funded debt to EBITDA exceeds 2.50, the applicable margins would increase to 3.25% for LIBOR loans, and 2.25% for Base Rate loans. Thereafter, the margins would increase by 25 basis points for each increase in the ratio of senior funded debt to EBITDA of 50 basis points or more, up to a maximum of 4.25% for LIBOR loans and 3.25% for Base Rate loans. The commitment fee for the facility also varies based on the ratio of funded debt to EBITDA, starting from 31.25 basis points when the ratio is less than 1.00, and increasing by 6.25 basis points for each increase in the ratio of 0.50, up to a maximum of 50 basis points. Based on this limitation, the amount available under the Bank Credit Facility, after giving effect to this Offering, is expected to be approximately $74.7 million. The Bank Credit Facility is secured by a first lien on substantially all of the assets of the Company and its significant subsidiaries, except for specified permitted liens incurred in connection with, or existing at the time of, acquisition of property or subsidiaries, including, in the case of Boomtown and its subsidiaries, the prior lien securing the Boomtown Notes. In addition, the Bank Credit Facility imposes various customary affirmative covenants on the Issuers and the Guarantors, including, among others, reporting covenants, covenants to maintain insurance, comply with laws, maintain properties and other customary covenants for a financing of this nature. The Bank Credit Facility imposes various negative covenants on the Issuers and the Guarantors including, without limitation, (i) restrictions on the payment of subordinated obligations, (ii) disposition of property, (iii) mergers, (iv) hostile acquisitions, (v) payment of dividends and other distributions, (vi) change in the nature of the Company's business, (vii) restrictions on the incurrence of additional indebtedness including issuances of guaranties, (viii) restrictions on capital expenditures and operating leases, (ix) restrictions on investments, (x) restrictions on transactions with affiliates, (xi) restrictions on liens and negative pledges, (xii) interest coverage ratio, and funded debt to EBITDA ratio, and (xiii) restrictions on amendments and modifications of subordinated indebtedness. 84 Events of default under the loan agreement include, among other things: (i) failure to make payments when due, (ii) breach of representations or warranties in the loan agreement, (iii) certain events of insolvency, (iv) failure to pay other indebtedness for borrowed money for debts of $5.0 million or more, or other breach or default under any such indebtedness allowing the holder or lender thereunder to accelerate the maturity thereof, or require same to be redeemed or repurchased, or an offer therefor to be made, (v) any event occurs which gives the holder/lender under a subordinated obligation the right to accelerate the maturity thereof, (vi) final judgement in an amount in excess of $1.0 million which has not been stayed or satisfied within 30 days of the entry thereof, (vii) revocation of the licenses affecting gaming operations accounting for 5% or more of consolidated gross revenues. BOOMTOWN NOTES In November 1993, Boomtown issued and sold an aggregate of $103.5 million principal amount of 11.5% First Mortgage Notes due November 1, 2003 (the "Boomtown Notes") and warrants to purchase shares of Boomtown common stock. The Boomtown Notes and Boomtown warrants were sold in units in a private placement to certain qualified institutional buyers (as defined in Rule 144A under the Securities Act) and institutional "accredited investors" (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act) and pursuant to sales occurring outside of the United States within the meaning of Regulation S. Substantially all of such originally issued Boomtown Notes were exchanged for new Boomtown Notes of like principal amount registered with the Commission, which are substantially identical to the original Boomtown Notes. In July 1997, in connection with the Merger and the Blue Diamond Swap, Boomtown repurchased and retired an aggregate of approximately $103 million in principal amount of the Boomtown Notes at a purchase price of $1,085 per $1,000 in principal amount (together with accrued interest thereon) pursuant to a tender offer (the "Boomtown Note Tender Offer"). Hollywood Park made a loan to Boomtown of the funds necessary for Boomtown to repurchase such tendered Boomtown Notes. Those funds were drawn under the Bank Credit Facility. Therefore, there remains outstanding an aggregate of approximately $1 million in principal amount of the Boomtown Notes. Holders who tendered their Boomtown Notes consented to certain amendments to the indenture governing the Boomtown Notes including the elimination of many of the restrictive covenants, including the covenants restricting incurrences of indebtedness and liens and limiting investments, dividends, equity repurchases and other restricted payments. In general, the Boomtown Notes are subject to redemption at Boomtown's option on or after November 1, 1998 at redemption prices (expressed as a percentage of the principal amount thereof) commencing at 104.25% in 1998 and declining ratably to 100.00% in 2001 and thereafter of their principal amount, plus accrued and unpaid interest thereon to the redemption date. The remaining Boomtown Notes are secured by substantially all of Boomtown's assets and are guaranteed on a secured basis by each of Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, a Louisiana Partnership in commendam, (the "Louisiana Partnership"), Louisiana Gaming Enterprises, Inc. (the general partner of the Louisiana Partnership), the Mississippi Partnership, and Bayview Yacht Club, Inc. (the general partner of the Mississippi Partnership), all of which are subsidiaries of Boomtown. 85 DESCRIPTION OF NOTES GENERAL The Old Notes were issued and the New Notes will be issued pursuant to an Indenture (the "Indenture") among the Issuers, the Guarantors and the Bank of New York, as trustee (the "Trustee"). The Old Notes are, and the New Notes will be, guaranteed pursuant to joint and several absolute and unconditional guaranties by each of the existing and future Material Restricted Subsidiaries of the Issuers, initially all of the Issuers' Subsidiaries, except Sunflower Racing, Inc., SR Food & Beverage Company, Boomtown Missouri, Inc., Boomtown Council Bluffs, Inc., Boomtown Iowa, L.C., Old River Enterprises, Boomtown Las Vegas, Inc., Boomtown Las Vegas Disposition Corporation, Boomtown Indiana, Inc., Boomtown Hoosier, Inc., Boomtown Riverboat, Inc., Pinnacle Gaming Development Corp., Switzerland County Development Corporation and HP Casino, Inc. As co-obligors, each of the Company and HPOC are, and will be, absolutely and unconditionally obligated for the payment of the Old Notes and New Notes, respectively. The Company and HPOC have entered into an agreement that, as between the Company and HPOC, HPOC would be primarily responsible for the payments on the Notes. However, such agreement in no way limits the obligations of the Company under the Notes. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939, as amended (the "TIA"). The Notes are subject to all such terms, and holders of Notes are referred to the Indenture and the TIA for a statement thereof. The following summary of the material provisions of the Indenture does not purport to be complete and is qualified in its entirety by reference to the Indenture, including the definitions therein of certain terms used below. Copies of the Indenture and Registration Rights Agreement are available as set forth below under "-- Additional Information." The definitions of certain terms used in the following summary are set forth below under "--Certain Definitions." For purposes of this summary, the term "Company" refers only to Hollywood Park, Inc. and not to any of its Subsidiaries or Affiliates. The Guaranty of the New Notes by the entity which owns and operates Boomtown Reno and will require consent of the Gaming Authorities in Nevada. The Old Notes and the related Guaranties are, and the New Notes and the related Guaranties will be, senior subordinated obligations of the Issuers and the Guarantors, respectively, and rank and will rank junior in right of payment to all existing and future Senior Debt and senior in right of payment to all existing and future subordinated indebtedness of the Obligors. The Old Notes and the related Guaranties are, and the New Notes and the related Guaranties will be, effectively subordinated to all secured indebtedness of the Obligors. As of June 30, 1997, on an as-adjusted basis after giving effect to the issuance of the Old Notes and the application of the proceeds therefrom, the Obligors would have had approximately $135.6 million of total indebtedness, $10.6 million would have constituted Senior Debt. The Indenture will permit the Obligors to incur substantial additional indebtedness, including Senior Debt and secured indebtedness, in the future. See "--Certain Covenants", "Risk Factors--Subordination and Ranking" and "--Dependence of Issuers on Guarantors for Repayment of Notes; Suretyship Defenses." As of the Issue Date, all of the Issuers' Material Subsidiaries were Restricted Subsidiaries and Guarantors. The Issuers are able to designate current or future Subsidiaries of the Issuers as Restricted Subsidiaries or as Unrestricted Subsidiaries. Unrestricted Subsidiaries are not subject to the restrictive covenants set forth in the Indenture. PRINCIPAL, MATURITY AND INTEREST The Notes are limited in aggregate principal amount to $125 million and will mature on August 1, 2007. The Notes bear interest at the rate of 9.5% per annum, payable in cash semi-annually in arrears on February 1 and August 1 of each year, commencing February 1, 1998, to holders of record on the immediately preceding January 15 and July 15. Interest on the Notes accrues from the most recent date to which interest has been paid or, if no interest has been paid, from the Issue Date. The New Notes will bear interest from their date of issuance. 86 Interest will accrue on the Old Notes that are tendered in exchange for the New Notes through the issue date of the New Notes. Holders of Old Notes that are accepted for exchange will not receive interest that is accrued but unpaid on the Old Notes at the time of exchange, but such interest will be payable, together with interest on the New Notes, on the first Interest Payment Date after the Expiration Date. Interest on the New Notes in accordance with the terms of the Indenture. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Principal, premium, if any, and interest and Liquidated Damages, if any, on the Notes are payable at the office or agency of the Issuers maintained for such purpose within the City and State of New York or, at the option of the Issuers, payment of interest and Liquidated Damages, if any, may be made by check mailed to the holders of the Notes at their respective addresses set forth in the register of holders of Notes; provided that all payments with respect to Global Notes, and any definitive Notes any holder of which has given wire transfer instructions to the Issuers, will be required to be made by wire transfer of immediately available funds to the accounts specified by such holder. Until otherwise designated by the Issuers, the Issuers' office or agency in New York will be the office of the Trustee maintained for such purpose. The Old Notes were, and the New Notes will be, issued in denominations of $1,000 and integral multiples thereof. OPTIONAL REDEMPTION The Issuers do not have the option to redeem the Notes prior to August 1, 2002. Thereafter, the Issuers have the option to redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice, at the redemption prices (expressed as percentages of the principal amount thereof) set forth below plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the applicable redemption date, if redeemed during the twelve-month period beginning on August 1 of the years indicated below:
YEAR PERCENTAGE ---- ---------- 2002.............................................................. 104.750% 2003.............................................................. 102.375 2004.............................................................. 101.188 2005 and thereafter............................................... 100.000%
Notwithstanding the foregoing, (a) the Issuers may, during the first 36 months after the Issue Date, redeem up to 25% of the initially outstanding aggregate principal amount of Notes with the net cash proceeds of one or more Public Equity Offerings of common stock of the Company at a redemption price in cash of 109.50% of the principal amount thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if any, to the redemption date; provided that at least 75% of the initially outstanding aggregate principal amount of Notes remains outstanding immediately after the occurrence of such redemption; and provided, further, that notice of any such redemption shall be given by the Issuers to the holders and the Trustee within 15 days after the consummation of any such Public Equity Offering and such redemption shall occur within 60 days of the date of such notice and (b) if any Gaming Authority requires that a holder or beneficial owner of Notes must be licensed, qualified or found suitable under any applicable gaming law and such holder or beneficial owner (i) fails to apply for a license, qualification or a finding of suitability within 30 days (or such shorter period as may be required by the applicable Gaming Authority) after being requested to do so by the Gaming Authority or (ii) is denied such license or qualification or not found suitable, the Issuers shall have the right, at their option, (A) to require any such holder or beneficial owner to dispose of its Notes within 30 days (or such earlier date as may be required by the applicable Gaming Authority) of receipt of such notice or finding by such Gaming Authority or (B) to call for the redemption of the Notes of such holder or beneficial owner at a redemption price equal to the least of (1) the principal amount thereof, (2) the price at which such holder or beneficial owner acquired the Notes, in either case, together with accrued interest and Liquidated Damages, if any, to the earlier of the date of redemption or the date of the denial of license or qualification or of the finding of unsuitability by such Gaming Authority or (3) such other lesser amount as may be required by any Gaming Authority. The Issuers shall notify the Trustee in writing of any such redemption as soon as practicable. The holder or beneficial owner applying for license, qualification or a finding of suitability must pay all costs of the licensure or investigation for such qualification or finding of suitability. 87 SELECTION AND NOTICE If less than all of the Notes are to be redeemed at any time, the Trustee will select the Notes to be redeemed among the holders of Notes in compliance with the requirements of the principal national securities exchange, if any, on which the Notes are listed, or, if the Notes are not so listed, on a pro rata basis, by lot or in accordance with any other method the Trustee considers fair and appropriate; provided that no Notes of $1,000 or less shall be redeemed in part. Notices of redemption shall be mailed by first class mail at least 30 but not more than 60 days before the redemption date to each holder of Notes to be redeemed at its registered address. Notices of redemption may not be conditional. If any Note is to be redeemed in part only, the notice of redemption that relates to such Note shall state the portion of the principal amount thereof to be redeemed. A new Note in principal amount equal to the unredeemed portion thereof will be issued in the name of the holder thereof upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. MANDATORY REDEMPTION Except as described below under "Repurchase at the Option of Holders," the Issuers are not be required to make mandatory redemption or sinking fund payments with respect to the Notes. SUBORDINATION The payment of principal, Liquidated Damages, if any, and interest on the Notes and the related Guaranties are, and on the New Notes and the related Guaranties will be, subordinated in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Debt, whether outstanding on the Issue Date or thereafter created, Incurred, assumed or guaranteed. Upon any distribution to creditors of any Obligor in a liquidation or dissolution of such Obligor or in a proceeding under Bankruptcy Law relating to such Obligor or its property, in an assignment for the benefit of creditors or any marshaling of such Obligor's assets and liabilities, (i) the holders of Senior Debt will be entitled to receive payment in full of all Obligations in respect of such Senior Debt (including Accrued Bankruptcy Interest) and to have all outstanding Letter of Credit Obligations and applicable Hedging Obligations fully cash collateralized before the Trustee or the holders shall be entitled to receive any payment or distribution of Obligations in respect of the Notes (except that the Trustee or the holders may receive payments and other distributions made from the defeasance trust described under "Legal Defeasance and Covenant Defeasance" and Permitted Junior Securities) and (ii) until all Obligations with respect to Senior Debt (as provided in clause (i) above) are paid in full and all outstanding Letter of Credit Obligations and applicable Hedging Obligations are fully cash collateralized, any distribution to which the Trustee or the holders would be entitled but for this provision, including any such distribution that is payable or deliverable by reason of the payment of any other Indebtedness of such Obligor being subordinated to the payment of the Notes, shall be made to holders of Senior Debt or their representatives, ratably in accordance with the respective amounts of the principal of such Senior Debt, interest (including, without limitation, Accrued Bankruptcy Interest) thereon and all other Obligations with respect thereto (except that holders may receive payments and other distributions made from the defeasance trust described under "Legal Defeasance and Covenant Defeasance" and Permitted Junior Securities), as their respective interests may appear. The Obligors will also be restrained from making any payment or distribution to the Trustee or any holder in respect of Obligations arising under or in connection with the Notes, and from acquiring from the Trustee or any holder any Notes for cash or property (other than payments and other distributions made from any defeasance trust described under "Legal Defeasance and Covenant Defeasance" and Permitted Junior Securities), until all principal and other Obligations arising under or in connection with the Senior Debt have been paid in full or fully cash-collateralized, if not yet due if (a) a default in the payment of any Obligations with respect to Designated Senior Debt occurs and is continuing (including any default in payment upon the maturity of any Designated Senior Debt by lapse of time, acceleration or otherwise), or any judicial proceeding is pending to 88 determine whether any such default has occurred or (b) any other default occurs and is continuing with respect to Designated Senior Debt that permits holders of the Designated Senior Debt as to which such default relates to accelerate its maturity and the Trustee receives a notice of such default (a "Payment Blockage Notice") from the affected Obligors or the holders of any Designated Senior Debt. Payments on the Notes may and shall be resumed (i) in the case of a payment default, upon the date on which such default is cured or waived and (ii) in case of a nonpayment default, the earlier of the date on which such nonpayment default is cured or waived or 179 days after the date on which the applicable Payment Blockage Notice is received by the Trustee, unless the maturity of any Designated Senior Debt has been accelerated. No new period of payment blockage predicated on a nonpayment default may be commenced unless and until 360 days have elapsed since the effectiveness of the immediately prior Payment Blockage Notice. No nonpayment default that existed or was continuing on the date of delivery of any Payment Blockage Notice to the Trustee shall be, or be made, the basis for a subsequent Payment Blockage Notice unless such default shall have been waived for a period of not less than 180 days. Notwithstanding the foregoing, the Issuers will be permitted to repurchase, redeem, repay or prepay any or all of the Notes to the extent required to do so by any Gaming Authority having authority over any Obligor. The Indenture provides that the Trustee or any holder that has received any payment or distribution in violation of the foregoing provisions will be required to hold the same without commingling and deliver the same, in the form received, together with any necessary endorsements, to the holders of Senior Debt or their representatives. The Indenture further requires that each affected Obligor promptly notify holders of Senior Debt if payment of the Notes is accelerated because of an Event of Default. As a result of the subordination provisions described above, in the event of a liquidation or insolvency, holders of Notes may recover less ratably than creditors of the affected Obligors who are holders of Senior Debt. See "Risk Factors--Subordination and Ranking" and "--Dependence of Issuers on Guarantors for Repayment of Notes; Suretyship Defenses." REPURCHASE AT THE OPTION OF HOLDERS CHANGE OF CONTROL Upon the occurrence of a Change of Control, each holder of Notes will have the right to require the Issuers to repurchase all or any part (equal to $1,000 or an integral multiple thereof) of such holder's Notes pursuant to the offer described below (the "Change of Control Offer") at an offer price in cash (the "Change of Control Payment") equal to 101% of the aggregate principal amount of Notes or, in the case of a REIT Change of Control, 102%, in each case, plus accrued and unpaid interest thereon, if any, to the date of repurchase. Within 30 days following any Change of Control, the Issuers will mail a notice to the Trustee and each holder describing the transaction or transactions that constitute the Change of Control and offering to repurchase Notes on the date specified in such notice, which date shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed (the "Change of Control Payment Date"), pursuant to the procedures required by the Indenture and described in such notice. The Issuers will comply with all applicable laws, including, without limitation, Section 14(e) of the Exchange Act and the rules thereunder and all applicable federal and state securities laws, and will include all instructions and materials necessary to enable holders to tender their Notes. On the Change of Control Payment Date, the Issuers will, to the extent lawful, (1) accept for payment all Notes or portions thereof properly tendered pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an amount equal to the Change of Control Payment in respect of all Notes or portions thereof so tendered and (3) deliver or cause to be delivered to the Trustee the Notes so accepted, together with an Officers' Certificate stating the aggregate principal amount of Notes or portions thereof being purchased by the Issuers. The Paying Agent will promptly mail to each holder of Notes so tendered the Change of Control Payment for such Notes, and the Trustee will promptly authenticate and mail (or cause to be transferred by book entry) to each holder a new Note equal in principal amount to any unpurchased portion of the Notes surrendered by such holder, if any; 89 provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The Issuers will publicly announce the results of the Change of Control Offer on or as soon as practicable after the Change of Control Payment Date. The Indenture will provide that, prior to complying with the provisions of this covenant, but in any event within 90 days following a Change of Control, the Issuers will either (a) repay all outstanding obligations with respect to Senior Debt, (b) obtain the requisite consents, if any, from the holders of Senior Debt to permit the repurchase of the Notes required by this covenant or (c) deliver to the Trustee an Officer's Certificate to the effect that no action of the kind described in clause (a) or (b) is necessary. The Change of Control provisions described above will be applicable whether or not any other provisions of the Indenture are applicable. Except as described above with respect to a Change of Control, the Indenture does not contain provisions that permit the holders of the Notes to require that the Issuers repurchase or redeem the Notes in the event of a takeover, recapitalization or similar transaction. The Bank Credit Facility contains, and any future Credit Facilities or other agreements relating to Indebtedness to which the Issuers become a party may contain, restrictions on the ability of the Issuers to purchase any Notes, and also may provide that certain change of control events with respect to the Issuers would constitute a default thereunder. In the event a Change of Control occurs at a time when the Issuers are prohibited from purchasing Notes, the Issuers could seek the consents of their lenders to the purchase of Notes or could attempt to refinance the borrowings that contain such prohibition. If the Issuers do not obtain all such requisite consents or repay such borrowings, the Issuers will remain prohibited from purchasing Notes. In such case, the Issuers' failure to purchase tendered Notes would constitute an Event of Default under the Indenture. In such circumstances, the subordination provisions in the Indenture would likely restrict payments to the holders of Notes. The Issuers will not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by the Issuers and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. The definition of Change of Control includes a phrase relating to the sale, lease, transfer, conveyance or other disposition of "all or substantially all" of the assets of the Issuers and their Restricted Subsidiaries taken as a whole. Although there is a developing body of case law interpreting the phrase "substantially all," there is no precise established definition of the phrase under applicable law. Accordingly, the ability of a holder of Notes to require the Issuers to repurchase such Notes as a result of a sale, lease, transfer, conveyance or other disposition of less than all of the assets of either Issuer or the Issuers and their Restricted Subsidiaries, taken as a whole, to another Person or group may be uncertain. ASSET SALES The Indenture provides that no Obligor will, directly or indirectly, consummate or enter into a binding commitment to consummate an Asset Sale unless (a) such Obligor, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or of which other disposition is made (as determined reasonably and in good faith by the Board of such Obligor) and (b) at least 75% of the consideration received by such Obligor from such Asset Sale will be cash or Cash Equivalents and will be received at the time of the consummation of any such Asset Sale; provided, however, that the amount of (x) any liabilities as shown on the Obligors' most recent balance sheet (or in the notes thereto) (other than (i) Indebtedness subordinate in right of payment to the Notes, (ii) contingent liabilities, (iii) liabilities or Indebtedness to Affiliates of the Issuers and (iv) Non-Recourse Indebtedness) that are assumed by the transferee of any such assets and (y) to the extent of the cash received, any notes or other obligations received by the Issuers or any such Restricted Subsidiary from such transferee that are converted by such Obligor into cash within 60 days of receipt, will be deemed to be cash for purposes of this provision. 90 Notwithstanding the foregoing, an Obligor will be permitted to consummate an Asset Sale without complying with the foregoing provisions if (i) such Obligor receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets or other property sold, issued or otherwise disposed of (as evidenced by a resolution of the Board of such Obligor) as set forth in an officers' certificate delivered to the Trustee, (ii) the transaction constitutes a "like-kind exchange" of the type contemplated by Section 1031 of the Internal Revenue Code and (iii) the consideration for such Asset Sale constitutes Productive Assets; provided that any non-cash consideration not constituting Productive Assets received by such Obligor in connection with such Asset Sale that is converted into or sold or otherwise disposed of for cash or Cash Equivalents at any time within 360 days after such Asset Sale and any Productive Assets constituting cash or Cash Equivalents received by such Obligor in connection with such Asset Sale shall constitute Net Cash Proceeds subject to the provisions set forth above. Upon the consummation of an Asset Sale, the Issuers or the affected Obligor will be required to apply all Net Cash Proceeds that are received from such Asset Sale within 360 days of the receipt thereof either (A) to reinvest (or enter into a binding commitment to invest, if such investment is effected within 360 days after the date of such commitment) in Productive Assets or in Asset Acquisitions permitted by the Indenture, or (B) to permanently prepay or repay Indebtedness of any Obligor other than Indebtedness that is subordinate in right of payment to the Notes. Pending the final application of any such Net Cash Proceeds, the Obligors may temporarily reduce revolving Indebtedness or otherwise invest such Net Cash Proceeds in any manner not prohibited by the Indenture. On the 361st day after an Asset Sale or such earlier date, if any, as the Board of each Issuer or the affected Obligor determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (A) or (B) of the preceding sentence (each a "Net Proceeds Offer Trigger Date"), such aggregate amount of Net Cash Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (A) or (B) of the preceding sentence (each a "Net Proceeds Offer Amount"), will be applied by the Issuers to make an offer to purchase (the "Net Proceeds Offer") on a date (the "Net Proceeds Offer Payment Date") not less than 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all holders on a pro rata basis, Notes in an amount equal to the Net Proceeds Offer Amount at a price in cash equal to 100% of the aggregate principal amount of Notes, in each case, plus accrued and unpaid interest, if any, thereon on the Net Proceeds Offer Payment Date; provided that if at any time within 360 days after an Asset Sale any non-cash consideration received by the Issuers or the affected Obligor in connection with such Asset Sale is converted into or sold or otherwise disposed of for cash, then such conversion or disposition will be deemed to constitute an Asset Sale hereunder and the Net Cash Proceeds thereof will be applied in accordance with this covenant. To the extent that the aggregate principal amount of Notes tendered pursuant to the Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Obligors may use any remaining proceeds of such Asset Sales for general corporate purposes (but subject to the other terms of the Indenture). Upon completion of a Net Proceeds Offer, the Net Proceeds Offer Amount relating to such Net Proceeds Offer will be deemed to be zero for purposes of any subsequent Asset Sale. In the event that a Restricted Subsidiary consummates an Asset Sale, only that portion of the Net Cash Proceeds therefrom (including any Net Cash Proceeds received upon the sale or other disposition of any non- cash proceeds received in connection with an Asset Sale) that are distributed to any Obligor will be required to be applied by the Obligors in accordance with the provisions of this paragraph. Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than $10 million the application of the Net Cash Proceeds constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds Offer Amounts arising subsequent to the Issue Date of the Notes from all Asset Sales by the Obligors in respect of which a Net Proceeds Offer has not been made aggregate at least $10 million at which time the affected Obligor will apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred to make a Net Proceeds Offer (each date on which the aggregate of all such deferred Net Proceeds Offer Amounts is equal to $10 million or more will be deemed to be a Net Proceeds Offer Trigger Date). In connection with any Asset Sale with respect to assets having a book value in excess of $10 million or as to which it is expected that the aggregate consideration therefor be received by the affected Obligor will exceed $10 million in value, such Asset Sale will be approved, prior to the consummation thereof, by the Board of the applicable Obligor. 91 CERTAIN COVENANTS RESTRICTED PAYMENTS The Indenture provides that no Obligor will, directly or indirectly, (i) declare or pay any dividend or make any other payment or distribution (other than dividends or distributions payable solely in Qualified Capital Stock of the Company or dividends or distributions payable to an Obligor) in respect of any Obligor's Equity Interests (including, without limitation, any payment in connection with any merger or consolidation involving such Obligor) or to the direct or indirect holders of such Obligor's Equity Interests in their capacity as such, (ii) purchase, redeem or otherwise acquire or retire for value (including, without limitation, any payment in connection with any merger or consolidation involving an Obligor) Equity Interests of any Obligor or of any direct or indirect parent or Affiliate of any Obligor (other than any such Equity Interests owned by any Obligor), (iii) make any payment on or with respect to, or purchase, defease, redeem, prepay, decrease or otherwise acquire or retire for value any Indebtedness that is subordinate in right of payment to the Notes, except a payment at Stated Maturity, or (iv) make any Investment (other than Permitted Investments) (each of the foregoing prohibited actions set forth in clauses (i), (ii), (iii) and (iv) being referred to as a "Restricted Payment"), if at the time of such proposed Restricted Payment or immediately after giving effect thereto, (A) a Default or an Event of Default has occurred and is continuing or would result therefrom, or (B) the Company is not, or would not be, able to Incur at least $1.00 of additional Indebtedness under the Consolidated Coverage Ratio test described in the second paragraph of the covenant described below under the caption "Incurrence of Indebtedness and Issuance of Preferred Stock" or (C) the aggregate amount of Restricted Payments (including such proposed Restricted Payment) made subsequent to the Issue Date (the amount expended for such purposes, if other than in cash, being the fair market value of such property as determined reasonably and in good faith by the Board of the applicable Obligor) exceeds or would exceed the sum, without duplication, of: (1) 50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Obligors during the period (treating such period as a single accounting period) beginning on the Issue Date and ending on the last day of the most recent fiscal quarter of the Company ending immediately prior to the date of the making of such Restricted Payment for which internal financial statements are available ending not more than 135 days prior to the date of determination, plus (2) 100% of the aggregate net cash proceeds received by the Company from any Person (other than from a Subsidiary of the Issuers) from the issuance and sale of Qualified Capital Stock of the Company or the conversion of debt securities or Convertible Preferred Stock into Qualified Capital Stock (to the extent that proceeds of the issuance of such Qualified Capital Stock would be includable in this clause upon initial issuance for cash) subsequent to the Issue Date and on or prior to the date of the making of such Restricted Payment (excluding any Qualified Capital Stock of the Company the purchase price of which has been financed directly or indirectly using funds (A) borrowed from any Obligor, unless and until and to the extent such borrowing is repaid, or (B) contributed, extended, guaranteed or advanced by any Obligor (including, without limitation, in respect of any employee stock ownership or benefit plan)), plus (3) 100% of the aggregate cash received by the Company subsequent to the Issue Date and on or prior to the date of the making of such Restricted Payment upon the exercise of options or warrants (whether issued prior to or after the Issue Date) to purchase Qualified Capital Stock of the Company, plus (4) to the extent that any Restricted Investment that was made after the Issue Date is sold for cash or Cash Equivalents or otherwise liquidated or repaid for cash or Cash Equivalents, or any dividends, distributions, principal repayments, or returns of capital are received by any Obligor in respect of any Restricted Investment, valued, in each such case, the lesser of (A) the cash or marked-to-market value of Cash Equivalents received with respect to such Restricted Investment (less the cost of disposition, if any) and (B) the initial amount of such Restricted Investment, plus (5) 50% of the aggregate dividends and distributions received by any Obligor from an Unrestricted Subsidiary, to the extent not already included in the calculation of Consolidated Net Income. 92 Notwithstanding the foregoing, the provisions set forth in the immediately preceding paragraph will not prohibit: (a) the payment of any dividend or the making of any distribution within 60 days after the date of declaration of such dividend or distribution if the making thereof would have been permitted on the date of declaration; provided such dividend will be deemed to have been made as of its date of declaration or the giving of such notice for purposes of this clause (a); (b) the redemption, repurchase, retirement or other acquisition of Capital Stock of the Company or warrants, rights or options to acquire Capital Stock of the Company either (i) solely in exchange for shares of Qualified Capital Stock of the Company or warrants, rights or options to acquire Qualified Capital Stock of the Company, or (ii) through the application of net proceeds of a substantially concurrent sale for cash (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company or warrants, rights or options to acquire Qualified Capital Stock of the Company; provided that no Default or Event of Default shall have occurred and be continuing at the time of such Restricted Payment or would result therefrom; (c) the redemption, repurchase, retirement, defeasance or other acquisition of Indebtedness of any Obligor that is subordinate or junior in right of payment to the Notes or the Guaranties either (i) solely in exchange for shares of Qualified Capital Stock of the Company or for Permitted Refinancing Indebtedness, or (ii) through the application of the net proceeds of a substantially concurrent sale for cash (other than to an Obligor) of (A) shares of Qualified Capital Stock of the Company or warrants, rights or options to acquire Qualified Capital Stock of the Company or (B) Permitted Refinancing Indebtedness; provided that no Default or Event of Default shall have occurred and be continuing at the time of such Restricted Payment pursuant to this clause (c) and would not result therefrom; (d) repurchases by the Company of its common stock; provided that the aggregate amount expended for all such common stock repurchases by the Company shall not exceed $10 million on a cumulative basis commencing on the Issue Date; and provided, further, that no Default or Event of Default shall have occurred and be continuing at the time of such Restricted Payment or would result therefrom; (e) (i) scheduled dividends payable in respect of the Convertible Preferred Stock not to exceed $2 million in the aggregate in any fiscal year; provided, that no Event of Default shall have occurred and be continuing at the time of such Restricted Payment or would result therefrom; and (ii) redemption of all of the outstanding Convertible Preferred Stock by means of conversion into shares of the Company's common stock plus payment of accrued and unpaid dividends; (f) redemptions, repurchases or repayments to the extent required by any Gaming Authority having jurisdiction over any Obligor or deemed necessary by the Board of either Issuer in order to avoid the suspension, revocation or denial of a gaming license by any Gaming Authority; (g) Investments in the Indiana Joint Venture Project, not to exceed $70 million in the aggregate; (h) other Restricted Payments not to exceed $20 million in the aggregate at any time; provided no Default or Event of Default then exists or would result therefrom; (i) repurchases by the Company of its common stock, options, warrants or other securities exercisable or convertible into such common stock from employees and directors of the Company or any of its respective Subsidiaries upon death, disability or termination of employment or directorship of such employees or directors; (j) the payment of any amounts in respect of Equity Interests by any Restricted Subsidiary organized as a partnership or a limited liability company or other pass-through entity, to the extent of capital contributions made to such Restricted Subsidiary (other than capital contributions made to such Restricted Subsidiary by the Obligors); provided, that no Default or Event of Default has occurred and is continuing at the time of such Restricted Payment or would result therefrom; 93 (k) the payment of any amounts in respect of Equity Interests by any Restricted Subsidiary organized as a partnership or a limited liability company or other pass-through entity, (i) to the extent required by applicable law or (ii) to the extent necessary for holders thereof to pay taxes with respect to the net income of such Restricted Subsidiary, the payment of which amounts under this clause (ii) is required by the terms of the relevant partnership agreement, limited liability company operating agreement or other governing document; provided, that except in the case of clause (i) no Default or Event of Default has occurred and is continuing at the time of such Restricted Payment or would result therefrom; (l) the payment of dividends or other distributions on minority interests in Equity Interests of Restricted Subsidiaries pursuant to requirements under partnership agreements or organizational or membership agreements of other pass-through entities as in effect on the Issue Date; provided such distributions are made pro rata with the distributions paid contemporaneously to an Obligor or its Affiliates holding an interest in such Equity Interests; provided, further, that no Default or Event of Default has occurred and is continuing at the time of such Restricted Payment or would result therefrom; (m) Investments in Unrestricted Subsidiaries, joint ventures, partnerships or limited liability companies consisting of conveyances of substantially undeveloped real estate in a number of acres which, after giving effect to any such conveyance, would not exceed in the aggregate for all such conveyances after the Issue Date, 50% of the sum of (A) the acres of undeveloped real estate held by the Obligors on such date plus (B) the acres of undeveloped real estate previously so conveyed by the Obligors after the Issue Date; provided, that no Default or Event of Default has occurred and is continuing at the time of such Restricted Payment or would result therefrom; or (n) Investments, not to exceed $10 million in the aggregate at any time outstanding, in any combination of (i) readily marketable equity securities and (ii) assets of the kinds described in the definition of "Cash Equivalents"; provided, that for the purposes of this clause (n), such Investments may be made without regard to the rating requirements or the maturity limitations set forth in such definition. In determining the aggregate amount of Restricted Payments made subsequent to the Issue Date, Restricted Payments made pursuant to clauses (a), (b), (c), (d), (e), (g) and (h) of this paragraph shall, in each case, be excluded from such calculation; provided, that any amounts expended or liabilities incurred in respect of fees, premiums or similar payments in connection therewith shall be included in such calculation. No later than the date of making any Restricted Payment, the Issuers shall deliver to the Trustee officers' certificates stating that such Restricted Payment complies with the Indenture and setting forth in reasonable detail the basis upon which the required calculations were computed (upon which the Trustee may conclusively rely without any investigation whatsoever), which calculations may be based upon the Issuers' latest available internal quarterly financial statements. The Board of either Issuer may designate any of its Restricted Subsidiaries to be Unrestricted Subsidiaries if such designation would not cause a Default. For purposes of making such determination, all outstanding Investments by the Obligors (except to the extent repaid in cash or in kind) in the Subsidiary so designated will be deemed to be Restricted Payments at the time of such designation and will reduce the amount available for Restricted Payments under the first paragraph of this covenant. All such outstanding Investments will be deemed to constitute Investments in an amount equal to the greatest of (x) the net book value of such Investments at the time of such designation, (y) the fair market value of such Investments at the time of such designation and (z) the original fair market value of such Investments at the time they were made. Such designation will only be permitted if such Restricted Payment would be permitted at such time and if such Restricted Subsidiary otherwise meets the definition of an Unrestricted Subsidiary. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK The Indenture provides that the Issuers will not, directly or indirectly, (i) Incur any Indebtedness or issue any Disqualified Capital Stock, other than Permitted Indebtedness, or (ii) cause or permit any of their Subsidiaries to Incur any Indebtedness or issue any Disqualified Capital Stock or preferred stock, in each case, other than Permitted Indebtedness. 94 Notwithstanding the foregoing limitations, either Issuer may issue Disqualified Capital Stock, and any Obligor may Incur Indebtedness (including, without limitation, Acquired Debt) or issue preferred stock, if (i) no Default or Event of Default shall have occurred and be continuing on the date of the proposed Incurrence or issuance or would result as a consequence of such proposed Incurrence or issuance and (ii) immediately after giving pro forma effect to such proposed Incurrence or issuance and the receipt and application of the net proceeds therefrom, the Issuers' Consolidated Coverage Ratio would not be less, for any period of four fiscal quarters ending during the applicable period specified in the table below, than the ratio specified opposite such period:
PERIOD RATIO ------ --------- Issue Date-December 31, 1998................................... 2.00:1.00 January 1, 1999-December 31, 1999.............................. 2.25:1.00 January 1, 2000 and thereafter................................. 2.50:1.00
Any Indebtedness of any Person existing at the time it becomes a Restricted Subsidiary (whether by merger, consolidation, acquisition of capital stock or otherwise) shall be deemed to be Incurred as of the date such Person becomes a Restricted Subsidiary. For purposes of determining compliance with this covenant, in the event that an item of Indebtedness meets the criteria of more than one of the categories of Permitted Indebtedness described in clauses (i) through (xi) of such definition or is entitled to be Incurred pursuant to the second paragraph of this covenant, the Issuers will, in their sole discretion, classify such item of Indebtedness in any manner that complies with this covenant and such item of Indebtedness will be treated as having been Incurred pursuant to only one of such clauses or pursuant to the second paragraph hereof. The Issuers may reclassify such Indebtedness from time to time in their sole discretion. Accrual of interest and the accretion of principal amount will not be deemed to be an Incurrence of Indebtedness for purposes of this covenant. LIENS The Indenture provides that no Obligor will, directly or indirectly, create, Incur or assume any Lien, except a Permitted Lien, securing Indebtedness that is pari passu with or subordinate in right of payment to the Notes or the Guaranties, on or with respect to any of its property or assets including any shares of stock or Indebtedness of any Restricted Subsidiary, whether owned on the Issue Date or thereafter acquired, or any income, profits or proceeds therefrom, unless (x) in the case of any Lien securing Indebtedness that is pari passu in right of payment with the Notes or the Guaranties, the Notes or the Guaranties are secured by a Lien on such property, assets or proceeds that is senior in priority to or pari passu with such Lien and (y) in the case of any Lien securing Indebtedness that is subordinate in right of payment to the Notes or the Guaranties, the Notes or the Guaranties are secured by a Lien on such property, assets or proceeds that is senior in priority to such Lien. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING RESTRICTED SUBSIDIARIES The Indenture provides that no Obligor will, directly or indirectly, create or otherwise cause or permit or suffer to exist or become effective any encumbrance or restriction on the ability of any Restricted Subsidiary to (a) pay dividends or make any other distributions on its Capital Stock, (b) make loans or advances to or pay any Indebtedness or other obligations owed to any Obligor or to any Restricted Subsidiary or (c) transfer any of its property or assets to any Obligor or to any Restricted Subsidiary (each such encumbrance or restriction in clause (a), (b) or (c), a "Payment Restriction"), except for such encumbrances or restrictions existing under or by reason of: (1) applicable law; (2) the Indenture; (3) customary non-assignment provisions of any purchase money financing contract or lease of any Restricted Subsidiary entered into in the ordinary course of business of such Restricted Subsidiary; (4) any instrument governing Acquired Debt Incurred in connection with an acquisition by any Obligor in accordance with the Indenture as the same was in effect on the date of such Incurrence; provided that such encumbrance or restriction is not, and will not be, applicable to any Person, or the properties or assets of any Person, other than the Person and its Subsidiaries or the property or assets, including 95 directly-related assets, such as accessions and proceeds so acquired or leased; (5) any restriction or encumbrance contained in contracts for the sale of assets to be consummated in accordance with the Indenture solely in respect of the assets to be sold pursuant to such contract; (6) any restrictions of the nature described in clause (c) above with respect to the transfer of assets secured by a Lien that was permitted by the Indenture to be Incurred; (7) any encumbrance or restriction contained in Permitted Refinancing Indebtedness; provided that the provisions relating to such encumbrance or restriction contained in any such Permitted Refinancing Indebtedness are no less favorable to the holders of the Notes in any material respect in the good faith judgment of the Board of either Issuer than the provisions relating to such encumbrance or restriction contained in the Indebtedness being refinanced, or (8) Indebtedness or Investments existing on the Issue Date, as in effect on the Issue Date. MERGER, CONSOLIDATION, OR SALE OF ASSETS The Indenture provides that no Obligor may, in a single transaction or a series of related transactions, consolidate or merge with or into any Person, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of such Obligor's properties or assets whether as an entirety or substantially as an entirety to any Person or adopt a Plan of Liquidation unless: (i) either (1) in the case of a consolidation or merger, such Obligor shall be the surviving or continuing corporation or (2) the Person (if other than such Obligor) formed by such consolidation or into which such Obligor is merged or the Person which acquires by sale, assignment, transfer, lease, conveyance or other disposition of the properties and assets of such Obligor and of such Obligor's Subsidiaries substantially as an entirety, or in the case of a Plan of Liquidation, the Person to which assets of such Obligor and such Obligor's Subsidiaries have been transferred (x) shall be a corporation organized and validly existing under the laws of the United States or any State thereof or the District of Columbia and (y) shall expressly assume, by supplemental indenture (in form and substance satisfactory to the Trustee), executed and delivered to the Trustee, the due and punctual payment of the principal of, and premium, if any, and interest on all of the Notes and, if applicable, the Guaranties and the performance of every covenant of the Notes, the Indenture and the Registration Rights Agreement on the part of such Obligor to be performed or observed; (ii) immediately after giving effect to such transaction and the assumption contemplated by clause (i)(2)(y) above (including giving effect to any Indebtedness and Acquired Debt Incurred or anticipated to be Incurred in connection with or in respect of such transaction), (1) the Obligors, including any such other Person becoming an Obligor through the operation of clause (i)(2) above would have a Consolidated Net Worth immediately after the transaction equal to or greater than the Consolidated Net Worth of such Obligor immediately preceding the transaction; and (2)(A) the Obligors, including any such other Person becoming an Obligor through the operation of clause (i)(2) above could Incur at least $1.00 of Indebtedness (other than Permitted Indebtedness) pursuant to the Consolidated Coverage Ratio test described above under the caption "-- Incurrence of Indebtedness and Issuance of Preferred Stock" or (B) any other Person which would, as a result of the applicable transaction, properly classify such Obligor as a consolidated subsidiary in accordance with GAAP, satisfied the conditions set forth in clause (i)(2)(x) above and either (x) also satisfied the condition set forth in clause (i)(2)(y) above and caused each acquired Issuer to become a Guarantor or (y) became a Guarantor, and, in either such case, after giving effect to such assumption of the Notes or Incurrence of Obligations under the Guaranty, such assuming or guarantying Person would be able to Incur at least $1.00 of Indebtedness pursuant to the Consolidated Coverage Ratio test described above under the caption "--Incurrence of Indebtedness and Issuance of Preferred Stock"; (iii) immediately before and immediately after giving effect to such transaction and the assumption contemplated by clause (i)(2)(y) above (including, without limitation, giving effect to any Indebtedness and Acquired Debt Incurred or anticipated to be Incurred and any Lien granted in connection with or in respect of the transaction) no Default and no Event of Default shall have occurred or be continuing; and (iv) such Obligor or such other Person shall have delivered to the Trustee (A) an officers' certificate and an opinion of counsel, each stating that such consolidation, merger, sale, assignment, transfer, lease, conveyance, other disposition or Plan of Liquidation and, if a supplemental indenture is required in 96 connection with such transaction, such supplemental indenture, comply with the applicable provisions of the Indenture and that all conditions precedent in the Indenture relating to such transaction have been satisfied and (B) a certificate from the Company's independent certified public accountants stating that such Obligor has made the calculations required by clause (ii) above in accordance with the terms of the Indenture and the Notes after the consummation of such transaction. Notwithstanding clause (ii)(2) above, (A) any Restricted Subsidiary may consolidate with, or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of all or substantially all of its assets to either Issuer or to a Wholly Owned Restricted Subsidiary of such Obligor (and an Issuer may effect such a transaction with the other Issuer) and (B) any Obligor may consolidate with or merge with or into any Person that has conducted no business and Incurred no Indebtedness or other liabilities if such transaction is solely for the purpose of effecting a change in the state of incorporation of such Obligor. Notwithstanding any other provision of this covenant, the Issuers may effect the Possible REIT Restructuring if the respective Boards of the Issuers determine, in good faith and in the exercise of their reasonable business judgment that it is in the best interest of each of the Issuers to do so. For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties and assets of one or more Subsidiaries of either Issuer, the Capital Stock of which constitutes all or substantially all of the properties and assets of such Issuer, shall be deemed to be the transfer of all or substantially all of the properties and assets of such Issuer. TRANSACTIONS WITH AFFILIATES The Indenture provides that no Obligor will make any payment to, or sell, lease, transfer or otherwise dispose of any of its properties or assets to, or purchase any property or assets from, or enter into or make or amend any transaction, contract, agreement, understanding, loan, advance or guarantee with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless (i) such Affiliate Transaction is, considered in light of any series of related transactions of which it comprises a part, on terms that are fair and reasonable and no less favorable to such Obligor than those that might reasonably have been obtained at such time in a comparable transaction or series of related transactions on an arms-length basis from a Person that is not such an Affiliate; (ii) with respect to any Affiliate Transaction involving aggregate consideration of $3 million or more, a majority of the disinterested members of the Board of the relevant Issuer (and of any other affected Obligor, where applicable) shall, prior to the consummation of any portion of such Affiliate Transaction, have reasonably and in good faith determined, as evidenced by a resolution of its Board, that such Affiliate Transaction meets the requirements of the foregoing clause; and (iii) with respect to any Affiliate Transaction involving value of $10 million or more, the Board of the applicable Obligor shall have received prior to the consummation of any portion of such Affiliate Transaction, a written opinion from an independent investment banking, accounting or appraisal firm of recognized national standing that such Affiliate Transaction is on terms that are fair to such Obligor from a financial point of view. The foregoing restrictions will not apply to (1) reasonable fees and compensation (including any such compensation in the form of Equity Interests not derived from Disqualified Capital Stock, together with loans and advances, the proceeds of which are used to acquire such Equity Interests) paid to, and indemnity provided on behalf of, officers, directors, employees or consultants of the Obligors as determined in good faith by the Board or senior management, (2) any transaction solely between or among Obligors to the extent any such transaction is otherwise in compliance with, or not prohibited by, the Indenture or (3) any Restricted Payment permitted by the terms of the covenant described above under the heading "--Restricted Payments." NO SUBORDINATED DEBT SENIOR TO THE NOTES OR GUARANTIES The Indenture provides that no Obligor will Incur any Indebtedness that is subordinate or junior in right of payment to any Senior Debt and senior in any respect in right of payment to the Notes or the Guaranties. 97 AMENDMENTS TO SUBORDINATION PROVISIONS The Indenture provides that, without the consent of the holders of 66 2/3% of the principal amount of the outstanding Notes, the Obligors will not amend, modify or alter the terms of any indebtedness subordinated to the Notes or the Guaranties in any way that will (i) increase the rate of or change the time for payment of interest on any indebtedness subordinated to the Notes, (ii) increase the principal of, advance the final maturity date of or shorten the Weighted Average Life to Maturity of any such subordinated indebtedness, (iii) alter the redemption provisions or the price or terms at which any Obligor is required to offer to purchase such subordinated indebtedness or (iv) amend the subordination provisions of any documents, instruments or agreements governing any such subordinated indebtedness, except to the extent that any of the foregoing would be required to permit any Obligor to make a Restricted Payment permitted by the covenant described above under the heading "--Restricted Payments." LINES OF BUSINESS The Indenture provides that the Obligors will not engage in any lines of business other than the Core Businesses. REPORTS The Indenture provides that, whether or not required by the rules and regulations of the Securities and Exchange Commission (the "Commission"), so long as any Notes are outstanding, the Issuers will furnish to the holders of Notes (i) all quarterly and annual financial information that would be required to be contained in a filing or filings by the Issuers with the Commission on Forms 10-Q and 10-K if the Issuers were required to file such forms, including a "Management's Discussion and Analysis of Financial Condition and Results of Operations" and, with respect to the annual information only, a report thereon by the Issuers' certified independent accountants and (ii) all current reports that would be required to be filed by the Issuers with the Commission on Form 8-K if the Issuers were required to file such reports. In addition, whether or not required by the rules and regulations of the Commission, the Issuers will file a copy of all such information and reports with the Commission for public availability (unless the Commission will not accept such a filing) and make such information available to securities analysts and prospective investors upon request. In addition, the Issuers have agreed that, for so long as any Notes remain outstanding, they will furnish to the holders and to securities analysts and prospective investors, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act. The Indenture permits the Issuers to deliver the consolidated reports or financial information of the Company to comply with the foregoing requirements. EVENTS OF DEFAULT AND REMEDIES The Indenture provides that each of the following constitutes an Event of Default: (i) default for 30 days in the payment when due of interest on, or Liquidated Damages with respect to, the Notes or the Guaranties (whether or not prohibited by the subordination provisions of the Indenture); (ii) default in payment of the principal of or premium, if any, on the Notes or the Guaranties when due and payable, at maturity, upon acceleration, redemption or otherwise (whether or not prohibited by the subordination provisions of the Indenture); (iii) failure by any Obligor for 45 days after written notice to comply with any of its other agreements in the Indenture, the Notes or the Guaranties; (iv) default under any mortgage, indenture or instrument under which there may be issued or by which there may be secured or evidenced any Indebtedness for money borrowed by any Obligor (or the payment of which is guaranteed by any Obligor) whether such Indebtedness or guarantee now exists, or is created after the Issue Date, which default (a) is caused by a failure to pay principal of or premium, if any, or interest on such Indebtedness prior to the expiration of the grace period provided in such Indebtedness on the date of such default (a "Payment Default") or (b) results in the acceleration of such Indebtedness prior to its express maturity and, in each case, the principal amount of any such Indebtedness, together with the principal amount of any other such Indebtedness under which there has been a Payment Default or the maturity of which has been so accelerated, aggregates $10 million or more; (v) failure by any Obligor to 98 pay final judgments aggregating in excess of $10 million, net of any applicable insurance, the carrier or underwriter with respect to which has acknowledged liability in writing, which judgments are not paid, discharged or stayed for a period of 60 days; and (vi) certain events of bankruptcy or insolvency with respect to any Obligor. If an Event of Default (other than an Event of Default with respect to certain events of bankruptcy, insolvency or reorganization) occurs and is continuing, then and in every such case, the Trustee or the holders of not less than 25% in aggregate principal amount of the then outstanding Notes may declare the principal amount, together with any accrued and unpaid interest, premium and Liquidated Damages on all the Notes and Guaranties then outstanding to be due and payable, by a notice in writing to the Issuers (and to the Trustee, if given by holders) specifying the Event of Default and that it is a "notice of acceleration" and on the fifth Business Day after delivery of such notice the principal amount, in either case, together with any accrued and unpaid interest, premium and Liquidated Damages on all the Notes or the Guaranties then outstanding will become immediately due and payable, notwithstanding anything contained in the Indenture, the Notes or the Guaranties to the contrary. Upon the occurrence of specified Events of Default relating to bankruptcy, insolvency or reorganization, or cross-acceleration to other indebtedness the principal amount, together with any accrued and unpaid interest, premium and Liquidated Damages, will immediately and automatically become due and payable, without the necessity of notice or any other action by any Person. Holders of the Notes may not enforce the Indenture, the Notes or the Guaranties except as provided in the Indenture. Subject to certain limitations, holders of a majority in principal amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from holders of the Notes notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal or interest) if it determines that withholding notice is in their interest. In the case of any Event of Default occurring by reason of any willful action (or inaction) taken (or not taken) by or on behalf of any Obligor with the intention of avoiding payment of the premium that the Issuers would have had to pay if the Issuers then had elected to redeem the Notes pursuant to the optional redemption provisions of the Indenture, an equivalent premium shall also become and be immediately due and payable to the extent permitted by law upon the acceleration of the Notes. If an Event of Default occurs prior to August 1, 2002 by reason of any willful action (or inaction) taken (or not taken) by or on behalf of the Issuers with the intention of avoiding the prohibition on redemption of the Notes prior to August 1, 2002, then the additional premium specified in the Indenture shall also become immediately due and payable to the extent permitted by law upon the acceleration of the Notes and Guaranties. The holders of a majority in aggregate principal amount of the Notes then outstanding by notice to the Trustee may on behalf of the holders of all of the Notes waive any existing Default or Event of Default and its consequences under the Indenture except a continuing Default or Event of Default in the payment of principal of, premium and Liquidated Damages, if any, or interest on the Notes or the Guaranties. The Issuers will be required to deliver to the Trustee annually statements regarding compliance with the Indenture, and the Issuers are required upon becoming aware of any Default or Event of Default, to deliver to the Trustee a statement specifying such Default or Event of Default. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS No past, present or future director, officer, employee, agent, manager, partner, member, incorporator or stockholder of any Obligor, in such capacity, will have any liability for any obligations of any Obligor under the Notes, the Indenture or the Guaranties or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each holder of Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Guaranties. Such waiver may not be effective to waive liabilities under the federal securities laws and it is the view of the Commission that such a waiver is against public policy. 99 LEGAL DEFEASANCE AND COVENANT DEFEASANCE The Indenture provides that the Obligors may, at their option and at any time, elect to have all of their obligations discharged with respect to the outstanding Notes ("Legal Defeasance") except for (i) the rights of holders of outstanding Notes to receive payments in respect of the principal of, premium, if any, and interest and Liquidated Damages on such Notes when such payments are due from the trust referred to below, (ii) the Issuers' obligations with respect to the Notes concerning issuing temporary Notes, registration of Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an office or agency for payment and money for security payments held in trust, (iii) the rights, powers, trusts, duties and immunities of the Trustee, and the Issuers' obligations in connection therewith and (iv) the Legal Defeasance provisions of the Indenture. In addition, the Issuers may, at their option and at any time, elect to have their obligations released with respect to certain covenants that are described in the Indenture ("Covenant Defeasance") and thereafter any omission to comply with such obligations shall not constitute a Default or Event of Default with respect to the Notes. In the event Covenant Defeasance occurs, certain events (not including non-payment, bankruptcy, receivership, rehabilitation and insolvency events) described above under the heading "Events of Default and Remedies" will no longer constitute an Event of Default with respect to the Notes. In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of the holders of the Notes, cash in U.S. dollars, noncallable Government Securities, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest and Liquidated Damages on the outstanding Notes on the stated maturity or on the applicable redemption date, as the case may be, and the Issuers must specify whether the Notes are being defeased to maturity or to a particular redemption date; (ii) in the case of Legal Defeasance, the Issuers shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Issuers have received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the Issue Date, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such opinion of counsel shall confirm that, the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred; (iii) in the case of Covenant Defeasance, the Issuers shall have delivered to the Trustee an opinion of counsel in the United States reasonably acceptable to the Trustee confirming that the holders of the outstanding Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred; (iv) no Default or Event of Default shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the borrowing of funds to be applied to such deposit) or insofar as Events of Default from bankruptcy or insolvency events are concerned, at any time in the period ending on the 91st day after the date of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in a breach or violation of, or constitute a default under any material agreement or instrument (other than the Indenture) to which any Obligor is a party or by which any Obligor is bound; (vi) the Issuers must have delivered to the Trustee an opinion of counsel to the effect that, as of the date of such opinion, assuming that no holder of any Notes would be considered an insider of any Obligor under applicable Bankruptcy Law, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable Bankruptcy Law; (vii) each Issuer must deliver to the Trustee an officers' certificate stating that the deposit was not made by such Issuer with the intent of preferring the holders of Notes over the other creditors of such Issuer with the intent of defeating, hindering, delaying or defrauding creditors of such Issuer or others; and (viii) each Issuer must deliver to the Trustee an officers' certificate and an opinion of counsel, each stating that all conditions precedent provided for relating to the Legal Defeasance or the Covenant Defeasance have been complied with. TRANSFER AND EXCHANGE A holder may transfer or exchange Notes in accordance with the Indenture. The Registrar and the Trustee may require a holder, among other things, to furnish appropriate endorsements and transfer documents and the 100 Issuers may require a holder to pay any taxes and fees required by law or permitted by the Indenture. The Issuers are not required to transfer or exchange any Note selected for redemption. Also, the Issuers are not required to transfer or exchange any Note for a period of 15 days before a selection of Notes to be redeemed. The registered holder of a Note will be treated as the owner of it for all purposes. AMENDMENT, SUPPLEMENT AND WAIVER Except as provided in the next three succeeding paragraphs, the Indenture or the Notes may be amended or supplemented with the consent of the holders of at least a majority in principal amount of the Notes then outstanding (including, without limitation, consents obtained in connection with a purchase of, or tender offer or exchange offer for, Notes), and any existing default or compliance with any provision of the Indenture or the Notes may be waived with the consent of the holders of a majority in principal amount of the then outstanding Notes (including consents obtained in connection with a tender offer or exchange offer for Notes). Without the consent of each holder affected, an amendment or waiver may not (with respect to any Notes held by a non-consenting holder) (i) reduce the principal amount of Notes whose holders must consent to an amendment, supplement or waiver, (ii) reduce the principal of or change the fixed maturity of any Note or alter the provisions with respect to the redemption of the Notes (other than provisions relating to the covenants described above under the caption "-- Repurchase at the Option of Holders"), (iii) reduce the rate of or change the time for payment of interest on any Note, (iv) waive a Default or Event of Default in the payment of principal of or premium, if any, or interest on the Notes (except a rescission of acceleration of the Notes by the holders of at least a majority in aggregate principal amount of the Notes and a waiver of the payment default that resulted from such acceleration), (v) make any Note payable in money other than that stated in the Notes, (vi) make any change in the provisions of the Indenture relating to waivers of past Defaults or the rights of holders of Notes to receive payments of principal of or premium, if any, or interest on the Notes, (vii) waive a redemption payment with respect to any Note (other than a payment required by one of the conditions described above under the caption "--Repurchase at the Option of Holders"), (viii) release any Guarantor from its obligations under any Guaranty, or (ix) make any change in the foregoing amendment and waiver provisions. Notwithstanding the foregoing, without notice to or the consent of any holder of Notes, the Obligors and the Trustee may amend or supplement the Indenture or the Notes (y) to provide for the Possible REIT Restructuring and such related modifications to the Indenture and the Notes as may be necessary to permit the implementation of, and the continuing operations of HPOC and the REIT after giving effect to, the Possible REIT Restructuring, including the making of operating lease payments by HPOC to the Company, the distribution by the Company of such amounts as may be required by the Internal Revenue Code and the regulations promulgated thereunder to maintain REIT status, which would include 95% of its taxable income (excluding net capital gains) under current law, and any other modifications to the covenants that may be necessary to comply with the applicable provisions of the Internal Revenue Code and the regulations promulgated thereunder, or may be necessary, in the good faith determination of the respective Boards of the Issuers as evidenced by Board resolutions, to provide for the same relative benefits and restrictions as existed under the Indenture prior to the Possible REIT Restructuring or (z) to cure any ambiguity, defect or inconsistency, to provide for uncertificated Notes in addition to or in place of certificated Notes, to provide for the assumption of the Obligors' obligations to holders of Notes in the case of a merger or consolidation, to make any change that would provide any additional rights or benefits to the holders of Notes or that does not adversely affect the legal rights under the Indenture of any such holder, to provide for the issuance of registered notes in exchange for the Notes pursuant to the Registration Rights Agreement or to comply with requirements of the Commission in order to effect or maintain the qualification of the Indenture under the TIA. Notwithstanding any provision of clause (y) above to the contrary, no transaction described therein may be effected except in compliance with the "Asset Sale" covenant in effect on the Issue Date or as amended in accordance with the terms of the Indenture (excluding amendment pursuant to such clause (y)). In addition, any amendment to the provisions of the article of the Indenture which governs subordination will require the consent of the holders of at least 66 2/3% in aggregate principal amount of the Notes then outstanding, if such amendment would adversely affect the rights of holders of Notes. 101 CONCERNING THE TRUSTEE The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of either Issuer, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; however, if it acquires any conflicting interest it must eliminate such conflict within 90 days, apply to the Commission for permission to continue or resign. The holders of a majority in principal amount of the then outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that in case an Event of Default shall occur (which shall not be cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. However, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any holder of Notes, unless such holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense. ADDITIONAL INFORMATION Anyone who receives this Prospectus may obtain a copy of the Indenture and Registration Rights Agreement without charge by writing to Hollywood Park, Inc., 1050 South Prairie Avenue, Inglewood CA 90301, Attn: Assistant Treasurer. CERTAIN DEFINITIONS Set forth below are certain defined terms used in the Indenture. Reference is made to the Indenture for a full disclosure of all such terms, as well as any other capitalized terms used herein for which no definition is provided. "Accrued Bankruptcy Interest" means, with respect to any Senior Debt, all interest accruing thereon after the filing of a petition or commencement of any other proceeding by or against any Obligor under any Bankruptcy Law, in accordance with and at the rate (including any rate applicable upon any default or event of default, to the extent lawful) specified in the documents evidencing or governing such Indebtedness or Hedging Obligations, whether or not the claim for such interest is allowed as a claim after such filing in any proceeding under such Bankruptcy Law. "Acquired Debt" means, with respect to any specified Person, Indebtedness of another Person and any of such other Person's Subsidiaries existing at the time such other Person becomes a Subsidiary of such Person or at the time it merges or consolidates with such Person or any of such Person's Subsidiaries or is assumed by such Person or any Subsidiary of such Person in connection with the acquisition of assets from such other Person and in each case not Incurred by such Person or any Subsidiary of such Person or such other Person in connection with, or in anticipation or contemplation of, such other Person becoming a Subsidiary of such Person or such acquisition, merger or consolidation. "Affiliate" means, when used with reference to any Person, (i) any other Person directly or indirectly controlling, controlled by, or under direct or indirect common control with, the referent Person or such other Person, as the case may be, or (ii) any directors, officer or partner of such Person or any Person specified in clause (i) above. For the purposes of this definition, the term "control" when used with respect to any specified Person means the power to direct or cause the direction of management or policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "affiliated," "controlling," and "controlled" have meanings correlative of the foregoing. None of the Initial Purchasers nor any of their respective Affiliates shall be deemed to be an Affiliate of any Obligor or of any of their respective Affiliates. No Wholly Owned Restricted Subsidiary of either Issuer shall be deemed to be an Affiliate of any Obligor. "Asset Acquisition" means (i) an Investment by any Obligor in any other Person pursuant to which such Person shall become an Obligor or a Wholly Owned Restricted Subsidiary of an Obligor or shall be merged into, or with any Obligor or Wholly Owned Restricted Subsidiary of an Obligor or (ii) the acquisition by any Obligor 102 of assets of any Person comprising a division or line of business of such Person or all or substantially all of the assets of such Person. "Asset Sale" means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other disposition (for purposes of this definition, each a "disposition") by any Obligor (including, without limitation, pursuant to any sale and leaseback transaction or any merger or consolidation of any Restricted Subsidiary of either Issuer with or into another Person (other than another Obligor) whereby such Restricted Subsidiary shall cease to be a Restricted Subsidiary of either Issuer) to any Person of (i) any property or assets of any Obligor to the extent that any such disposition is not in the ordinary course of business of such Obligor or (ii) any Capital Stock of any Restricted Subsidiary, other than (1) any disposition to either Issuer, (2) any disposition to any Obligor or Wholly Owned Restricted Subsidiary, (3) any disposition that constitutes a Restricted Payment or a Permitted Investment that is made in accordance with the covenant described above under the caption "-- Restricted Payments", (4) any transaction or series of related transactions resulting in net cash proceeds to such Obligor of less than $1 million, (5) any transaction that is consummated in accordance with the covenant described above under the caption "--Merger, Consolidation or Sale of Assets," (6) the sale or discount, in each case without recourse (direct or indirect), of accounts receivable arising in the ordinary course of business of either Issuer or such Restricted Subsidiary, as the case may be, but only in connection with the compromise or collection thereof, (7) any pledge, assignment by way of collateral security, grant of security interest, hypothecation or mortgage, permitted by the Indenture or any foreclosure, judicial or other sale, public or private, by the pledgee, assignee, mortgagee or other secured party of the subject assets, (8) a disposition of assets constituting a Permitted Investment or (9) distributions, recapitalizations or reclassifications of Equity Interests (other than Disqualified Capital Stock) of HPOC or the Company in connection with the Possible REIT Restructuring. "Bank Credit Facility" means the Credit Facility provided to the Company pursuant to the Reducing Revolving Loan Agreement, dated as of March 27, 1997, by and among the Company, the financial institutions from time to time named therein (the "Banks"), Bank of Scotland, Bankers Trust Company and Societe General, as Co-Agents for the Banks, and Bank of America NT&SA, as Managing Agent, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time by the same or different institutional lenders. "Bankruptcy Law" means the United States Bankruptcy Code and any other bankruptcy, insolvency, receivership, reorganization, moratorium or similar law providing relief to debtors, in each case, as from time to time amended and applicable to the relevant case. "Board" means the Board of Directors or similar governing entity of an Obligor, the members of which are elected by the holders of Capital Stock of such Obligor or, if applicable, a duly-appointed committee of such Board of Directors or similar governing body, having jurisdiction over the subject matter at issue. "Boomtown Notes" means the 11 1/2% First Mortgage Notes due 2003 issued by Boomtown and remaining outstanding after Boomtown's offer to repurchase and repurchase of such notes pursuant to an Offer to Purchase and Consent Solicitation Statement dated March 28, 1997, as amended. "Capital Stock" means (i) with respect to any Person that is a corporation, any and all shares, rights, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of common stock and preferred stock of such Person, and (ii) with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person. "Capitalized Lease Obligation" means, as to any Person, the discounted rental stream payable by such Person that is required to be classified and accounted for as a capital lease obligation under GAAP and, for purposes of this definition, the amount of such obligation at any date shall be the capitalized amount of such obligation at such date, determined in accordance with GAAP. The final maturity of any such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without penalty. 103 "Cash Equivalents" means (i) Government Securities; (ii) certificates of deposit, eurodollar time deposits and bankers acceptances maturing within 12 months from the date of acquisition thereof by any Obligor and issued by any commercial bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any U.S. branch of foreign bank having, at the date of acquisition of the applicable Cash Equivalent, (A) combined capital and surplus of not less than $500 million and (B) a commercial paper rating of at least A-1 from S&P or at least P-1 from Moody's; (iii) repurchase obligations with a term of not more than seven days after the date of acquisition thereof by any Obligor for underlying securities of the types described in clauses (i), (ii) and (vi) hereof, entered into with any financial institution meeting the qualifications specified in clause (ii) above; (iv) commercial paper having a rating of at least P-1 from Moody's or a rating of at least A-1 from S&P on the date of acquisition thereof by any Obligor; (v) debt obligations of any corporation maturing within 12 months after the date of acquisition thereof by any Obligor, having a rating of at least P-1 or aaa from Moody's or A-1 or AAA from S&P on the date of such acquisition; and (vi) mutual funds and money market accounts investing at least 90% of the funds under management in instruments of the types described in clauses (i) through (v) above and, in each case, maturing within the period specified above for such instrument after the date of acquisition thereof by any Obligor. "Change of Control" means the occurrence of any of the following: (i) the Possible REIT Restructuring, (ii) the sale, lease, transfer, conveyance or other disposition (other than by way of merger or consolidation), in one transaction or a series of related transactions, of all or substantially all of the assets of either Issuer, or the Issuers and their Restricted Subsidiaries taken as a whole, to any "person" (as such term is used in Section 13(d)(3) of the Exchange Act) (as defined below), (iii) the adoption, or, if applicable, the approval of any requisite percentage of either Issuer's stockholders of a plan relating to the liquidation or dissolution of such Issuer, (iv) the consummation of any transaction (including, without limitation, any merger or consolidation) the result of which is that any "person" (as defined above), other than a Principal, becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that a person shall be deemed to have "beneficial ownership" of all securities that such person has the right to acquire, whether such right is currently exercisable or is exercisable only upon the occurrence of a subsequent condition), directly or indirectly, of more than 50% of the Voting Stock of either Issuer (measured by voting power rather than number of shares), or (v) during any consecutive two-year period, individuals who at the beginning of such period constituted the Board of either Issuer (together with any new directors whose election to such Board or whose nomination for election by the stockholders of such Issuer was approved by a vote of a majority of the directors of such Issuer then still in office who were either directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of such Issuer then in office. Except as otherwise expressly provided, the term "Change of Control" includes a REIT Change of Control. "Consolidated Coverage Ratio" means, with respect to any Person on any date of determination, the ratio of (a) Consolidated EBITDA for the period of four fiscal quarters most recently ended prior to such date for which internal financial reports are available, ended not more than 135 days prior to such date to (b) (i) Consolidated Interest Expense during such period plus (ii) dividends on or in respect of any Capital Stock of any such Person paid in cash during such period; provided that the Consolidated Coverage Ratio shall be calculated giving pro forma effect, as of the beginning of the applicable period, to any acquisition, Incurrence or redemption of Indebtedness (including the Notes), issuance or redemption of Disqualified Capital Stock, acquisition, Asset Sale, purchases of assets that were previously leased, redemption of Convertible Preferred Stock or re-designation of a Restricted Subsidiary as an Unrestricted Subsidiary, at any time during or subsequent to such period, but on or prior to the date on which such calculation is made. In making such computation, Consolidated Interest Expense (i) attributable to any Indebtedness bearing a floating interest rate shall be computed on a pro forma basis as if the rate in effect on the date of computation had been the applicable rate for the entire period, or (ii) attributable to interest on any Indebtedness under a revolving Credit Facility shall be computed on a pro forma basis based upon the average daily balance of such Indebtedness outstanding during the applicable period. 104 "Consolidated EBITDA" means, with respect to any Person for any period, the sum (without duplication) of (i) the Consolidated Net Income of such Person for such period, plus (ii) to the extent that any of the following shall have been taken into account in determining such Consolidated Net Income, and without duplication, (A) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions of assets outside the ordinary course of business), (B) the Consolidated Interest Expense of such Person for such period, (C) the amortization expense (including the amortization of deferred financing charges) and depreciation expense for such Person and its Restricted Subsidiaries for such period and (D) other non-cash items (other than non-cash interest) of such Person or any of its Restricted Subsidiaries (including any non-cash compensation expense attributable to stock option or other equity compensation arrangements), other than any non- cash item for such period that requires the accrual of or a reserve for cash charges for any future period and other than any non-cash charge for such period constituting an extraordinary item of loss, less (iii)(A) all non-cash items of such Person or any of its Restricted Subsidiaries increasing such Consolidated Net Income for such period and (B) all cash payments during such period relating to non-cash items that were added back in determining Consolidated EBITDA in any prior period. "Consolidated Interest Expense" means, with respect to any Person for any period, the sum of (i) the consolidated interest expense of such Person and its Restricted Subsidiaries for such period, whether paid or accrued (including, without limitation, amortization of original issue discount, non- cash interest payments, the interest component of any deferred payment obligations, the interest component of all payments associated with Capitalized Lease Obligations, commissions, discounts and other fees and charges incurred in respect of letter of credit or bankers' acceptance financings, and net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated interest of such Person and its Subsidiaries that was capitalized during such period, and (iii) any interest expense on Indebtedness of another Person that is guaranteed by such Person or one of its Restricted Subsidiaries or secured by a Lien on assets of such Person or one of its Restricted Subsidiaries (whether or not such Support Obligation or Lien is called upon) and (iv) the product of (a) all dividend payments on any series of preferred stock of such Person or any of its Restricted Subsidiaries, times (b) a fraction, the numerator of which is one and the denominator of which is one minus the then current combined federal, state and local statutory tax rate of such Person, expressed as a decimal, in each case, on a consolidated basis and in accordance with GAAP. "Consolidated Net Income" means, with respect to any Person for any period, the aggregate net income (or loss) of such Person and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided, however, that there shall be excluded therefrom (i) net after-tax gains and losses from all sales or dispositions of assets outside of the ordinary course of business and (ii) net after-tax extraordinary or non- recurring gains or losses, (iii) the net income of any Person acquired in a "pooling of interests" transaction accrued prior to the date it becomes a Restricted Subsidiary of such Person or is merged or consolidated with or into such Person or any Restricted Subsidiary, (iv) the cumulative effect of a change in accounting principles, (v) any net income of any other Person if such other Person is not a Restricted Subsidiary and is accounted for by the equity method of accounting, except that such Person's equity in the net income of any such other Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such other Person during such period to such Person or a Restricted Subsidiary as a dividend or other distribution, (subject, in case of a dividend or other distribution to a Restricted Subsidiary, to the limitation that such amount so paid to a Restricted Subsidiary shall be excluded to the extent that such amount could not at that time be paid to either Issuer due to the restrictions set forth in clause (vi) below (regardless of any waiver of such conditions)), (vi) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, by contract, operation of law, pursuant to its charter or otherwise on the payment of dividends or the making of distributions by such Restricted Subsidiary to such Person except that (A) such Person's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been paid or distributed during such period to such Person as a dividend or other distribution (provided that such ability is not due to a waiver of such restriction) and (B) such Person's equity in a net loss of any such Restricted 105 Subsidiary for such period shall be included in determining such Consolidated Net Income regardless of any such restriction, (vii) any restoration to income of any contingency reserve, except to the extent that provision for such reserve was made out of Consolidated Net Income accrued at any time following the Issue Date, (viii) income or loss attributable to discontinued operations (including, without limitation, operations disposed of during such period whether or not such operations were classified as discontinued), (ix) in the case of a successor to such Person by consolidation or merger or as a transferee of such Person's assets, any net income or loss of the successor corporation prior to such consolidation, merger or transfer of assets and (x) the net income (but not loss) of any Unrestricted Subsidiary, whether or not distributed to any Obligor. "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (i) the consolidated equity of the common stockholders of such Person and its consolidated Subsidiaries as of such date, plus (ii) the respective amounts reported on such Person's consolidated balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Capital Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock, less (x) all write-ups (other than write-ups resulting from foreign currency translations and write-ups of tangible assets of a going concern business made within 12 months after the acquisition of such business) subsequent to the Issue Date in the book value of any asset owned by such Person or a consolidated Subsidiary of such Person, (y) all investments as of such date in unconsolidated Subsidiaries and in Persons that are not Subsidiaries (except, in each case, Permitted Investments), and (z) all unamortized debt discount and expense and unamortized deferred charges as of such date, all of the foregoing determined in accordance with GAAP. "Convertible Preferred Stock" means the Company's $70.00 Convertible Preferred Stock, par value $1.00 per share, and the depositary shares relating thereto. "Core Businesses" means the gaming, card club, racing, sports, entertainment, lodging, restaurant, riverboat operations, real estate development and all other businesses and activities necessary for or reasonably related or incident thereto, including without limitation related acquisition, construction, development or operation of related truck stop, transportation, retail and other facilities designed to enhance any of the foregoing. "Credit Facilities" means, with respect to any Obligor, one or more debt facilities or commercial paper facilities with any combination of banks, other institutional lenders and other Persons extending financial accommodations or holding corporate debt obligations in the ordinary course of their business, providing for revolving credit loans, term loans, receivables financing (including through the sale of receivables to such lenders or to special purpose entities formed to borrow from such lenders against such receivables) or letters of credit, in each case, as amended, restated, modified, renewed, refunded, replaced or refinanced in whole or in part from time to time by the same or different institutional lenders. "Default" means any event that is or with the passage of time or the giving of notice or both would be an Event of Default. "Designated Senior Debt" means any Indebtedness under the Bank Credit Facility (which is outstanding or which the lenders thereunder have a commitment to extend) and, if applicable, any other Senior Debt permitted under the Indenture, the principal amount (committed or outstanding) of which is $25 million or more and that has been designated by either Issuer as "Designated Senior Debt." "Disqualified Capital Stock" means any Capital Stock, other than the Convertible Preferred Stock, which by its terms (or by the terms of any security into which it is, by its terms, convertible or for which it is, by its terms, exchangeable at the option of the holder thereof), or upon the happening of any specified event, is required to be redeemed or is redeemable (at the option of the holder thereof) at any time prior to the earlier of the repayment of all Notes or the stated maturity of the Notes or is exchangeable at the option of the holder thereof for Indebtedness at any time prior to the earlier of the repayment of all Notes or the stated maturity of the Notes. "Equity Interests" means Capital Stock and all warrants, options or other rights to acquire Capital Stock (but excluding any debt security that is convertible into, or exchangeable for, Capital Stock). 106 "Event of Default" means the occurrence of any of the events described under the caption "--Events of Default and Remedies", after giving effect to any applicable grace periods or notice requirements. "GAAP" means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date. "Gaming Approval" means any governmental approval relating to any gaming business or enterprise. "Gaming Authority" means any governmental authority with regulatory oversight of, authority to regulate or jurisdiction over any gaming businesses or enterprises, including the State Gaming Control Board of Nevada, the Washoe County, Nevada, or the Nevada, Mississippi or Louisiana Gaming Commission with regulatory oversight of, authority to regulate or jurisdiction over any gaming operation (or proposed gaming operation) owned, managed or operated by any Obligor. "Gaming Laws" means all applicable provisions of all (i) constitutions, treaties, statutes, laws, rules, regulations and ordinances of any Gaming Authority, (ii) Gaming Approvals and (iii) orders, decisions, judgments, awards and decrees of any Gaming Authority. "Global Note" means a permanent global note in registered form deposited with the Trustee, as a custodian for The Depositary Trust Company or any other designated depositary. "Government Securities" means marketable direct obligations issued by, or unconditionally guaranteed by, the United States government or issued by any agency or instrumentality thereof and backed by the full faith and credit of the United States, in each case maturing within 12 months from the date of acquisition thereof by any Obligor. "Guarantor" means any existing or future Material Restricted Subsidiaries of either Issuer, which has guaranteed the obligations of the Issuers arising under or in connection with the Notes, as required by the Indenture. "Guaranty" means a guaranty by a Guarantor of the Obligations of the Issuers arising under or in connection with the Notes. "Hedging Obligations" means all obligations of the Obligors arising under or in connection with any rate or basis swap, forward contract, commodity swap or option, equity or equity index swap or option, bond, note or bill option, interest rate option, foreign currency exchange transaction, cross currency rate swap, currency option, cap, collar or floor transaction, swap option, synthetic trust product, synthetic lease or any similar transaction or agreement. "Incur" means, with respect to any Indebtedness of any Person or any Lien, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or Lien or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness on the balance sheet of such Person (and "Incurrence," "Incurred," "Incurrable" and "Incurring" shall have meanings correlative to the foregoing). "Indebtedness" means with respect to any Person, without duplication, whether contingent or otherwise, (i) any obligations for money borrowed, (ii) any obligation evidenced by bonds, debentures, notes, or other similar instruments, (iii) obligations in respect of letters of credit or other similar instruments, (iv) any obligations to pay the deferred purchase price of property or services, including Capitalized Lease Obligations, (v) the maximum fixed redemption or repurchase price of Disqualified Capital Stock, (vi) Indebtedness of other Persons of the types described in clauses (i) through (v) above, secured by a Lien on the assets of such Person or its Restricted Subsidiaries, valued, in such cases where the recourse thereof is limited to such assets, at the lesser of the principal amount of such Indebtedness or the fair market value of the subject assets, (vii) indebtedness of other Persons of the types described in clauses (i) through (v) above, guaranteed by such Person or any of its 107 Restricted Subsidiaries and (viii) the net obligations of such Person under Hedging Obligations; provided that the amount of any Indebtedness at any date shall be calculated as the outstanding balance of all unconditional obligations and the maximum liability supported by any contingent obligations at such date. Notwithstanding the foregoing, "Indebtedness" shall not be construed to include trade payables, credit on open account, accrued liabilities, provisional credit, daylight overdrafts or similar items. "Indiana Joint Venture Project" means the possible development of a riverboat casino facility in Switzerland County, Indiana. "Interest Swap Obligations" means the net obligations of any Person under any interest rate protection agreement, interest rate future, interest rate option, interest rate swap, interest rate cap, collar or floor transaction or other interest rate Hedging Obligation. "Investment" by any Person means any direct or indirect (i) loan, advance or other extension of credit or capital contribution (valued at the fair market value thereof as of the date of contribution or transfer) (by means of transfers of cash or other property or services for the account or use of other Persons, or otherwise); (ii) purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by any other Person (whether by merger, consolidation, amalgamation or otherwise and whether or not purchased directly from the issuer of such securities or evidences of Indebtedness); (iii) guarantee or assumption of any Indebtedness or any other obligation of any other Person (except for an assumption of Indebtedness for which the assuming Person receives consideration at the time of such assumption in the form of property or assets with a fair market value at least equal to the principal amount of the Indebtedness assumed); (iv) the acquisition, by purchase or otherwise, of all or substantially all of the business or assets or other beneficial ownership of any Person; and (v) all other items that would be classified as investments (including, without limitation, purchases of assets outside the ordinary course of business) on a balance sheet of such Person prepared in accordance with GAAP. Notwithstanding the foregoing, the purchase or acquisition of any securities, Indebtedness or Productive Assets of any other Person solely with Qualified Capital Stock shall not be deemed to be an Investment. The term "Investments" shall also exclude extensions of trade credit and advances to customers and suppliers to the extent made in the ordinary course of business on ordinary business terms. The amount of any non-cash Investment shall be the fair market value of such Investment, as determined conclusively in good faith by management of affected Obligor unless the fair market value of such Investment exceeds $5 million, in which case the fair market value shall be determined conclusively in good faith by the Board of such Obligor at the time such Investment is made. The amount of any Investment shall not be adjusted for increases or decreases in value, or write-ups, write-downs or write-offs subsequent to the date such Investment is made with respect to such Investment. "Issue Date" means August 7, 1997. "Letter of Credit Obligations" means Obligations of an Obligor arising under or in connection with letters of credit. "Lien" means, with respect to any assets, any mortgage, lien, pledge, charge, security interest or other similar encumbrance (including without limitation, any conditional sale or other title retention agreement or lease in the nature thereof, any option or other agreement to sell, and any filing of or agreement to give, any security interest). "Material Restricted Subsidiary" means any Subsidiary which is both a Material Subsidiary and a Restricted Subsidiary. "Material Subsidiary" means, at any date of determination, any Subsidiary of either Issuer which, together with its Subsidiaries (i) had assets which as of the date of the Issuers' most recent quarterly consolidated balance sheet, constituted 5% or more of the Issuers' total assets on a consolidated basis as of such date, as determined in accordance with GAAP, (ii) had Consolidated EBITDA for the 12-month period ending on the date of the Issuers' most recent quarterly consolidated statement of income which constituted 5% or more of the Issuers' Consolidated EBITDA (calculated for this purpose without giving effect to clause (vi) of the definition of Consolidated Net Income) for such period or (iii) would constitute a Significant Subsidiary. 108 "Moody's" means Moody's Investors Services, Inc., and its successors. "Net Cash Proceeds" means with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents received by any Obligor from such Asset Sale, net of (i) reasonable out-of- pocket expenses, fees and other direct costs relating to such Asset Sale (including, without limitation, brokerage, legal, accounting and investment banking fees and sales commissions), (ii) taxes paid or payable after taking into account any reduction in tax liability due to available tax credits or deductions and any tax sharing arrangements, (iii) repayment of Indebtedness (other than any intercompany Indebtedness) that is required by the terms thereof to be repaid or pledged as cash collateral, or the holders of which otherwise have a contractual claim that is legally superior to any claim of the holders (including a restriction on transfer) to the proceeds of the subject assets, in connection with such Asset Sale, and (iv) appropriate amounts to be provided by any applicable Obligor, as a reserve, in accordance with GAAP, against any liabilities associated with such Asset Sale and retained by limitation, pension and other post-employment benefit liabilities, liabilities related to environmental matters and liabilities under any indemnification obligations associated with such Asset Sale and any reserve for adjustment to the sale price received in such Asset Sale for so long as such reserve is held. "Non-Recourse Indebtedness" means Indebtedness of an Unrestricted Subsidiary (i) as to which none of the Obligors (a) provides credit support of any kind (including any undertaking, agreement or instrument that would constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor or otherwise) or (c) constitutes the lender; (ii) no default with respect to which (including any rights that the holders thereof may have to take enforcement action against an Unrestricted Subsidiary) would permit (upon notice, lapse of time or both) any holder of any other Indebtedness (other than the Notes being offered hereby) of any Obligor to declare a default on such other Indebtedness or cause the payment thereof to be accelerated or payable prior to its stated maturity and (iii) as to which the lenders have been notified in writing that they will not have any recourse to the stock or assets of any Obligor. "Obligations" means any principal, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities, whether absolute or contingent, payable under the documentation governing any Indebtedness. "Obligor" means either Issuer or any Guarantor. "Paying Agent" means the Person so designated by the Issuers in accordance with the Indenture, initially the Trustee. "Permitted Indebtedness" means, without duplication, each of the following: (i) Indebtedness of the Obligors outstanding on the Issue Date and reflected in the financial statements set forth in this Prospectus as in effect on the Issue Date as reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon; (ii) Indebtedness Incurred by the Issuers under the Notes and by the Guarantors under the Guaranties; (iii) Indebtedness Incurred by any Obligor pursuant to the Boomtown Notes and the Bank Credit Facility; provided that the aggregate principal amount of Indebtedness of the Obligors outstanding thereunder as of any date of Incurrence shall not exceed $100 million, to be reduced dollar-for-dollar by the amount of any increase to the face amount of Support Obligations permitted to be Incurred pursuant to clause (xi) of this definition; (iv) Indebtedness of either Issuer to any Obligor or of any Guarantor to any other Obligor for so long as such Indebtedness is held by either Issuer or by another Obligor; provided that (A) any Indebtedness of either Issuer to any other Obligor is unsecured and evidenced by an intercompany promissory note that is subordinated, pursuant to a written agreement, to such Issuer's obligations under the Indenture and the 109 Notes and the Registration Rights Agreement, and (B) if as of any date any Person other than either Issuer or a Guarantor owns or holds any such Indebtedness or holds a Lien in respect of such Indebtedness, such date shall be deemed to be an Incurrence of Indebtedness not constituting Permitted Indebtedness under this clause (iv) by the issuer of such Indebtedness; (v) Indebtedness of a Restricted Subsidiary to either Issuer for so long as such Indebtedness is held by an Obligor; provided that if as of any date any Person other than an Obligor acquires any such Indebtedness or holds a Lien in respect of such Indebtedness, such acquisition shall be deemed to be an Incurrence of Indebtedness not constituting Permitted Indebtedness under this clause (v) by the issuer of such Indebtedness; (vi) Permitted Refinancing Indebtedness; (vii) the Incurrence by Unrestricted Subsidiaries of Non-Recourse Indebtedness; provided that, if any such Indebtedness ceases to be Non- Recourse Indebtedness of an Unrestricted Subsidiary, such event shall be deemed to constitute an Incurrence of Indebtedness that is not permitted by this clause (vii); (viii) Indebtedness Incurred by any Obligor solely to finance the construction or acquisition or improvement of, or consisting of Capitalized Leased Obligations Incurred to acquire rights of use in, capital assets useful in such Obligor's business and, in any such case, Incurred prior to or within 180 days after the construction, acquisition, improvement or leasing of the subject assets, not to exceed in aggregate principal amount outstanding at any time, (A) $15 million per Obligor or (B) $100 million in the aggregate for all of the Obligors, and additional Indebtedness of the kind described in this clause (viii) with respect to which no Obligor is directly or indirectly liable, and which is expressly made non-recourse to the Obligors and all of their assets, except the asset so financed; (ix) Interest Swap Obligations entered into not as speculative Investments but as hedging transactions designed to protect the Obligors against fluctuations in interest rates in connection with Indebtedness otherwise permitted hereunder; (x) Indebtedness of any Obligor arising in respect of performance bonds and completion guaranties (to the extent that the Incurrence thereof does not result in the Incurrence of any obligation for the payment of borrowed money of others), in the ordinary course of business, in amounts and for the purposes customary in such Obligor's industry for businesses comparable to those of such Obligor; provided, that such Indebtedness shall be Incurred solely in connection with the development, construction, improvement or enhancement of assets useful in such Obligor's business and; (xi) other Indebtedness consisting of Support Obligations not exceeding $25 million in aggregate principal amount at any time, which may be increased by the Issuers in their discretion, subject to availability under, and a corresponding reduction to, the principal amount of Indebtedness permitted to be Incurred under the Bank Credit Facility pursuant to clause (iii) of this definition. "Permitted Investments" means, without duplication, each of the following: (i) Investments in cash (including deposit accounts with major commercial banks) and Cash Equivalents; (ii) Investments by the Obligors in any Obligor or any Person that is or will become upon giving effect to such Investment, or as a result of which such Person is merged, consolidated or liquidated into, or conveys substantially of all its assets to, an Obligor or a Wholly Owned Restricted Subsidiary; provided that for purposes of calculating at any date the aggregate amount of Investments made since the Issue Date pursuant to the covenant described above under the caption "--Restricted Payments," such Investment shall be a Permitted Investment only so long as any Subsidiary in which any such Investment has been made continues to be an Obligor or a Wholly Owned Restricted Subsidiary; (iii) Investments existing on the Issue Date, each such Investment to be (A) in an amount less than $1 million, (B) listed on a schedule to the Indenture or (C) an existing Investment by any one or combination of HPI and its consolidated subsidiaries in any other such Person; 110 (iv) accounts receivable created or acquired in the ordinary course of business of any Obligor on ordinary business terms; (v) Investments arising from transactions by the Obligors with trade creditors or customers in the ordinary course of business (including any such Investment received pursuant to any plan of reorganization or similar arrangement pursuant to the bankruptcy or insolvency of such trade creditors or customers or otherwise in settlement of a claim); (vi) Investments made as the result of non-cash consideration received from an Asset Sale that was made pursuant to and in compliance with the covenant described above under the caption "--Assets Sales"; and (vii) Investments consisting of advances to officers, directors and employees of the Obligors for travel, entertainment, relocation, purchases of Capital Stock of an Obligor permitted by the Indenture and analogous ordinary business purposes. "Permitted Junior Securities" means Equity Interests in the Obligors or debt securities that are subordinated to all Senior Debt (and any debt securities issued in exchange for Senior Debt) to substantially the same extent as, or to a greater extent than, the Notes and the Guaranties are subordinated to Senior Debt pursuant to the Indenture. "Permitted Liens" means (i) Liens in favor of either Issuer or Liens on the assets of any Guarantor so long as such Liens are held by another Obligor; (ii) Liens on property of a Person existing at the time such Person is merged into or consolidated with any Obligor; provided that such Liens were not Incurred in anticipation of such merger or consolidation and do not extend to any assets other than those of the Person merged into or consolidated with such Obligor; (iii) Liens on property existing at the time of acquisition thereof by any Obligor; provided that such Liens were not Incurred in anticipation of such acquisition; (iv) Liens Incurred to secure Indebtedness permitted by clause (viii) of the definition of Permitted Indebtedness, attaching to or encumbering only the subject assets and directly related property such as proceeds and products thereof and accessions and replacements thereto; (v) Liens to secure the performance of statutory obligations, surety or appeal bonds, performance bonds or other obligations of a like nature incurred in the ordinary course of business; (vi) Liens created by "notice" or "precautionary" filings in connection with operating leases or other transactions pursuant to which no Indebtedness is Incurred by any Obligor; (vii) Liens existing on the Issue Date; (viii) Liens for taxes, assessments or governmental charges or claims that are not yet delinquent or that are being contested in good faith by appropriate proceedings promptly instituted and diligently concluded; provided that any reserve or other appropriate provision as shall be required in conformity with GAAP shall have been made therefor; (ix) Liens on shares of any equity security or any warrant or operation to purchase an equity security or any security which is convertible into an equity security issued by any Obligor that holds, directly or indirectly through a holding company or otherwise, a license under any Gaming Law of the State of Nevada; provided that this clause (ix) shall apply only so long as the Gaming Laws of the State of Nevada provide that the creation of any restriction on the disposition of any of such securities shall not be effective and, if such Gaming Laws at any time cease to so provide, then this clause (ix) shall be of no further effect; (x) Liens on securities constituting "margin stock" within the meaning of Regulation G, T, U or X promulgated by the Board of Governors of the Federal Reserve System, to the extent that the Investment by any Obligor in such margin stock is permitted by the Indenture and (xi) other Liens arising by operation of law or in the ordinary course of business, securing obligations not constituting Indebtedness and not past due. "Permitted Refinancing Indebtedness" means any Indebtedness of any Obligor issued in exchange for, or the net proceeds of which are used to repay, redeem, extend, refinance, renew, replace, defease or refund other Permitted Indebtedness of such Obligor arising under clauses (i), (viii), (x) or (xi) of the definition of "Permitted Indebtedness" or Indebtedness Incurred under the Consolidated Coverage Ratio test in the covenant described above under the heading "--Incurrence of Indebtedness and Issuance of Preferred Stock" (any such Indebtedness, "Existing Indebtedness"); provided that: (i) the principal amount of such Permitted Refinancing Indebtedness does not exceed the principal amount of such Existing Indebtedness (plus the amount of 111 prepayment penalties, premiums and expenses incurred or paid in connection therewith), except to the extent that the Incurrence of such excess is otherwise permitted by the Indenture; (ii) if such Indebtedness is subordinated to, or pari passu in right of payment with, the Notes, such Permitted Refinancing Indebtedness has a final maturity date on or later than the final maturity date of, and has a Weighted Average Life to Maturity equal to or greater than the Weighted Average Life to Maturity of, such Existing Indebtedness, (iii) if such Existing Indebtedness is subordinated in right of payment to the Notes, such Permitted Refinancing Indebtedness has a final maturity date on or later than the final maturity date of, and is subordinated in right of payment to, the Notes on terms at least as favorable to the holders of Notes as those contained in the documentation governing the Indebtedness being repaid, redeemed, extended, refinanced, renewed, replaced, defeased or refunded and (iv) such Permitted Refinancing Indebtedness shall be Indebtedness solely of the Obligors originally obligated thereunder, unless otherwise permitted by the Indenture. "Plan of Liquidation" means, with respect to any Person, a plan (including by operation of law) that provides for, contemplates or the effectuation of which is preceded or accomplished by (whether or not substantially contemporaneously) (i) the sale, lease, conveyance, of all or substantially all of the assets of such Person otherwise than as an entirety or substantially as an entirety and (ii) the distribution of all or substantially all of the proceeds of such sale, lease, conveyance, or other disposition and all or substantially all of the remaining assets of such Person to holders of Capital Stock of such Person. "Principals" means (a) R.D. Hubbard, (b) any spouse, parent or child of such Principal or (c) any trust, corporation, partnership or other Person, the beneficiaries, stockholders, partners, owners or other Persons holding an 80% or more controlling interest in which are Persons described in clause (a) or (b) of this definition. "Productive Assets" means assets (including assets owned directly or indirectly through Capital Stock of a Restricted Subsidiary) of a kind used or usable in the businesses of the Obligors as they are conducted on the date of the Asset Sale. "Public Equity Offering" means a public equity offering, underwritten by a nationally recognized underwriter pursuant to an effective registration statement under the Securities Act of Qualified Capital Stock. "Qualified Capital Stock" means any Capital Stock that is not Disqualified Capital Stock. "Rating Agencies" means (i) S&P, (ii) Moody's or (iii) a nationally recognized securities rating agency or agencies, as the case may be, selected by the Issuers, which may be substituted for S&P or Moody's or both. "Rating Category" means (i) with respect to S&P, any of the following categories: BB, B, CCC, CC, C and D (or equivalent successor categories); (ii) with respect to Moody's, any of the following categories: Ba, B, Caa, Ca, C and D (or equivalent successor categories); and (iii) the equivalent of any such category of S&P or Moody's used by another Rating Agency. In determining whether the rating of the Notes has decreased by one or more gradations, gradations within Rating Categories (+ and - for S&P, 1, 2 and 3 for Moody's; or the equivalent gradations for another Rating Agency) shall be taken into account (e.g., with respect to S&P, a decline in a rating from BB+ to BB, as well as from BB to BB-, will constitute a decrease of one gradation). "Rating Decline" means (i) if the Notes are rated, immediately prior to the announcement of the REIT Restructuring, as investment grade instruments by both Rating Agencies, a subsequent decline in rating to a rating below investment grade by at least one Rating Agency, (ii) if the Notes are rated, immediately prior to the announcement of the REIT Restructuring, as investment grade instruments by either Rating Agency, a subsequent decline in the rating of the Notes by both Rating Agencies to a rating below investment grade or (iii) if the Notes are rated, immediately prior to the announcement of the REIT Restructuring, as below investment grade instruments by both Rating Agencies, a subsequent decline in the rating of the Notes by either or both of the Rating Agencies by one or more gradations (including gradations within Rating Categories as well as between Rating Categories). "REIT" means, a real estate investment trust into which the Company may be reorganized in the Possible REIT Restructuring. 112 "REIT Change of Control" means the occurrence of both (i) the Possible REIT Restructuring and (ii) a Rating Decline within 30 days after giving effect to the Possible REIT Restructuring. "Restricted Investment" means an Investment other than a Permitted Investment. "Restricted Subsidiary" of a Person means any Subsidiary of the referent Person that is not an Unrestricted Subsidiary. If no referent Person is specified, "Restricted Subsidiary" means a Subsidiary of either Issuer. "S&P" means Standard & Poors Rating Group, a division of The McGraw-Hill Industries, Inc., and its successors. "Senior Debt" means (i) all Indebtedness outstanding under Credit Facilities and all Hedging Obligations with respect thereto, (ii) any other Indebtedness permitted to be Incurred by the Issuers under the terms of the Indenture, unless the instrument under which such Indebtedness is Incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes and (iii) all Obligations with respect to the foregoing. Notwithstanding anything to the contrary in the foregoing, Senior Debt will not include (v) any liability for federal, state, local or other taxes owed or owing by either Issuer, (w) any Indebtedness of any Obligor to any of its Restricted Subsidiaries or other Affiliates, (x) any trade payables, (y) any Indebtedness that is incurred in violation of the Indenture and (z) Indebtedness which, when Incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to any Obligor. "Significant Subsidiary" means any Subsidiary that would be a "significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated pursuant to the Exchange Act, as such Regulation is in effect on the date hereof. "Stated Maturity" means, with respect to any installment of interest or principal on any series of Indebtedness, the date on which such payment of interest or principal was scheduled to be paid in the original documentation governing such Indebtedness, and shall not include any contingent obligations to repay, redeem or repurchase any such interest or principal prior to the date originally scheduled for the payment thereof. "Subsidiary," with respect to any Person, means (i) any corporation or comparably organized entity, a majority of whose voting stock (defined as any class of capital stock having voting power under ordinary circumstances to elect a majority of the Board of such Person) is owned, directly or indirectly, by any one or more of the Obligors and (ii) any other Person (other than a corporation) in which any one or more of the Obligors, directly or indirectly, has at least a majority ownership interest entitled to vote in the election of directors, managers or trustees thereof or in which such Obligor is the managing general partner. "Support Obligation" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness of any other Person and, without limiting the generality of the foregoing, any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness of such other Person (whether arising by virtue of partnership arrangements, or by agreement to keep-well, to purchase assets, goods, securities or services, to take-or-pay, or to maintain financial statement conditions or otherwise) or (ii) entered into for purposes of assuring in any other manner the obligee of such Indebtedness of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided that the term "Support Obligation" shall not include (a) endorsements for collection or deposit in the ordinary course of business, or (b) commitments to make Permitted Investments in Obligors or their Restricted Subsidiaries. "Unrestricted Subsidiary" means (i) any Subsidiary that is designated by the Board of either Issuer as its Unrestricted Subsidiary pursuant to a Board resolution; but only to the extent that such Subsidiary (a) has no Indebtedness other than Non-Recourse Indebtedness, (b) is not party to any agreement, contract, arrangement or understanding with any Obligor unless the terms of any such agreement, contract, arrangement or understanding are no less favorable to such Obligor than those that might be obtained at the time from Persons who are not Affiliates of such Obligor, (c) is a Person with respect to which none of the Obligors has any direct or indirect obligation (x) to subscribe for additional equity interests or (y) to maintain or preserve such Person's financial 113 condition or to cause such Person to achieve any specified levels of operating results, (d) has not guaranteed or otherwise directly or indirectly provided credit support for any Indebtedness of any Obligor, and (e) has at least one director on its Board who is not a director or executive officer of any Obligor and has at least one executive officer who is not a director or executive officer of any Obligor. Any such designation by the Board of either Issuer shall be evidenced to the Trustee by filing with the Trustee a certified copy of the Board resolution giving effect to such designation and an officers' certificate certifying that such designation complied with the foregoing conditions and was permitted by the covenant described above under "--Restricted Payments." If at any time any Unrestricted Subsidiary would fail to meet the foregoing requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary shall be deemed to be Incurred by a Restricted Subsidiary as of such time (and, if such Indebtedness is not permitted to be Incurred as of such date under the covenant described above under "--Incurrence of Indebtedness and Issuance of Preferred Stock," such Issuers shall be in default of such covenant). The Board of either Issuer may at any time designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such designation shall be deemed to be an Incurrence of Indebtedness by a Restricted Subsidiary of any outstanding Indebtedness of such Unrestricted Subsidiary and such designation shall only be permitted if (i) such Indebtedness is permitted under the covenant described above under the heading "--Incurrence of Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis as if such designation had occurred at the beginning of the reference period, and (ii) no Default or Event of Default would be in existence following such designation. "Voting Stock" of any Person as of any date means the Capital Stock of such Person that is at the time entitled to vote in the election of the Board of such Person. "Weighted Average Life to Maturity" means, when applied to any Indebtedness at any date, the number of years obtained by dividing (i) the then outstanding aggregate principal amount of such Indebtedness into (ii) the total of the products obtained by multiplying (A) the amount of each then remaining installment, sinking fund, serial maturity or other required payment or principal, including payment at final maturity, in respect thereof, by (B) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment. "Wholly Owned Restricted Subsidiary" means any Wholly Owned Subsidiary of either Issuer that is a Restricted Subsidiary. "Wholly Owned Subsidiary" of any Person means any Subsidiary of such Person of which all the outstanding voting securities (other than directors' qualifying shares) which normally have the right to vote in the election of directors are owned by such Person or any wholly owned Subsidiary of such Person. 114 PLAN OF DISTRIBUTION This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of New Notes received in exchange for Old Notes where such Old Notes were acquired as a result of market-making activities or other trading activities. Each broker-dealer that receives New Notes for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such New Notes. The Issuers have agreed that under certain circumstances, for a period of up to 180 days after the Expiration Date, it will make this Prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. The Issuers and the Guarantors will not receive any proceeds from any sale of New Notes by broker-dealers. New Notes received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the New Notes or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such New Notes. Any broker-dealer that acquired Old Notes as a result of market making activities or other trading activities (and not directly from the Issuers or Guarantors) and who resells New Notes that were received by it pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such New Notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of New Notes and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 115 BOOK-ENTRY; DELIVERY AND FORM The certificates representing the Notes will be issued in fully registered form without interest coupons. Old Notes sold in reliance on Rule 144A will be represented by one or more permanent global Notes in definitive, fully registered form without interest coupons (each a "Restricted Global Note," and together with the Regulation S Global Note, the "Global Notes") and will be deposited with the relevant Trustee as custodian for, and registered in the name of, a nominee of DTC. Ownership of beneficial interests in a Global Note will be limited to persons who have accounts with DTC ("participants") or Persons who hold interests through participants. Ownership of beneficial interests in a Global Note will be shown on, and the transfer of that ownership will be effected only through, records maintained by DTC or its nominee (with respect to interests of participants) and the records of participants (with respect to interests of persons other than participants). Qualified institutional buyers may hold their interests in a Restricted Global Note directly through DTC if they are participants in such system, or indirectly through organizations which are participants in such system. Investors may hold their interests in a Regulation S Global Note directly through Cedel or Euroclear, if they are participants in such systems, or indirectly through organizations that are participants in such system. Investors may also hold such interests through organizations other than Cedel or Euroclear that are participants in the DTC system. Cedel and Euroclear will hold interests in the Regulation S Global Notes on behalf of their participants through DTC. So long as DTC, or its nominee, is the registered owner or holder of a Global Note, DTC or such nominee, as the case may be, will be considered the sole owner or Holder represented by such Global Note for all purposes under the Indenture and the Notes. No beneficial owner of an interest in a Global Note will be able to transfer that interest except in accordance with DTC's applicable procedures, in addition to those provided for under the Indenture and, if applicable, those of Euroclear and Cedel. Payments of the principal of, and interest on, a Global Note will be made to DTC or its nominee, as the case may be, as the registered owner thereof. None of the Issuers, the Trustee nor any Paying Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. The Issuers expect that DTC or its nominee, upon receipt of any payment of principal or interest in respect of a Global Note, will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of such Global Note as shown on the records of DTC or its nominee. The Issuers also expect that payments by participants to owners of beneficial interests in such Global Note held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers registered in the names of nominees for such customers. Such payments will be the responsibility of such participants. Transfers between participants in DTC will be effected in the ordinary way in, accordance with DTC rules and will be settled in same-day funds. Transfers between participants in Euroclear and Cedel will be effected in the ordinary way in accordance with their respective rules and operating procedures. The Issuers expect that DTC will take any action permitted to be taken by a holder of Notes (including the presentation of Notes for exchange as described below) only at the direction of one or more participants to whose account the DTC interests in a Global Note is credited and only in respect of such portion of the aggregate principal amount of Notes as to which such participant or participants has or have given such direction. However, if there is an Event of Default under the Notes, DTC will exchange the applicable Global Note for Certificated Notes, which it will distribute to its participants and which may be legended as set forth under the heading "Notice to Investors." 116 The Issuers understand that: DTC is a limited purpose trust company organized under the laws of the State of New York, a "banking organization" within the meaning of New York Banking Law, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the Uniform Commercial Code and a "Clearing Agency" registered pursuant to the provisions of Section 17A of the Exchange Act. DTC was created to hold securities for its participants and facilitate the clearance and settlement of securities transactions between participants through electronic book-entry changes in accounts of its participants, thereby eliminating the need for physical movement of certificates and certain other organizations. Indirect access to the DTC system is available to others such as banks, brokers, dealers and trust companies that clear through or maintain a custodial relationship with a participant, either directly or indirectly ("indirect participants"). Although DTC, Euroclear and Cedel are expected to follow the foregoing procedures in order to facilitate transfers of interests in a Global Note among participants of DTC, Euroclear and Cedel, they are under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. None of the Issuers, the Trustee nor any Paying Agent will have any responsibility for the performance by DTC, Euroclear or Cedel or their respective participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Certificated Notes. If DTC is at any time unwilling or unable to continue as a depositary for the Global Notes and a successor depositary is not appointed by the Company within 90 days, the Issuers will issue Certificated Notes, in exchange for the Global Notes. Holders of an interest in a Restricted Global Note may receive Certificated Notes, which may bear the legend referred to under "Notice to Investors," in accordance with the DTC's rules and procedures in addition to those provided for under the Indenture. 117 EXPERTS The consolidated financial statements of Hollywood Park as of December 31, 1996 and 1995, and for each of the three years in the period ended December 31, 1996, included in this Prospectus, to the extent and for the periods indicated in their report have been audited by Arthur Andersen LLP, independent public accountants, as indicated in their report to opinion with respect thereto, and are included herein in reliance upon the authority of said firm as experts in giving said reports. The consolidated financial statements of Boomtown, Inc. as of September 30, 1995 and 1996, and for each of the three years in the period ended September 30, 1996, appearing in this Prospectus and Registration Statement, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given upon the authority of such firm as experts in accounting and auditing. LEGAL MATTERS The legality of the New Notes offered hereby, and the Guaranties thereof, will be passed upon for the Issuers and the Guarantors by Irell & Manella LLP. 118 INDEX TO FINANCIAL STATEMENTS
PAGE ---- HOLLYWOOD PARK, INC. Report of Arthur Andersen LLP, Independent Public Accountants............ F-2 Consolidated Balance Sheets.............................................. F-3 Consolidated Statements of Operations.................................... F-4 Consolidated Statements of Changes in Stockholders' Equity............... F-5 Consolidated Statements of Cash Flows.................................... F-6 Notes to Consolidated Financial Statements............................... F-7 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC Report of Arthur Andersen LLP, Independent Public Accountants............ F-37 Balance Sheets........................................................... F-38 Statements of Operations................................................. F-39 Statements of Members' Equity............................................ F-40 Statements of Cash Flows................................................. F-41 Notes to Financial Statements............................................ F-42 BOOMTOWN, INC. Report of Ernst & Young LLP, Independent Auditors........................ F-45 Consolidated Balance Sheets.............................................. F-46 Consolidated Statements of Operations.................................... F-47 Consolidated Statements of Stockholders' Equity.......................... F-48 Consolidated Statements of Cash Flows.................................... F-49 Notes to Consolidated Financial Statements............................... F-50
F-1 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To The Board of Directors and Stockholders of Hollywood Park, Inc.: We have audited the accompanying consolidated balance sheets of Hollywood Park, Inc. (a Delaware corporation) and subsidiaries (the "Company") as of December 31, 1996, and 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hollywood Park, Inc. and subsidiaries as of December 31, 1996, and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. Arthur Andersen LLP Los Angeles, California February 18, 1997 F-2 HOLLYWOOD PARK, INC. CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, ------------------ AS OF 1996 1995 JUNE 30, 1997(a) -------- -------- ---------------- (UNAUDITED) ASSETS ------ (IN THOUSANDS) Current Assets: Cash and cash equivalents................. $ 11,922 $ 22,406 $ 38,409 Restricted cash........................... 4,486 3,126 11,096 Short term investments.................... 4,766 6,447 1,275 Other receivables, net of allowance for doubtful accounts of $780,000 (unaudited) in 1997, $1,089,000 in 1996, and $1,841,00 in 1995........................ 7,110 8,147 10,625 Prepaid expenses and other assets......... 6,215 3,888 21,686 Deferred tax assets....................... 6,422 4,888 6,587 Current portion of notes receivable....... 38 34 40 -------- -------- -------- Total current assets................. 40,959 48,936 89,718 Notes receivable........................... 819 857 9,464 Property, plant and equipment, net......... 130,835 174,717 277,084 Goodwill and lease with TRAK East, net..... 20,370 28,024 32,685 Long term gaming assets.................... 0 19,063 0 Other assets............................... 12,903 11,706 17,147 -------- -------- -------- $205,886 $283,303 $426,098 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current Liabilities: Accounts payable.......................... $ 10,043 $ 12,518 $ 13,163 Accrued lawsuit settlement................ 2,750 5,232 2,750 Accrued liabilities....................... 9,733 13,762 35,499 Accrued compensation...................... 4,198 3,295 4,803 Gaming liabilities........................ 2,499 3,998 2,545 Racing liabilities........................ 6,106 3,836 15,672 Current portion of notes payable.......... 35 32,310 6,222 -------- -------- -------- Total current liabilities............ 35,364 74,951 80,654 Notes payable.............................. 282 15,629 116,396 Gaming liabilities......................... 0 16,894 0 Deferred tax liabilities................... 9,065 10,083 9,411 -------- -------- -------- Total liabilities.................... 44,711 117,557 206,461 Minority interests......................... 3,015 0 3,030 Stockholders' Equity Capital stock-- Preferred--$1.00 par value, authorized 250,000 shares; 27,499 issued and out- standing.............................. 28 28 28 Common--$.10 par value authorized 40,000,000 shares; 23,793,636 (unau- dited) issued and outstanding in 1997, 18,332,016 in 1996 and 18,504,798 in 1995.................................. 1,833 1,850 2,380 Capital in excess of par value........... 167,074 168,479 221,222 Accumulated deficit...................... (10,775) (4,611) (7,023) -------- -------- -------- Total stockholders' equity........... 158,160 165,746 216,607 -------- -------- -------- $205,886 $283,303 $426,098 ======== ======== ========
- -------- (a) Includes the consolidated accounts of Boomtown. See accompanying notes to consolidated financial statements. F-3 HOLLYWOOD PARK, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED FOR THE YEARS ENDED DECEMBER 31, JUNE 30, ---------------------------------- --------------- 1996 1995 1994 1997 1996 ---------- ---------- ---------- ------- ------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUES: Gaming................... $ 50,717 $ 26,656 $ 11,745 $26,847 $24,803 Racing................... 71,308 79,862 78,719 35,868 38,353 Food and beverage........ 13,947 19,783 20,540 6,860 7,637 Other income............. 7,253 4,271 6,320 3,564 3,487 ---------- ---------- ---------- ------- ------- 143,225 130,572 117,324 73,139 74,280 ---------- ---------- ---------- ------- ------- EXPENSES: Gaming................... 27,249 5,291 0 15,161 14,489 Racing................... 30,167 30,960 32,099 15,409 15,996 Food and beverage........ 19,573 24,749 22,318 8,819 9,082 Administrative........... 41,477 45,447 39,858 18,531 21,589 Other.................... 2,485 3,200 2,121 1,439 1,099 Depreciation and amortization............ 10,695 11,384 9,563 5,780 5,400 Write off of investment in Sunflower............ 11,412 0 0 0 11,412 Lawsuit settlement....... 0 6,088 0 0 0 Casino pre-opening and training expenses....... 0 0 2,337 0 0 Turf Paradise acquisition costs................... 0 0 627 0 0 ---------- ---------- ---------- ------- ------- 143,058 127,119 108,923 65,139 79,067 ---------- ---------- ---------- ------- ------- Operating income (loss).... 167 3,453 8,401 8,000 (4,787) Interest expense......... 942 3,922 3,061 129 898 ---------- ---------- ---------- ------- ------- Income (loss) before minority interest and taxes..................... (775) (469) 5,340 7,871 (5,685) Minority interest........ 15 0 0 63 0 Income tax expense....... 3,459 693 1,568 3,100 2,444 ---------- ---------- ---------- ------- ------- Net income (loss).......... $ (4,249) $ (1,162) $ 3,772 $ 4,708 $(8,129) ========== ========== ========== ======= ======= Dividend requirements on convertible preferred stock..................... $ 1,925 $ 1,925 $ 1,925 $ 962 $ 962 Net income (loss) available to (allocated to) common shareholders.............. $ (6,174) $ (3,087) $ 1,847 $ 3,746 $(9,091) ========== ========== ========== ======= ======= Per common share: Net income (loss)-- primary................. $ (0.33) $ (0.17) $ 0.10 $ 0.20 $ (0.49) Net income (loss)--fully diluted................. $ (0.33) $ (0.17) $ 0.10 $ 0.20 $ (0.49) Number of shares--primary.. 18,505 18,399 18,224 18,366 18,613 Number of shares--fully diluted................... 20,797 20,691 20,516 20,657 20,904
See accompanying notes to consolidated financial statements. F-4 HOLLYWOOD PARK, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 AND THE SIX MONTHS ENDED JUNE 30, 1997
CAPITAL IN TOTAL PREFERRED COMMON EXCESS OF ACCUMULATED STOCKHOLDERS' STOCK STOCK PAR VALUE DEFICIT EQUITY --------- ------ -------------- ----------- ------------- (IN THOUSANDS) BALANCE AT YEAR END 1993................... $28 $1,772 $155,725 $ (3,325) $154,200 Net income............ 0 0 0 3,772 3,772 Net income--Turf Paradise six months ended December 31, 1993................. 0 0 0 198 198 Issuance of common stock to acquire-- Sunflower Racing, Inc.................. 0 59 11,099 0 11,158 Issuance of contingent shares related to Sunflower Racing, Inc. acquisition..... 0 6 (6) 0 0 Net changes related to Turf Paradise equity. 0 0 74 (222) (148) Preferred stock dividends--$70.00 per share................ 0 0 0 (1,925) (1,925) --- ------ -------- -------- -------- BALANCE AT YEAR END 1994................... 28 1,837 166,892 (1,502) 167,255 Net loss.............. 0 0 0 (1,162) (1,162) Issuance of common stock to acquire-- Pacific Casino Management, Inc...... 0 13 1,587 0 1,600 Investment in bonds-- unrealized holding loss................. 0 0 0 (22) (22) Preferred stock dividends--$70.00 per share................ 0 0 0 (1,925) (1,925) --- ------ -------- -------- -------- BALANCE AT YEAR END 1995................... 28 1,850 168,479 (4,611) 165,746 Net loss.............. 0 0 0 (4,249) (4,249) Issuance of common stock to acquire-- Pacific Casino Management, Inc...... 0 5 535 0 540 Repurchase and retirement of common stock................ 0 (22) (1,940) 0 (1,962) Investment in bonds-- unrealized holding gain................. 0 0 0 10 10 Preferred stock dividends--$70.00 per share................ 0 0 0 (1,925) (1,925) --- ------ -------- -------- -------- BALANCE AT YEAR END 1996................... 28 1,833 167,074 (10,775) 158,160 Net income............ 0 0 0 4,708 4,708 Issuance of common stock to acquire-- Pacific Casino Management, Inc...... 0 3 497 0 500 Issuance of common stock to acquire-- Boomtown, Inc. ...... 0 581 56,423 0 57,004 Common stock options exercised............ 0 8 648 0 656 Repurchase and retirement of common stock................ 0 (45) (3,420) 0 (3,465) Investment in bonds-- unrealized holding gain................. 0 0 0 8 8 Preferred stock dividends--$35.00 per share................ 0 0 0 (964) (964) --- ------ -------- -------- -------- BALANCE AT JUNE 30, 1997 (UNAUDITED)............ $28 $2,380 $221,222 $ (7,023) $216,607 === ====== ======== ======== ========
See accompanying notes to consolidated financial statements. F-5 HOLLYWOOD PARK, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED FOR THE SIX MONTHS DECEMBER 31, ENDED JUNE 30, ---------------------------- ---------------------- 1996 1995 1994 1997 1996 -------- -------- -------- ------- -------- (UNAUDITED) (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss)........ $ (4,249) $ (1,162) $ 3,772 $ 4,708 $ (8,129) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization........... 10,027 10,857 10,064 5,780 4,901 Minority interests...... 15 0 0 15 0 Changes in accounts due to deconsolidation of subsidiary in bankruptcy: Property, plant and equipment.............. 58,380 0 0 0 58,380 Secured notes payable... (28,918) 0 0 0 (28,904) Unsecured notes payable................ (15,323) 0 0 0 (15,373) Goodwill and lease with TRAK East.............. 6,908 0 0 0 6,908 (Gain) loss on sale or disposal of property, plant and equipment..... (2) 64 55 (24) (5) Unrealized gain (loss) on short term bond investing............... 10 0 0 8 (7) Changes in assets and liabilities, net of effects of the purchase of a business: Increase in restricted cash................... (1,360) (2,427) (490) (6,610) (7,028) Increase in casino lease and related interest receivable, net.................... 0 (9,204) (11,745) 0 0 Decrease (increase) in other receivables, net.................... 1,037 77 (5,022) (1,520) (759) (Increase) decrease in prepaid expenses and other assets........... (3,524) (304) (5,488) (1,287) 3,689 (Increase) decrease in deferred tax assets.... (1,534) (349) (3,207) (165) 2,684 (Decrease) increase in accounts payable....... (2,475) 5,685 (1,596) 387 629 (Decrease) increase in accrued lawsuit settlement............. (2,482) 5,232 0 0 (2,482) (Decrease) increase in accrued gaming liabilities............ (1,499) 3,998 0 46 (1,207) (Decrease) increase in accrued liabilities.... (3,489) 6,437 1,612 3,464 (4,262) (Decrease) increase in accrued compensation... 903 (761) 1,559 605 346 Increase in racing liabilities............ 2,270 1,404 1,026 9,566 11,436 (Decrease) increase in deferred tax liabilities............ (1,018) 744 2,173 (24) (5,313) -------- -------- -------- ------- -------- Net cash provided by (used in) operating activities........... 13,677 20,291 (7,287) 14,949 15,504 -------- -------- -------- ------- -------- Cash flows from investing activities: Additions to property, plant and equipment.... (23,786) (25,150) (27,584) (3,927) (9,132) Receipts from sale of property, plant and equipment.............. 9 98 75 0 6 Principal collected on notes receivable....... 34 31 31 18 16 Purchase of short term investments............ (16,888) (35,875) (96,822) (1,937) (11,154) Proceeds from short term investments....... 18,569 29,428 116,625 5,428 13,548 Long term gaming assets................. 2,169 (2,169) 0 0 598 Cash acquired in the purchase of a business, net of transaction and other costs.................. 0 715 344 12,264 0 -------- -------- -------- ------- -------- Net cash (used in) provided by investing activities........... (19,893) (32,922) (7,331) 11,846 (6,118) -------- -------- -------- ------- -------- Cash flows from financing activities: Proceeds from unsecured notes payable.......... 0 1,681 1,850 0 0 Proceeds from secured notes payable.......... 0 3,358 2,300 0 0 Payment of unsecured notes payable.......... (23) (3,813) (5,019) 0 0 Payment of secured notes payable.......... (3,358) (1,333) (5,998) 0 0 Payments under capital lease obligations...... 0 (53) (135) 0 0 Payments from minority interest partners...... 3,000 0 0 0 0 Common stock repurchase and retirement......... (1,962) 0 0 0 0 Turf Paradise equity transactions........... 0 0 50 0 0 Common stock options exercised.............. 0 0 0 654 0 Dividends paid to preferred stockholders........... (1,925) (1,925) (1,925) (962) (962) -------- -------- -------- ------- -------- Net cash provided by (used for) financing activities........... (4,268) (2,085) (8,877) (308) (962) -------- -------- -------- ------- -------- Increase (decrease) in cash equivalents........ (10,484) (14,716) (23,495) 26,487 8,424 Cash and cash equivalents at the beginning of the period.................. 22,406 37,122 60,617 11,922 22,406 -------- -------- -------- ------- -------- Cash and cash equivalents at the end of the period.................. $ 11,922 $ 22,406 $ 37,122 $38,409 $ 30,830 ======== ======== ======== ======= ========
See accompanying notes to consolidated financial statements. F-6 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements for the year ended December 31, 1996, included the accounts of Hollywood Park, Inc. (the "Company" or "Hollywood Park") and its wholly owned subsidiaries: Hollywood Park Operating Company (which has two wholly owned subsidiaries, Hollywood Park Food Services, Inc. and Hollywood Park Fall Operating Company), Sunflower Racing, Inc. ("Sunflower") (which has one wholly owned subsidiary, SR Food and Beverage, Inc.), Turf Paradise, Inc. ("Turf Paradise"), and HP/Compton, Inc., which owned 88% of Crystal Park Hotel and Casino Development Company LLC, as of December 31, 1996, and presently owns 89.8% ("Crystal Park LLC"), which built and presently leases the Crystal Park Hotel and Casino ("Crystal Park"), to an unaffiliated third party. As of June 30, 1997, the Company owns and operates a casino and hotel in Verdi, Nevada ("Boomtown Reno"), a riverboat casino in Harvey, Louisiana ("Boomtown New Orleans"), and a dockside casino in Biloxi, Mississippi ("Boomtown, Biloxi"). Sunflower was acquired on March 23, 1994, and was accounted for under the purchase method of accounting. Turf Paradise was acquired on August 11, 1994, and was accounted for under the pooling of interests method of accounting. Crystal Park began operations on October 25, 1996. The Hollywood Park-Casino is a division of Hollywood Park, Inc. 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. The consolidated statements for the six months ended June 30, 1997 and 1996, are unaudited, however, in the opinion of management they reflect all normal and recurring adjustments that are necessary to present a fair statement of the financial results for the interim periods. It should be understood that accounting measurements at 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. ACQUISITION OF BOOMTOWN, INC. On June 30, 1997, pursuant to the Agreement and Plan of Merger dated as of April 23, 1996, by and among Hollywood Park, HP Acquisition, Inc., a wholly owned subsidiary of the Company, and Boomtown, HP Acquisition, Inc. was merged with and into Boomtown (the "Merger"). As a result of the Merger, Boomtown became a wholly owned subsidiary of the Company and each share of Boomtown common stock was converted into the right to receive 0.625 of a share of Hollywood Park's common stock. Approximately 5,362,850 shares of Hollywood Park common stock, valued at $9.8125, (excluding shares repurchased from Edward P. Roski, Jr. ("Roski") and subsequently retired, as described below) were issued in the Merger. The Merger was accounted for under the purchase method of accounting for a business combination, and thus the consolidated balance sheet of Boomtown as of June 30, 1997, is consolidated with Hollywood Park's, though Boomtown's consolidated statement of operations is not consolidated with Hollywood Park's. The Merger generated approximately $2,683,000 of excess acquisition cost over the recorded value of the net assets acquired, all of which was allocated to goodwill, to be amortized over 40 years. The amortization of the goodwill is not deductible for income tax purposes. The Company acquired three of the four Boomtown properties, Boomtown Reno, Boomtown New Orleans, and Boomtown Biloxi. Boomtown's Las Vegas property was divested following the Merger on July 1, 1997. Boomtown's Las Vegas property was divested because it had generated significant operating losses since it opened, thus reducing the overall profitability of Boomtown. Boomtown and its subsidiaries exchanged substantially all of their interest in the Las Vegas property, including substantially all of the operating assets and notes receivable of approximately $27,300,000 from the landowner/lessor of the Las Vegas property, IVAC, a F-7 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) California general partnership of which Roski, a former Boomtown director, is a general partner, for, among other things, two unsecured notes receivable totaling approximately $8,465,000, cash, assumption of certain liabilities and release from certain lease obligations. The first note receivable is for $5,000,000, bearing interest at Bank of America National Trust and Savings Association's ("Bank of America") reference rate plus 1.5% per year, with annual principal receipts of $1,000,000 plus accrued interest commencing on July 1, 1998. The second note is for approximately $3,465,000, bearing interest at Bank of America's reference rate plus 0.5% per year, with the principal and accrued interest payable to the Company, in full, on July 1, 2000. In addition, concurrently with the divestiture of the Las Vegas property, Hollywood Park purchased and retired 446,491 shares of Hollywood Park common stock received by Roski in the Merger for a price of approximately $3,465,000, payable in the form of a Hollywood Park promissory note. The promissory note bears interest at Bank of America's reference rate plus 1.0%. Interest is payable quarterly and annual principal payments in five equal installments of approximately $693,000 are due commencing July 1, 1998. Boomtown Reno is situated on 569 acres (though current operations presently utilize approximately 61 acres) in Verdi Nevada, two miles from the California border and seven miles west of downtown Reno, on Interstate 80, the major highway connecting northern California and Nevada. Boomtown Reno draws a significant portion of its customers from Interstate 80 traffic. Boomtown Reno offers a 40,000-square foot casino, with 1,320 slot machines and 44 table games, a 122-room hotel, a 35,000-square foot family entertainment center, a 16-acre truck stop, a full-service recreational vehicle park, a newly renovated service station and mini-mart, and other related amenities. Boomtown New Orleans opened in August 1994 on a 50 acre site in Harvey, Louisiana, approximately ten miles form the French Quarter of New Orleans. Gaming operations are conducted from a 250-foot replica of a paddle-wheel riverboat, offering 911 slot machines and 55 table games in a 30,000-square foot casino. The land-based facility includes a 20,000-square foot family entertainment center, a western saloon and dance hall, with restaurant and buffet services. As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company. Previously, Boomtown New Orleans was owned and operated by a Louisiana limited partnership (the "Louisiana Partnership"), of which 92.5% was owned by Hollywood Park with the remaining 7.5% owned by Eric Skrmetta ("Skrmetta"). On November 18, 1996, Boomtown entered into an agreement with Skrmetta under which it would pay approximately $5,670,000 in return for Skrmetta's interest in the Louisiana Partnership. Under the terms of the agreement, Boomtown made a down payment of $500,000, and the Company paid the remaining $5,170,000 on August 8, 1997. Boomtown Biloxi opened in July 1994 and occupies 19 acres on Biloxi, Mississippi's historic Back Bay. The dockside property consists of a land- based facility which houses all non-gaming amenities including a 20,000-square foot family entertainment center, food and beverage facilities and a western themed dance hall and cabaret. Gaming operations are conducted on a 40,000- square foot barge, which is permanently moored to the land-based facility. The casino covers 33,632-square feet, offering 1,038 slot machines, 35 table games and related amenities. Boomtown Biloxi is operated by a Mississippi limited partnership (the "Mississippi Partnership"), of which 85% is owned and controlled by Hollywood Park, with the remaining 15% owned by Skrmetta. Both Hollywood Park and Skrmetta have an option, exercisable over a four year period beginning July 1997, to exchange Skrmetta's interest in the Mississippi Partnership, at Skrmetta's option, for either cash and/or shares of Hollywood Park common stock with an aggregate value equal to the value of Skrmetta's 15% interest in the Mississippi Partnership, with such value determined by a formula set forth in the relevant partnership agreements. On August 13, 1997, Hollywood Park notified Skrmetta of the Company's intention to exercise this option and acquire Skrmetta's 15% interest in the Mississippi Partnership. F-8 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Boomtown Biloxi barge and building shell were owned by National Gaming Mississippi, Inc., a subsidiary of Chartwell Leisure, Inc. ("National Gaming"). Boomtown Biloxi leased these assets from National Gaming under a 25- year lease with a 25-year renewal option, and also received marketing services from National Gaming. National Gaming received 16% of the adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), as defined in the relevant contract. On August 4, 1997, Hollywood Park executed an agreement pursuant to which one of the Hollywood Park entities repurchased the assets for $5,250,000, payable through a down payment of approximately $1,500,000, with the balance paid in three equal annual installments of $1,250,000. The Adjusted EBITDA participation and other related agreements were terminated upon repurchase of the assets. PRO FORMA RESULTS OF OPERATIONS The following pro forma results of operations were prepared under the assumption that the acquisition of Boomtown had occurred at the beginning of the period presented. The historical results of operations of Boomtown (excluding the results of operations of Boomtown's Las Vegas property, which was divested in connection with the Merger) were combined with Hollywood Park's. Pro forma adjustments were made for the following: interest income earned on the excess net proceeds from the issuance of $125,000,000 of 9.5% Hollywood Park Senior Subordinated Notes (the "Notes") elimination of the amortization of the issuance costs associated with Boomtown's First Mortgage Notes; amortization of the issuance costs of the Notes; amortization of the excess purchase price over net assets acquired in the Merger; elimination of the amortization of the discount associated with the Boomtown First Mortgage Notes; interest expense associated with the promissory notes from Hollywood Park to the former lessor of Boomtown's Las Vegas property; elimination of the interest expense associated with the Boomtown First Mortgage Notes; amortization of the up-front loan fees associated with the Company's Bank Credit Facility; interest expense associated with the Notes at 9.5%; and the estimated 40% tax benefit associated with the pro forma adjustments. HOLLYWOOD PARK, INC. UNAUDITED PRO FORMA COMBINED CONSOLIDATED RESULTS OF OPERATIONS
FOR THE TWELVE MONTHS FOR THE SIX MONTHS ENDED ENDED JUNE 30, DECEMBER 31, ------------------------- ------------- 1997 1996 1996 ------------ ------------ ------------- Revenues: Gaming.............................. $110,196,000 $103,412,000 $208,699,000 Racing.............................. 35,868,000 38,353,000 71,308,000 Other............................... 28,179,000 29,960,000 56,871,000 ------------ ------------ ------------ 174,243,000 171,725,000 336,878,000 ------------ ------------ ------------ Operating income (loss) (a)........... 17,221,000 (29,607,000) (17,788,000) Income (loss) before extraordinary item................................. $ 5,393,000 $(40,693,000) $(37,346,000) ============ ============ ============ Dividend requirements on convertible preferred stock...................... $ 962,000 $ 962,000 $ 1,925,000 Income (loss) before extraordinary item available to (allocated to) common shareholders.................. $ 4,431,000 $(41,655,000) $(39,271,000) ============ ============ ============ Per common share: Income (loss) before extraordinary item--primary...................... $ 0.19 $ (1.74) $ (1.65) Income (loss) before extraordinary item--fully diluted................ $ 0.19 $ (1.74) $ (1.65)
- -------- (a) The 1996 operating loss included the non-recurring write off of Hollywood Park's investment in Sunflower of $11,412,000, and the non-recurring loss on Boomtown's sale of its Las Vegas property of $36,562,000. F-9 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. The Company supports SB 900, currently pending in the California Legislature, which would remove the sunset clause from SB 100 and, among other things, would allow the Company to operate the Hollywood Park-Casino beyond December 31, 1998. It is too early in the legislative session to comment on the prospects of SB 900. Pursuant to the authority provided by SB 100, on November 17, 1995, Hollywood Park acquired substantially all of 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 Park-Casino. 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 136,008 common shares, issued on November 17, 1995, (ii) shares of Hollywood Park common stock, having a value of $540,000, or 48,674 common shares, issued on November 19, 1996 and (iii) shares of Hollywood Park common stock, having a value of $500,000, or 33,417 common shares, issued on February 10, 1997. Virtually all of the approximately $21,568,000 of excess acquisition cost over the recorded value of the net assets acquired from PCM was allocated to goodwill and will be amortized over 40 years. The amortization of the goodwill is not deductible for income tax purposes. ACQUISITION OF SUNFLOWER On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the Bankruptcy Code, due to the Kansas Legislature's failure to pass legislation that would have allowed additional forms of gaming at Sunflower, and thereby allowing Sunflower to more effectively compete with Missouri riverboat gaming. On March 31, 1996, 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 March 23, 1994, the Company finalized the transaction to acquire Sunflower, a greyhound and thoroughbred racing facility located in Kansas City, Kansas. Sunflower, operating as the Woodlands, became a wholly owned subsidiary of Hollywood Park, with the transaction accounted for under the purchase method of accounting. The acquisition price was $15,000,000 paid for with 591,715 shares of Hollywood Park common stock, with a then market price of $25.35 per share. For financial reporting purposes, the transaction was valued at $19.00 per Hollywood Park common share, based on the size of the block of shares issued in the acquisition relative to the then current trading volume. Immediately following the acquisition, the Company contributed $5,000,000 in cash to Sunflower to repay a portion of the subordinated debt Sunflower owed to Mr. Hubbard, in return for more favorable terms on the balance of the subordinated debt. Of the approximately $6,625,000 of restated excess acquisition cost over recorded value of the net assets acquired, $1,153,000 was allocated to the F-10 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) racing facility lease and management agreement Sunflower has with The Racing Association of Kansas East ("TRAK East") and was to be amortized over the remaining lease period of 20 years, with the balance of $5,472,000 allocated to goodwill, to be amortized over 40 years. The amortization of the goodwill was not deductible for income tax purposes. An additional 55,574 shares of Hollywood Park common stock were issued to Mr. Richard Boushka, a former Sunflower shareholder, as required by the agreement of merger, because the market price of Hollywood Park common stock 180 days after closing was more than 10% less than the market price on the closing date of the acquisition. The agreement of merger provided that under certain circumstances the former Sunflower shareholders were entitled to receive additional shares of Hollywood Park common stock. As of March 23, 1995, the former Sunflower shareholders transferred their rights to such additional consideration to Hollywood Park for nominal consideration and have no further entitlements to additional consideration. ACQUISITION OF TURF PARADISE On August 11, 1994, the shareholders of Turf Paradise approved the Agreement of Merger, entered into on March 30, 1994, by Hollywood Park and Turf Paradise and as amended on May 27, 1994, pursuant to which Turf Paradise became a wholly owned subsidiary of Hollywood Park. Turf Paradise owns and operates a thoroughbred race track in Phoenix, Arizona. The transaction was accounted for under the pooling of interests method of accounting, with approximately $627,000 of merger related costs incurred in total and expensed by both the Company and Turf Paradise. In connection with the merger, the Company issued a total of 1,498,016 shares of Hollywood Park common stock, valued as of the date of issuance at approximately $33,800,000. Each share of Turf Paradise common stock was valued at $13.00 and was converted to approximately 0.577 shares of Hollywood Park common stock, which had a then fair market value of $22.53 based on the weighted average of all trades on the NASDAQ National Market System for the twenty trading days up to and including August 10, 1994. As required under the pooling of interests method of accounting, the consolidated financial statements for the periods prior to the acquisition have been restated to include the accounts and results of operations of Turf Paradise. The consolidated financial statements for the year 1994 include the results of operations for the twelve months ended December 31, 1994, for both Hollywood Park and Turf Paradise. Separate results of the combined entities are as follows:
YEAR ENDED DECEMBER 31, 1994 ------------------------------------- HOLLYWOOD TURF PARK PARADISE COMBINED ------------ ----------- ------------ Total revenues......................... $100,010,000 $17,313,000 $117,323,000 Total expenses......................... 97,563,000 15,988,000 113,551,000 ------------ ----------- ------------ Net income........................... $ 2,447,000 $ 1,325,000 $ 3,772,000 ============ =========== ============
PRO FORMA RESULTS OF OPERATIONS The following pro forma results of operations were prepared under the assumption that the acquisition of PCM and Sunflower had occurred at the beginning of each period shown. The historical results of operations for PCM, Sunflower and Turf Paradise were combined with the Company's results and pro forma adjustments related to the PCM acquisition were made for the following: lease rent revenue due to Hollywood Park from PCM and concession sales made to PCM; lease rent expense recorded by PCM; other operating expenses including consulting fees, legal and audit services and other miscellaneous duplicate expenses; amortization of the excess purchase price allocated to goodwill; interest expense on the unpaid lease rent; and income taxes. Adjustments related to the Sunflower acquisition were made for the following: amortization of the excess purchase price allocated to the lease with TRAK East and to goodwill; interest expense reduction related to the reduction in both the principal and interest on Sunflower's subordinated debt; the termination of the management agreement Sunflower had with a former shareholder and the wages and payroll taxes paid to a former Sunflower shareholder; director's fees and income taxes. F-11 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The pro forma earnings per share reflect the 218,099 common shares actually issued to the former PCM shareholders, as of February 10, 1997. The pro forma earnings per share also reflect the 647,289 shares issued to the former Sunflower shareholders.
YEAR ENDED DECEMBER 31, -------------------------- 1995 1994 ------------ ------------ (UNAUDITED) Revenues........................................ $149,892,000 $128,651,000 Operating income................................ 15,841,000 18,662,000 Income before interest, income taxes, depreciation and amortization.................. 9,346,000 12,698,000 Net income (loss)............................. $ (1,866,000) $ 196,000 ============ ============ Dividend requirements on convertible preferred stock.......................................... $ 1,925,000 $ 1,925,000 Net loss allocated to common shareholders....... $ (3,791,000) $ (1,729,000) Per common share: Net loss--primary............................. $ (0.20) $ (0.09) Net loss--fully diluted....................... $ (0.20) $ (0.09)
RESTRICTED CASH Restricted cash as of June 30, 1997 and December 31, 1996, was for amounts due to horsemen for purses, stakes and awards. Restricted cash as of December 31, 1995, included approximately $2,482,000 related to the Class Actions lawsuit settlement (see Note 18 Commitments and Contingencies) and approximately $644,000 related to amounts due to horsemen for purses, stakes and awards. GAMING-CASINO REVENUE AND PROMOTIONAL ALLOWANCES Gaming-Casino gaming revenues consisted of fees collected from patrons on a per seat or per hand basis. Revenues in the accompanying statements of operations exclude the retail value of food and beverage provided to card players on a complimentary basis. The estimated cost of providing these promotional allowances was $1,316,000 for the year ended December 31, 1996. There were no comparable costs for the year ended December 31, 1995. The estimated costs of providing these promotional allowances during the three and six months ended June 30, 1997, was $339,000 and $665,000, respectively, and was $888,000 and $1,668,000 for the three and six months ended June 30, 1996, respectively. ALLOWANCE FOR DOUBTFUL ACCOUNTS With the November 17, 1995, acquisition of PCM the Company assumed the gaming accounts receivable, and associated allowance for doubtful account balances that were on PCM's balance sheet. ESTIMATES Financial statements prepared in accordance with 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. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment are depreciated on the straight line method over their estimated useful lives as follows:
YEARS ----- Land improvements................ 3 to 25 Buildings........................ 5 to 40 Equipment........................ 3 to 10
Maintenance and repairs were charged to operations of facilities; betterments were capitalized. The cost of property sold or otherwise disposed of and the accumulated depreciation were eliminated from both the property and accumulated depreciation accounts with any gain or loss recorded in the expense accounts. F-12 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Property, plant and equipment is carried on the Company's balance sheets at depreciated cost. Whenever there are recognized events or changes in circumstances that affect the carrying amount of the property, plant and equipment, management reviews the assets for possible impairment. In accordance with current accounting standards, management uses estimated expected future net cash flows to measure the recoverability of property, plant and equipment. The estimation of expected future net cash flows is inherently uncertain and relies to a considerable extent on assumptions regarding current and future economic 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 property, plant and equipment. INCOME TAXES The Company accounts for income taxes under Statement of Financial Accounting Standards ("SFAS") 109, Accounting for Income Taxes, whereby deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. Under SFAS 109, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that included the enactment date. PRE-OPENING EXPENSES The Company expensed pre-opening costs associated with the Hollywood Park-Casino, which opened on July 1, 1994, as incurred. These costs included, project salaries, hiring costs and other pre-opening services. POOLING OF INTERESTS EXPENSES Hollywood Park's costs of $414,000 incurred in connection with the acquisition of Turf Paradise, and Turf Paradise's acquisition costs of $213,000, were expensed as incurred. EARNINGS PER SHARE Primary earnings per share were computed by dividing income (loss) attributable to (allocated to) common shareholders (net income (loss) less preferred stock dividend requirements) by the weighted average number of common shares outstanding during the period. Fully diluted per share amounts were similarly computed, but include the effect, when dilutive, of the conversion of the convertible preferred shares and the 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. STOCK REPURCHASE On July 22, 1996, the Company announced its intention to repurchase, and to retire up to 2,000,0000 shares of its common stock on the open market or in negotiated transactions. As of December 31, 1996, the Company had repurchased and retired (with the last purchase being made on November 13, 1996) 222,300 common shares, at a cost of approximately $1,962,000. RECLASSIFICATIONS Certain reclassifications have been made to the 1996, 1995 and 1994 balances to be consistent with the 1997 financial statement presentation. F-13 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 2--SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
FOR THE YEARS ENDED DECEMBER 31, ------------------------------ 1996 1995 1994 -------- ---------- ---------- Cash paid during the year for: Interest................................... $299,000 $2,098,000 $1,513,000 Income taxes............................... 40,000 143,000 2,524,000 -------- ---------- ---------- $339,000 $2,241,000 $4,037,000 ======== ========== ==========
NOTE 3--SHORT TERM INVESTMENTS Short term investments as of December 31, 1996 and 1995, and June 30, 1997 consisted of the following:
AS OF DECEMBER 31, AS OF --------------------- JUNE 30, 1996 1995 1997 ---------- ---------- ----------- (UNAUDITED) Corporate bonds............................ $4,766,000 $4,504,000 $1,275,000 Flexible deposit program................... 0 1,000,000 0 U.S. agency securities..................... 0 906,000 0 Accrued interest........................... 0 37,000 0 ---------- ---------- ---------- Total.................................... $4,766,000 $6,447,000 $1,275,000 ========== ========== ==========
As of December 31, 1996 and June 30, 1997, short term investments consisted of corporate bonds with Moody's ratings of Ba2 to B3, and Standard and Poors rating of BB+ to B-, though some of the bonds are not rated by either agency. Investments in corporate bonds carry a greater amount of principal risk than other investments made by the Company, and yield a corresponding higher return. The corporate bond investment as of December 31, 1996, had a weighted average maturity of 1.5 years, and because the Company reasonably expects to liquidate these investments in its normal operating cycle the investments are classified as short term, are held as available for sale, and recorded in the accompanying financial statements at their fair value, as determined by the quoted market price. For the year ended December 31, 1996, proceeds from the sale or redemption of corporate bond investments were approximately $8,429,000, all of which was reinvested, and gross realized gains and gross realized losses were $28,000 and $39,000, respectively. For the year ended December 31, 1995, proceeds from the sale or redemption of corporate bond investments were approximately $7,806,000, all of which was reinvested, and gross realized gains and gross realized losses were $34,000 and $3,000, respectively. The net unrealized holding gains (losses), were $10,000 and ($22,000), for the year ended December 31, 1996, and 1995, respectively. For the six months ended June 30, 1997, proceeds form the sale or redemption of corporate bond investments were approximately $5,428,000, and gross realized gains and gross realized losses were $2,000 and $82,000, respectively. The net unrealized holding gain for the six months ended June 30, 1997, was approximately $8,000. The Flexible deposit program was a discretionary investment plan with Bankers Trust that provided capital preservation when held to maturity, plus income at a targeted rate; therefore, this investment was held to maturity. The Flexible deposit program investment was not rated. The investments in U.S. agency securities included U.S. Treasury Bills with each U.S. agency security rated AAA by both Moodys and Standard and Poors. F-14 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Company classified the Flexible deposit program and the U.S. agency securities as held to maturity, and as such, the investments were recorded in the accompanying financial statements at amortized costs, which, based on the short term nature of the investments and their relative liquidity, approximates fair value. NOTE 4--PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment held at December 31, 1996, 1995 and June 30, 1997 consisted of the following:
DECEMBER 31, AS OF ------------------------- JUNE 30, 1996 1995 1997 (a) ------------ ------------ ------------ (UNAUDITED) Land and land improvements........... $ 32,215,000 $ 42,490,000 $ 49,471,000 Buildings............................ 150,935,000 175,960,000 259,298,000 Equipment............................ 31,531,000 36,003,000 74,566,000 Vessel............................... 0 0 18,925,000 Construction in progress............. 128,000 8,394,000 5,548,000 ------------ ------------ ------------ 214,809,000 262,847,000 407,808,000 Less accumulated depreciation........ 83,974,000 88,130,000 130,724,000 ------------ ------------ ------------ $130,835,000 $174,717,000 $277,084,000 ============ ============ ============
- -------- (a) Includes property, plant and equipement related to Boomtown. NOTE 5--SECURED AND UNSECURED NOTES PAYABLE Notes payable as of December 31, 1996, 1995 and June 30, 1997 consisted of the following:
AS OF DECEMBER 31, AS OF -------------------- JUNE 30, 1996 1995 (a) 1997 (b) -------- ----------- ------------ (UNAUDITED) Secured notes payable..................... $ 0 $28,667,000 $114,879,000 Unsecured notes payable................... 317,000 15,914,000 3,745,000 Secured note payable--Texaco.............. 0 3,358,000 0 Capital lease obligations................. 0 0 3,994,000 -------- ----------- ------------ 317,000 47,939,000 122,618,000 Less current maturities................... 35,000 32,310,000 6,222,000 -------- ----------- ------------ $282,000 $15,629,000 $116,396,000 ======== =========== ============
- -------- (a) The secured and unsecured notes payable as of December 31, 1995, related to Sunflower and were non-recourse to Hollywood Park. (b) Includes notes payable related to Boomtown. HOLLYWOOD PARK (unaudited) On June 30, 1997, Hollywood Park and a bank syndicate lead by Bank of America closed the reducing revolving credit facility (the "Bank Credit Facility") for up to $225,000,000. On August 7, 1997, the Bank Credit Facility was reduced to approximately $104,500,000 by the net cash proceeds received from the issuance of the Hollywood Park Senior Subordinated Notes (the "Notes") (as described below). The Bank Credit Facility is secured by substantially all of the assets of Hollywood Park and its significant subsidiaries, and imposes certain customary affirmative and negative covenants. F-15 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The Bank Credit Facility has been amended twice. First, among other matters, to reduce the availability of the facility until the Bank Credit Facility was approved by the Louisiana Gaming Control Board. The Company received this approval on July 10, 1997. Second, among other matters, to allow the co- issuance of the Notes by HPOC with Hollywood Park. Debt service requirements on the Bank Credit Facility consist of current interest payments on outstanding indebtedness through September 30, 1999. As of September 30, 1999, and on the last day of each third calendar month thereafter, through June 30, 2001, the Bank Credit Facility will decrease by 7.5% of the commitment in effect on September 30, 1999. As of September 30, 2001, and on the last day of each third calendar month thereafter, the Bank Credit Facility will decrease by 10% of the commitment in effect on September 30, 1999. Any principal amounts outstanding in excess of the Bank Credit Facility commitment, as so reduced, will be payable on such quarterly reduction dates. The Bank Credit Facility provides for a letter of credit sub-facility of $10,000,000, of which $2,035,000 is currently outstanding for the benefit of Hollywood Park's California self insured workers' compensation program. The facility also provides for a swing sub-facility of up to $10,000,000. Borrowings under the Bank Credit Facility bear interest at an annual rate determined, at the election of the Company, by reference to the "Eurodollar Rate" (for interest periods of 1, 2, 3 or 6 months) or the "Reference Rate", as such terms are respectively defined in the Bank Credit Facility, plus margins which vary depending upon Hollywood Park's ratio of funded debt to earnings before interest, taxes, deprecation and amortization ("EBITDA"). The margins start at 1.25% for Eurodollar loans and at 0.25% for Base Rate loans, at funded debt to EBITDA ratio of less than 1.50%. Thereafter, the margins for each type of loan increases by 25 basis points for each increase in the ratio of funded debt to EBITDA of 50 basis points or more, up to 2.625% for Eurodollar loans and 1.625% for Base Rate loans. However, if the ratio of senior funded debt to EBITDA exceeds 2.50, the applicable margins will increase to 3.25% for Eurodollar loans, and 2.25% for Base Rate loans. Thereafter, the margins would increase by 25 basis points for each increase in the ratio of senior funded debt to EBITDA of 50 basis points or more, up to a maximum of 4.25% for Eurodollar loans and 3.25% for Base Rate loans. The applicable margins as of June 30, 1997, were 1.75% with respect to the Eurodollar Rate based interest rate and 0.75% with respect to the Base Rate interest rate. Hollywood Park pays a quarterly commitment fee for the average daily amount of unused portions of the Bank Credit Facility. The commitment fee is also dependent upon the Company's ratio of funded debt to EBITDA. The commitment fee for the Bank Credit Facility starts at 31.25 basis points when the ratio is less than 1.00, and increases by 6.25 basis points for each increase in the ratio of 0.50, up to a maximum of 50 basis points. For the quarter beginning July 1, 1997, this fee is 43.75 basis points. On July 3, 1997, Hollywood Park borrowed $112,000,000 from the Bank Credit Facility to fund Boomtown's offer to purchase its First Mortgage Notes, and repaid this amount on August 7, 1997, with a portion of the proceeds from the August 6, 1997, issuance of $125,000,000 of 9.5% Senior Subordinated Notes due 2007. The Notes were co-issued by Hollywood Park and HPOC (the "Obligors"). The balance of the proceeds from the issuance are expected to be used primarily for expansion projects. Interest on the Notes is payable semi-annually, on February 1st and August 1st. The Notes will be redeemable at the option of the Company, in whole or in part, on or after August 1, 2002, at a premium to face amount, plus accrued interest, with the premium to the face amount decreasing on each subsequent anniversary date. The Notes are unsecured obligations of Hollywood Park and HPOC, guaranteed by all other material restricted subsidiaries of either Hollywood Park or HPOC. The indenture governing the Notes contains certain covenants that, among other things, limit the ability of the Obligors and their restricted subsidiaries to incur additional indebtness and issue preferred stock, pay F-16 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) dividends or make other distributions, repurchase equity interests or subordinated indebtness, create certain liens, enter into certain transactions with affiliates, sell assets, issue or sell equity interests in their respective subsidiaries or enter into certain mergers and consolidations. On July 1, 1997, in connection with the divestiture of Boomtown's Las Vegas property, Hollywood Park issued an unsecured promissory note of approximately $3,465,000. The promissory note bears interest equal to the Bank of America reference rate plus 1.0%. Interest is payable quarterly with five annual principal payments of approximately $693,000 commencing July 1, 1998. During the six months ended June 30, 1997, the Company paid dividends of $962,000 on its convertible preferred stock, representing $70.00 per share, or $0.70 per depositary share. On July 1, 1997, the Company declared the regular quarterly preferred stock dividend of $481,000, payable on August 15, 1997. Effective August 28, 1997, the Company will exercise its option to covert all 2,749,900 of its outstanding depositary shares into approximately 2,291,492 shares of its common stock; thereby; eliminating the annual preferred cash dividend payment of approximately $1,924,000. Prior to execution of the Bank Credit Facility, Hollywood Park maintained a $75,000,000 unsecured loan facility with Bank of America (the "Business Loan Agreement"). The Business Loan Agreement consisted of a $60,000,000 line of credit (the "Line of Credit") and a $15,000,000 revolver (the "Revolver"). The Business Loan Agreement was amended five times to, among other matters, extend the date for drawing down the Line of Credit and for using the Revolver to June 30, 1997, to amend the quick asset to current liability ratio covenant, and to adjust the tangible net worth covenant. During the year ended December 31, 1996, the Company did not borrow any funds under the Business Loan Agreement, except for the May 1, 1996, issuance of a standby letter of credit of $2,617,000, as security for the Company's workers' compensation self-insurance program. Texaco Secured Note Payable On September 3, 1996, Hollywood Park paid the secured non-interest bearing promissory note of $3,358,000, related to the October 27, 1995, purchase of 37.33 acres of land adjacent to the Inglewood property. Gold Cup Contest The Company's Gold Cup note payable resulted from the $1,000,000 Gold Cup Contest on July 20, 1986. The prize money is payable to the winner in 20 annual installments of $50,000, beginning August 1, 1986. The remaining liability of $317,000, at December 31, 1996. BOOMTOWN In November 1993, Boomtown sold $103,500,000 of 11.5% First Mortgage Notes due November 1, 2003 (the "First Mortgage Notes"). On July 3, 1997, Boomtown repurchased and retired approximately $102,142,000 in principal amount of the First Mortgage Notes, at a purchase price of $1,085 per $1,000 in principal amount, along with accrued interest thereon, pursuant to a tender offer. As a result of the Merger, Boomtown, as required under the indenture governing the First Mortgage Notes, initiated a change in control purchase offer at a price of $1,010 for each $1,000 for the remaining approximately $1,358,000 aggregate principal amount of First Mortgage Notes outstanding. This change in control purchase offer was completed on August 12, 1997, and only a portion of the remaining First Mortgage Notes were tendered. On August 4, 1997, Hollywood Park executed a purchase agreement pursuant to which one of the Hollywood Park entities repurchased the barge and the building shell at Boomtown Biloxi for at total cost of $5,250,000. A payment of $1,500,000 was made on August 4, 1997, with the balance payable in three equal annual installments of $1,250,000. F-17 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) As of August 8, 1997, Boomtown New Orleans is wholly owned by the Company. Previously, Boomtown New Orleans was owned and operated by the Louisiana Partnership, of which 92.5% was owned by Hollywood Park with the remaining 7.5% owned by Skrmetta. On November 18, 1996, Boomtown entered into an agreement with Skrmetta under which it would pay approximately $5,670,000 in return for Skrmetta's interest in the Louisiana Partnership. Under the term of the agreement, Boomtown made a down payment of $500,000, and the Company paid the remaining $5,170,000 on August 8, 1997. As of June 30, 1997, Boomtown had four outstanding notes payable totaling approximately $2,704,000. Two of the notes which total $223,000 are secured by furniture, fixtures and equipment, bear interest at 11.5% and mature in September 1997. One note, in the amount of $2,294,000, was secured by the Boomtown New Orleans riverboat, bore interest at 13.0% and was set to mature in January 1999. On August 7, 1997, Boomtown elected to pre-pay this note and incurred a 1.0% penalty. The remaining note, in the amount of $187,000, is secured by gaming equipment, bears interest at 12.25% and matures December 1997. In addition to the notes payable, Boomtown also has capital lease obligations for equipment with a total balance of approximately $3,994,000. In connection with the sale its Las Vegas property, Boomtown took back two notes receivable from Roski, the former lessor of the Las Vegas property, totaling approximately $8,465,000. The first note receivable is for $5,000,000, bearing interest at Bank of America's reference rate plus 1.5% per year, with annual principal receipts of $1,000,000 plus accrued interest commencing on July 1, 1998. The second note is for approximately $3,465,000, bearing interest at Bank of America's reference rate plus 0.5% per year, with the principal and accrued interest payable, in full, on July 1, 2000. SUNFLOWER On March 24, 1994, an Amended and Restated Credit and Security Agreement (the "Sunflower Senior Credit") was executed between Sunflower and five banks in connection with the Company's acquisition of Sunflower. As of June 30, 1997, the outstanding balance of the Sunflower Senior Credit was $28,667,000. The Sunflower Senior Credit is non-recourse to Hollywood Park. On May 17, 1996, Sunflower filed for reorganization under Chapter 11 of the Bankruptcy Code. The Cash Collateral Agreement suspended any interest or principal payments on the Sunflower Senior Credit until September 17, 1997. On July 15, 1997, Sunflower presented to the Bankruptcy Court a plan of reorganization (the "Plan") which provides for the sale of Sunflower's property to the Wyandotte Indians of Oklahoma (the "Wyandotte Indians"). Under the Plan, the land would be held by the United States Government in trust for the Wyandotte Indians, and a casino would be built on the property. Upon completion of the casino, Hollywood Park and a partner (North American Sports Management) would operate the facility in return for 30% of the profits. The Company would guarantee certain bank debt of Sunflower of up to $28,667,000 to allow the property to be released as collateral and then transferred to the Wyandotte Indians. The Company's guaranty would not go into effect unless, and until, all material regulatory approvals have been obtained for operation of the casino, and approval has been obtained under the Bank Credit Facility, as well. In 1995, under a promissory note executed in December 1994, between Hollywood Park and Sunflower, Hollywood Park advanced $2,500,000 to Sunflower to make certain payments due on the Sunflower Senior Credit. The amounts borrowed under the promissory note, along with accrued interest, are subordinate to the Sunflower Senior Credit. Although the Company will continue to pursue payment of the promissory note, for financial reporting purposes the outstanding balance of the promissory note was written off as of March 31, 1996. As of June 30, 1997 and December 31, 1996, Sunflower's unsecured notes payable totaled $15,574,000. The unsecured notes payable included $13,060,000, payable to Mr. Hubbard (Chief Executive Officer of Hollywood Park, and former shareholder of Sunflower) on January 1, 2003. As a condition of the merger between the Company and Sunflower, Hollywood Park contributed $5,000,000 in cash to Sunflower to pay F-18 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) accrued interest, and a portion of the note payable to Mr. Hubbard in exchange for a reduction in the interest rate on this debt to 9.0% from 14.0%. The remaining $2,514,000 relates to a Special Assessment note payable to Wyandotte County, Kansas for the cost of construction of various streets and sewers serving Sunflower. The Special Assessment note was entered into in 1990, and is a 15 year note, with a fixed interest rate of 6.59%. ANNUAL MATURITIES As of December 31, 1996, annual maturities of total notes and loans payable are as follows:
YEAR ENDING: ------------ December 31, 1997.................................................... $50,000 December 31, 1998.................................................... 50,000 December 31, 1999.................................................... 50,000 December 31, 2000.................................................... 50,000 December 31, 2001.................................................... 50,000 Thereafter........................................................... 200,000
The fair values of the Company's various debt instruments discussed above approximate their carrying amounts based on the fact that borrowings bear interest at variable market based rates. NOTE 6--LONG TERM GAMING ASSETS Long term gaming assets related to the capital lease between the Company and the city of Compton covering the hotel, surrounding parking and an expansion parcel at Crystal Park. With the completion of the construction of Crystal Park, as of December 31, 1996, the long term gaming assets were reclassed to property, plant and equipment. The capital 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 received a rent payment credit equal to the costs incurred to renovate Crystal Park, and no cash rent payments are expected to be made until the nineteenth year of the lease, or 2014. NOTE 7--LONG TERM GAMING LIABILITIES Long term gaming liabilities consist of the Company's capital lease obligation associated with the lease of the hotel, surrounding parking and the expansion parcel from the city of Compton for the Crystal Park Hotel and Casino. This liability was reduced as the construction disbursements were made. NOTE 8--ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF 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 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 F-19 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) fair value measured as the amount at which the asset could be bought or sold in a current transaction between willing parties, other than in a forced liquidation sale. The estimation of expected future net cash flows is inherently uncertain and relies to a considerable extent on assumptions regarding current and future net cash flows, market conditions, and the availability of capital. If, in future periods, there are changes in the estimates or assumptions incorporated into the impairment review analysis the changes could result in an adjustment to the carrying amount of the asset, but at no time would previously recognized impairment losses be restored. NOTE 9--DEVELOPMENT EXPENSES Included in Administrative expenses were development costs of approximately $1,092,000, $2,716,000, and $1,275,000 for the years ended December 31, 1996, 1995, and 1994, respectively. The expenses in 1996 consisted primarily of costs related to the Inglewood site master plan and card clubs in California. The expenses in 1995 consisted primarily of costs related to the following projects: the environmental impact study for the proposed stadium at Hollywood Park, card clubs under consideration in the cities of Stockton, Pomona and South San Francisco, and the retail center project (since abandoned). The costs incurred in 1994 were primarily generated by the initial financial and economic analysis of the proposed stadium, numerous card clubs, and the music dome. Included in Administrative expenses for the six months ended June 30, 1997, was $114,000 of development expenses; primarily related to the master site plan for the Inglewood property. Included in Administrative expenses for the six months ended June 30, 1996, was $317,000 of development expenses; primarily related to the proposed stadium, the master site plan for the Inglewood property, and card clubs in Stockton and Hawaiian Gardens. NOTE 10--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 SFAS 123, and noted that the impact on the net loss for the year ended December 31, 1996, and for the six months ended June 30, 1997 were immaterial. F-20 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 11--RACING OPERATIONS The Company conducts thoroughbred racing at its Hollywood Park, Sunflower, and Turf Paradise race tracks, located in California, Kansas and Arizona, respectively. Sunflower is primarily a greyhound racing facility. On May 17, 1996, due to competition from Missouri riverboat gaming, Sunflower filed for reorganization under Chapter 11 of the Bankruptcy Code, and as of April 1, 1996, Sunflower's operating results were no longer consolidated with Hollywood Park's; therefore, Sunflower's 1996 racing results and statistics have been excluded from this note. Sunflower is operating during the reorganization. Under Kansas racing law, Sunflower is not granted any race days and does not generate any pari-mutuel commissions. The Kansas Racing Commission granted Sunflower the facility ownership and management licenses; with all race days until the year 2014 granted to TRAK East, a Kansas not-for-profit corporation. Sunflower has an agreement with TRAK East to provide the physical race tracks along with management and consulting services for twenty-five years with options to renew for one or more successive five year terms. The Agreement and Restatement of Lease and Management Agreement was entered into as of September 14, 1989.
1996 1995 1994 ---- ---- ---- LIVE ON-TRACK RACE DAYS Hollywood Park race track..................................... 103 97 102 Turf Paradise race track...................................... 166 171 185 Sunflower--Horses............................................. -- 49 62 Sunflower--Greyhounds......................................... -- 294 213
A summary of the pari-mutuel handle and deductions, by racing facility for the year ended December 31, are as follows:
1996 1995 1994 ------------ ------------ ------------ HOLLYWOOD PARK--LIVE HORSE RACING Total pari-mutuel handle............. $677,827,000 $643,246,000 $699,748,000 Less patrons' winning tickets........ 547,775,000 520,291,000 565,685,000 ------------ ------------ ------------ 130,052,000 122,955,000 134,063,000 Less: State pari-mutuel tax.............. 19,263,000 20,691,000 26,260,000 City of Inglewood pari-mutuel tax.. 1,287,000 1,384,000 1,711,000 Racing purses and awards........... 26,300,000 26,888,000 31,183,000 Satellite wagering fees............ 12,784,000 13,545,000 16,732,000 Interstate location fees........... 44,815,000 34,170,000 27,570,000 Other fees......................... 390,000 419,000 519,000 ------------ ------------ ------------ Pari-mutuel commissions............ 25,213,000 25,858,000 30,088,000 Add off-track independent handle commissions....................... 2,280,000 2,251,000 1,797,000 ------------ ------------ ------------ Total pari-mutuel commissions including charity days............ 27,493,000 28,109,000 31,885,000 Less charity day pari-mutuel commissions....................... 0 0 739,000 ------------ ------------ ------------ Total pari-mutuel commissions net of charity days................... $ 27,493,000 $ 28,109,000 $ 31,146,000 ============ ============ ============
F-21 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Turf Paradise races live five days a week, and on three of these days Turf Paradise concurrently operates as a simulcast site.
1996 1995 1994 ------------ ------------ ----------- TURF PARADISE--LIVE HORSE RACING Total pari-mutuel handle.............. $147,748,000 $111,509,000 $96,493,000 Less patrons' winning tickets......... 114,585,000 86,460,000 74,918,000 ------------ ------------ ----------- 33,163,000 25,049,000 21,575,000 Less: State pari-mutuel tax............... 18,000 345,000 669,000 Racing purses and awards............ 4,501,000 4,757,000 5,399,000 State sales tax..................... 302,000 415,000 537,000 Off-track commissions............... 115,000 117,000 137,000 Interstate location fees............ 20,034,000 10,943,000 6,006,000 ------------ ------------ ----------- Pari-mutuel commissions............... 8,193,000 8,472,000 8,827,000 Add off-track independent handle commissions.......................... 166,000 699,000 297,000 ------------ ------------ ----------- Total pari-mutuel commissions including charity days............... 8,359,000 9,171,000 9,124,000 Less charity day pari-mutuel commissions.......................... 17,000 0 29,000 ------------ ------------ ----------- Total pari-mutuel commissions net of charity days......................... $ 8,342,000 $ 9,171,000 $ 9,095,000 ============ ============ ===========
The acquisition of Sunflower was accounted for under the purchase method of accounting and as such results of operations prior to the March 23, 1994 acquisition date are not presented.
GREYHOUNDS HORSES 1995 1995 ----------- ---------- TRAK EAST AT SUNFLOWER--LIVE RACING Total pari-mutuel handle............................. $47,406,000 $2,844,000 Less patrons' winning tickets........................ 37,379,000 2,273,000 ----------- ---------- 10,027,000 571,000 Less: State pari-mutuel tax.......................... 1,721,000 104,000 Racing purses and awards............................. 2,230,000 190,000 ----------- ---------- Total pari-mutuel commissions........................ $ 6,076,000 $ 277,000 =========== ========== GREYHOUNDS HORSES 1994 1994 ----------- ---------- Total pari-mutuel handle............................. $74,941,000 $6,274,000 Less patrons' winning tickets........................ 59,778,000 5,012,000 ----------- ---------- 15,163,000 1,262,000 Less: State pari-mutuel tax.......................... 2,527,000 210,000 Racing purses and awards............................. 3,372,000 421,000 ----------- ---------- Total pari-mutuel commissions........................ $ 9,264,000 $ 631,000 =========== ==========
As a stipulation to the granting of race dates, the California Horse Racing Board ("CHRB") requires that Hollywood Park designate three days from both the live Spring/Summer Meet and the Autumn Meeting as charity days. As of the 1994 Autumn Meeting, the charity day payments were changed to the net proceeds from the charity days not to exceed 2/10 of 1.0% of the total live on-track pari- mutuel handle for the respective race meet. Charity day payments must be made to a distributing agent approved by the CHRB. The following table F-22 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) summarizes the revenues and expenses that were excluded from the statements of operations for the period prior to the 1994 Autumn Meeting and the total charity day liability for the past three years:
1996 1995 1994 -------- -------- -------- Racing revenues.................................. $ 0 $ 0 $961,000 Less: Salaries, wages and employee benefits...... 0 0 285,000 Other expenses................................... 0 0 298,000 -------- -------- -------- Net proceeds (old charity day law)............... 0 0 378,000 Add: 2/10 of 1% of live on track pari-mutuel handle as of the Autumn Meeting 1994 (revised charity day law)................................ 338,000 370,000 117,000 -------- -------- -------- Total charity day payable........................ $338,000 $370,000 $495,000 ======== ======== ========
Arizona racing law requires that 1.0% of the total in-state pari-mutuel handle (on-track live pari-mutuel handle and off-track within the state pari- mutuel handle) of three charity days be paid to a distributing agent approved by the Arizona Racing Commission. The Arizona Department of Racing did not assign any charity days in 1995, therefore no payments were required. Turf Paradise paid $17,000 to the distributing agent in 1996, and paid $29,000 in 1994. Hollywood Park conducts simulcast meets of live races held at local southern California race tracks. As of 1993, the Company began to simulcast races from northern California concurrently with live on-track racing. In July 1994, Assembly Bill 1418 was enacted allowing for unrestricted simulcasting between northern and southern California. Previous legislation, enacted in September 1993, limited such simulcasting to races with purses of at least $20,000. A summary of simulcast pari-mutuel handle and commissions for the years ended December 31, are as follows:
1996 1995 1994 ------------ ------------ ------------ HOLLYWOOD PARK--SIMULCAST RACING Pari-mutuel handle: Thoroughbred meets................ $375,910,000 $379,263,000 $291,526,000 Quarter Horse meets............... 23,067,000 22,793,000 18,754,000 Harness meets..................... 6,165,000 4,391,000 3,948,000 ------------ ------------ ------------ $405,142,000 $406,447,000 $314,228,000 ============ ============ ============ Pari-mutuel commissions: Thoroughbred meets................ $ 12,669,000 $ 11,527,000 $ 7,624,000 Quarter Horse meets............... 454,000 457,000 377,000 Harness meets..................... 120,000 86,000 79,000 ------------ ------------ ------------ $ 13,243,000 $ 12,070,000 $ 8,080,000 ============ ============ ============
F-23 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) TRAK East at Sunflower operates year round simulcasting of both greyhounds and horses. Pari-mutuel handle and commissions earned by TRAK East for the year ended December 31, 1995 and March 23, 1994 (the date Sunflower was acquired) through December 31, 1994, are as follows:
1996 1995 1994 ---- ----------- ----------- TRAK EAST AT SUNFLOWER--SIMULCAST RACING Pari-mutuel handle: Greyhounds................................... $-- $10,871,000 $ 7,162,000 Horses....................................... -- 29,600,000 24,010,000 ---- ----------- ----------- $-- $40,471,000 $31,172,000 ==== =========== =========== Pari-mutuel commission: Greyhounds................................... $-- $ 2,342,000 $ 1,361,000 Horses....................................... -- 5,742,000 4,690,000 ---- ----------- ----------- $-- $ 8,084,000 $ 6,051,000 ==== =========== ===========
Turf Paradise accepts simulcasts of live races from other tracks concurrently with live on-track racing as well as operating as a simulcast site for Prescott Downs between live meets. Turf Paradise also accepts simulcast signals on the two dark days (days without live racing) a week during the live on-track meet.
1996 1995 1994 ----------- ----------- ----------- TURF PARADISE--SIMULCAST RACING Pari-mutuel handle all meets............. $55,814,000 $55,093,000 $46,549,000 Pari-mutuel commissions all meets........ 4,768,000 3,909,000 3,410,000
NOTE 12--INCOME TAXES As discussed in Note 1, the Company accounts for income taxes under SFAS 109. On November 17, 1995, the Company acquired PCM and accounted for the acquisition under the purchase method of accounting. Before the acquisition, PCM was an S-corporation for income tax purposes and under the terms of the merger was dissolved into Hollywood Park. On March 23, 1994, the Company acquired Sunflower and accounted for the acquisition under the purchase method of accounting. Before the acquisition, Sunflower was an S-corporation and under the terms of the merger became a C-corporation for income tax purposes. Turf Paradise was acquired on August 11, 1994, and was accounted for under the pooling of interests method of accounting. F-24 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The composition of the Company's income tax expense for the years ended December 31, 1996, 1995 and 1994 is as follows:
CURRENT DEFERRED TOTAL ----------- ----------- ---------- YEAR ENDED DECEMBER 31, 1996: U.S. Federal........................... $ 4,341,000 $(1,681,000) $2,660,000 State.................................. (3,293,000) 4,092,000 799,000 ----------- ----------- ---------- $ 1,048,000 $ 2,411,000 $3,459,000 =========== =========== ========== YEAR ENDED DECEMBER 31, 1995: U.S. Federal........................... $ 0 $ 473,000 $ 473,000 State.................................. 42,000 178,000 220,000 ----------- ----------- ---------- $ 42,000 $ 651,000 $ 693,000 =========== =========== ========== YEAR ENDED DECEMBER 31, 1994: U.S. Federal........................... $ 1,094,000 $ 656,000 $1,750,000 State.................................. (1,155,000) 973,000 (182,000) ----------- ----------- ---------- $ (61,000) $ 1,629,000 $1,568,000 =========== =========== ==========
The following table reconciles the Company's income tax expense (based on its effective tax rate) to the federal statutory tax rate of 34%:
1996 1995 1994 ---------- --------- ---------- Income (loss) before income tax expense, at the statutory rate.................. $ (269,000) $(159,000) $1,816,000 Pooling costs......................... 0 0 213,000 Goodwill amortization................. 195,000 72,000 0 Political and lobbying costs.......... 291,000 353,000 179,000 State income taxes, net of federal tax benefits............................. 800,000 145,000 (120,000) Valuation allowance................... 0 0 (465,000) Non-deductible expenses............... 105,000 260,000 0 Additional provisions................. 2,337,000 22,000 (55,000) ---------- --------- ---------- Income tax expense...................... $3,459,000 $ 693,000 $1,568,000 ========== ========= ==========
For the years ended December 31, 1996, and 1995, the tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below, along with a summary of activity in the valuation allowance. F-25 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
1996 1995 ------------ ------------ Current deferred tax assets: Workers' compensation insurance reserve.......... $ 790,000 $ 905,000 General liability insurance reserve.............. 690,000 619,000 Legal accrual.................................... 58,000 76,000 Write off of investment in Sunflower............. 3,111,000 0 Development costs................................ 0 268,000 Lawsuit settlement............................... 1,104,000 2,087,000 Vacation and sick pay accrual.................... 270,000 377,000 Bad debt allowance............................... 437,000 739,000 Los Angeles revitalization zone credit........... 0 0 Other............................................ 435,000 177,000 ------------ ------------ Current deferred tax assets.................... 6,895,000 5,248,000 Less valuation allowance......................... (120,000) (109,000) ------------ ------------ Current deferred tax assets.................... 6,775,000 5,139,000 Current deferred tax liabilities: Business insurance and other..................... (353,000) (251,000) ------------ ------------ Net current deferred tax assets.................... $ 6,422,000 $ 4,888,000 ============ ============ Non-current deferred tax assets: Net operating loss carryforwards................. $ 0 $ 931,000 General business tax credits..................... 36,000 468,000 Los Angeles revitalization zone tax credits...... 9,299,000 6,406,000 Other............................................ 42,000 156,000 Alternative minimum tax credit................... 1,244,000 412,000 ------------ ------------ Non-current deferred tax assets................ 10,621,000 8,373,000 Less valuation allowance......................... (5,511,000) (5,221,000) ------------ ------------ Non-current deferred tax assets................ 5,110,000 3,152,000 ------------ ------------ Non-current deferred tax liabilities: Expansion plans.................................. (400,000) (400,000) Los Angeles revitalization zone accelerated write-off....................................... (461,000) (560,000) Depreciation and amortization.................... (10,580,000) (11,862,000) Other............................................ (2,734,000) (413,000) ------------ ------------ Non-current deferred tax liabilities........... (14,175,000) (13,235,000) ------------ ------------ Net non-current deferred tax liabilities........... $ (9,065,000) $(10,083,000) ============ ============
The Company is located in the Los Angeles revitalization tax zone and is entitled to special state of California income tax credits related to sales tax paid on operating materials and supplies, on construction assets and wages paid to staff who reside within the zone. With the construction of the Hollywood Park-Casino and Crystal Park, the Company earned substantial tax credits related to sales tax paid on the assets acquired and on wages paid to construction employees. F-26 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
DECEMBER 31, --------------------- 1996 1995 ---------- ---------- Valuation allowance at beginning of period................ $5,330,000 $2,986,000 Valuation allowance utilized during the year.............. 0 0 Valuation allowance established for California state...... 0 0 Los Angeles revitalization zone tax credit................ 302,000 2,344,000 ---------- ---------- Valuation allowance at end of period.................... $5,632,000 $5,330,000 ========== ==========
As of December 31, 1995, the Company had a federal regular net tax operating loss of approximately $2,200,000 that in 1996 the Company carried back to 1994 generating a cash refund of approximately $56,000 and increased the alternative minimum tax credit by approximately $660,000, and also increased the general business tax credits by approximately $19,000. As of December 31, 1996, the Company had approximately $36,000 of general business tax credits and $1,244,000 of alternative minimum tax credits available to reduce future federal income taxes, although in either case, the tax credits generally cannot reduce federal taxes paid below the calculated amount of alternative minimum tax. The general business tax credits expire in 2000, and the alternative minimum tax credits do not expire. The Company's use of its tax credit carryforwards is subject to certain limitations imposed by Section 383 of the Internal Revenue Code and by the separate return limitation year rules of the consolidated return regulations. Although Management currently expects that such limitations will not prevent the Company from fully utilizing the benefits of its tax credits, it is possible that such limitations could defer or reduce the Company's use of its general business tax credits and alternative minimum tax credit carryforwards. NOTE 13--STOCKHOLDERS' EQUITY Effective August 28, 1997, the Company will exercise its option to convert all 2,749,900 of its outstanding Depositary Shares into approximately 2,291,492 shares of its common stock; thereby, eliminating the annual preferred cash dividend of approximately $1,925,000. On June 30, 1997, the Company issued approximately 5,362,850 shares of Hollywood Park common stock, valued at $9.8125, (excluding 446,491 shares of the Company's common stock repurchased from Roski, and subsequently retired), to acquire Boomtown. During 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 December 31, 1996, the Company had repurchased and retired (with the last purchase in 1996 made on November 13, 1996) 222,300 common shares at a cost of approximately $1,962,000. On November 17, 1995, the Company acquired PCM's net assets for 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 136,008 common shares were issued on November 17, 1995, (ii) shares of Hollywood Park common stock, having a value of $540,000, or 48,674 common shares, were issued on November 19, 1996, and (iii) shares of Hollywood Park common stock, having a value of $500,000, or 33,417 common shares were issued on February 10, 1997. On March 23, 1994, the Company issued 591,715 shares of Hollywood Park common stock to acquire Sunflower. An additional 55,574 shares of Hollywood Park common stock were subsequently issued to Mr. Richard Boushka, a former Sunflower shareholder, as required by the agreement of merger. The acquisition of Sunflower was accounted for under the purchase method of accounting. F-27 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) On August 11, 1994, the Company issued 1,498,016 shares of Hollywood Park common stock to acquire Turf Paradise. The acquisition of Turf Paradise was accounted for under the pooling of interests method of accounting and the historical per common share earnings of the Company have been restated as if the acquisition had occurred at the beginning of each period presented. NOTE 14--LEASE OBLIGATIONS The Company leases certain equipment primarily for use in racing operations (pari-mutuel wagering equipment) and general office equipment. Minimum lease payments required under operating leases that have initial terms in excess of one year as of December 31, 1996 are approximately $1,354,000 in 1997 and annually thereafter. Total rent expense for these long term lease obligations for the years ended December 31, 1996, 1995 and 1994 was $1,378,000, $1,318,000 and $1,437,000, respectively. NOTE 15--RETIREMENT PLANS The Hollywood Park Pension Plan (the "Pension Plan") was a non-contributory, defined benefit plan covering employees of Hollywood Park, Inc. who met the Pension Plan's service requirements, and all employees of Hollywood Park Operating Company not eligible for participation in a multi-employer defined benefit plan, who met the Pension Plan's service requirements. Hollywood Park elected to terminate the Pension Plan as of January 31, 1997. Accrued Pension Plan benefits were frozen as of September 1, 1996, for all Pension Plan participants, except retained participants (participants who, because of legal requirements, including the provisions of the National Labor Relations Act, are represented by a collective bargaining agent), whose accrued benefits were frozen as of December 31, 1996. As of the date the Pension Plan benefits were frozen, participants became 100% vested in their accrued benefits, regardless of the number of years of service. The funds accumulated under the Pension Plan will be used to provide the retirement benefits accrued by the participants. Pension Plan participants will receive their fully accrued benefits only if the Pension Plan's assets are sufficient to cover such accrued benefits, but in no event can the Pension Plan assets be paid to the Company prior to the satisfaction of all accrued Pension Plan benefits to the participants. Management presently believes that the accumulated Pension Plan assets are sufficient to provide for the participant's accumulated Pension Plan benefits. The Company's Pension Plan funding policy was to contribute amounts to the Pension Plan fund in an amount, at least equal to the minimum funding requirements of the Employee Retirement Income Security Act of 1974, though not in excess of the maximum deductible limit. The Pension Plan was subject to full funding limitation in 1996; therefore, no contributions were made in 1996. The Company contributed approximately $22,000 to the Pension Plan in 1995. F-28 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) RETIREMENT PLANS FUNDED STATUS
DECEMBER 31, ---------------------- 1996 1995 ---------- ---------- Actuarial present value of benefit obligations: Accumulated benefit obligation, including vested benefits of $2,627,000 and $4,078,000 at December 31, 1996 and 1995, respectively........................... $2,627,000 $4,190,000 ========== ========== Projected benefit obligation for service rendered to date.................................................. $2,627,000 $5,080,000 Less Pension Plan assets at fair value................. 4,436,000 5,754,000 Less Pension Plan contribution......................... 0 22,000 ---------- ---------- Pension Plan assets in excess of projected benefit obligation............................................ 1,809,000 696,000 Unrecognized net gain from past experience different from that assumed and effects of changes in assumptions........................................... (1,052,000) (323,000) Unrecognized net asset being recognized over 15 years.. (452,000) (539,000) ---------- ---------- Pension Plan asset (liability)....................... $ 305,000 $ (166,000) ========== ========== Net pension expense--Service cost...................... $ 698,000 $ 314,000 Net pension expense--Interest cost..................... 325,000 354,000 Actual return on assets................................ (784,000) (753,000) Net amortization and deferral.......................... 255,000 247,000 ---------- ---------- Net periodic pension cost............................ $ 494,000 $ 162,000 ========== ==========
The December 31, 1996, reserve liabilities and related asset values for the annuity contract are not included in the table above, because the Company executed an agreement with the insurance company holding the annuity contracts to no longer participate in the annual adjustments to the contract values. The December 31, 1995, Pension Plan liabilities and assets included in the table above are annuity contract reserve liabilities and the related assets for the current Pension Plan retirees. The weighted average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations were 7.5% and 5.0%, respectively, at December 31, 1996, and 8.0% and 5.0%, respectively, at December 31, 1995. The expected long term rate of return on assets was 8.0% at December 31, 1996 and 1995. The Company also contributed to several collectively-bargained multi- employer pension and retirement plans (covering full and part-time employees) which are administered by unions, and to a pension plan covering non-union employees which is administered by an association of race track owners. Amounts charged to pension cost and contributed to these plans for the years ended December 31, 1996, 1995 and 1994 totaled $1,872,000, $1,781,000 and $1,846,000, respectively. Contributions to the collectively-bargained plans are determined in accordance with the provisions of negotiated labor contracts and generally are based on the number of employee hours or days worked. Contributions to the non-union plans are based on the covered employees' compensation. Information from the plans administrators is not available to permit the Company to determine its share of unfunded vested benefits or prior service liability. It is the opinion of management that no material liability exists. There is no defined benefit pension plan for Turf Paradise. Effective January 31, 1997, in conjunction with the termination of the Pension Plan, Hollywood Park elected to terminate its non-qualified Supplementary Employment Retirement Plan ("SERP"). The SERP was an unfunded plan, established primarily for the purpose of restoring the retirement benefits for highly compensated F-29 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) employees that were eliminated by the Internal Revenue Service in 1994, when the maximum annual earnings allowed for qualified pension plans was reduced to $150,000 from $235,850. Messers, Hubbard, Finnigan and Robbins participated in the SERP prior to its termination. NOTE 16--RELATED PARTY TRANSACTIONS Since November 1993, the Company has had an aircraft time sharing agreement with R.D. Hubbard Enterprises, Inc., ("Hubbard Enterprises") which is wholly owned by Mr. Hubbard. The agreement automatically renews each month unless written notice of termination is given by either party at least two weeks before a renewal date. The Company reimburses Hubbard Enterprises for expenses incurred as a result of the Company's use of the aircraft, which totaled approximately $120,000 in 1996, $126,000 in 1995, and $139,000 in 1994. On March 23, 1994, the Company acquired Sunflower, a greyhound and thoroughbred race track located in Kansas City, Kansas, in which Mr. Hubbard owned a 60% interest. The agreement of merger also provided that under certain circumstances the former Sunflower shareholders were entitled to receive additional shares of Hollywood Park common stock. As of March 23, 1995, the former Sunflower shareholders transferred their right to such additional consideration to Hollywood Park for nominal consideration and have no further entitlements to additional consideration. 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 in 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. NOTE 17--STOCK OPTION PLAN In 1996, the shareholders of the Company adopted the 1996 Stock Option Plan (the "1996 Plan"), which provides for the issuance of up to 900,000 shares. Except for the provisions governing the number of shares issuable under the 1996 Plan and except for provisions which reflect changes in tax and securities laws, the provisions of the 1996 Plan are substantially similar to the provision of the prior plan adopted in 1993. The 1996 Plan is administered and terms of option grants are established by the Board of Directors' Compensation Committee. Under the terms of the 1996 Plan, options alone or coupled with stock appreciation rights may be granted to selected key employees, directors, consultants and advisors of the Company. Options become exercisable ratably over a vesting period as determined by the Compensation Committee and expire over terms not exceeding ten years from the date of grant, one month after termination of employment, or six months after the death or permanent disability of the optionee. The purchase price for all shares granted under the 1996 Plan shall be determined by the Compensation Committee, but in the case of incentive stock options, the price will not be less than the fair market value of the common stock at the date of grant. On April 26, 1996, the Company amended the non-qualified stock option agreements issued through this date, to lower the per share price of the outstanding options to $10.00. On May 19, 1995, the Company amended the non-qualified stock option agreements issued through this date, to reflect the substantial decline in the fair market value of the common stock, lowering the per share price of the outstanding options to $13.00. In 1994, Turf Paradise had approximately 23,000 stock options outstanding, all of which were fully exercised prior to the acquisition. F-30 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table summarizes information related to shares under option and shares available for grant under the Plan.
1996 1995 1994 ------- ------- ------- Options outstanding at beginning of year.......... 249,000 235,000 150,000 Options granted during the year................... 433,500 15,000 85,000 Options expired during the year................... (40,000) (1,000) 0 ------- ------- ------- Options outstanding at end of year.............. 642,500 249,000 235,000 ======= ======= ======= Total shares available for issuance under the plan............................................. 900,000 625,000 625,000 Per share price of outstanding options issued in prior year....................................... $ 10.00 $ 13.00 $ 25.50 Per share price of outstanding options issued in current year..................................... $ 10.00 $ 13.25 $ 22.00 Per share price of outstanding options issued in current year..................................... $ 11.50 -- -- Number of shares subject to exercisable option at end of year...................................... 188,332 128,000 50,000
NOTE 18--COMMITMENTS AND CONTINGENCIES 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, 1996, a notice of appeal was filed in connection with the Derivative Action judgment, and on or about February 14, 1997, the appellant filed her opening brief. The Company intends to oppose the purported appeal. F-31 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 December 31, 1996, of $2,750,000 represents the settlement with the Walkers. Sunflower entered into a two year consulting agreement with Mr. Richard Boushka, a former Sunflower shareholder, as of March 24, 1994. Consulting services include assisting Sunflower in obtaining all approvals, licenses and permits necessary for Sunflower to conduct casino gaming and to operate video lottery terminals at or next to Sunflower's property. Under the terms of the agreement Mr. Boushka will receive monthly payments totaling $100,000 per year. As of May 1995, given Sunflower's financial results, all payments to Mr. Boushka were suspended, though Mr. Boushka did continue to provide services per the agreement. F-32 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 19--UNAUDITED SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION In connection with the issuance of the Hollywood Park Notes (as defined elsewhere herein), Hollywood Park's subsidiaries (excluding Sunflower Racing, Inc. and Subsidiary) will guarantee the Notes. The following is a summary of the consolidating financial information: SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION AS OF YEARS ENDED DECEMBER 31, 1996 AND 1995 AND FOR THE THREE YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994 (IN THOUSANDS)
GUARANTOR ENTITIES ------------------------------- HOLLYWOOD HOLLYWOOD PARK SUNFLOWER PARK, OPERATING TURF RACING, INC. HOLLYWOOD INC. COMPANY HP/COMPTON, PARADISE, AND CONSOLIDATING PARK, INC. (PARENT) AND SUBS. INC. INC. SUBSIDIARY ENTRIES CONSOLIDATED --------- --------- ----------- --------- ------------ ------------- ------------ DECEMBER 31, 1996: - ------------------ Current assets.......... $ 23,416 $12,526 $ 513 $ 4,504 $ -- $ 0 $ 40,959 Non-current assets...... 93,770 25,528 28,914 16,715 -- 0 164,927 Investment in subs...... 49,398 0 0 0 -- (49,398) 0 Inter-company........... (4,772) 0 2,748 2,096 -- (72) 0 -------- ------- ------- ------- -------- -------- $161,812 $38,054 $32,175 $23,315 -- $(49,470) $205,886 ======== ======= ======= ======= ======== ======== Current liabilities..... $ 16,379 $16,064 $ 200 $ 2,721 $ -- $ 0 $ 35,364 Non-current liabilities. 3,775 5,572 3,015 0 -- 0 12,362 Inter-company........... 9,032 (9,032) 0 72 -- (72) 0 Equity.................. 132,626 25,450 28,960 20,522 -- (49,398) 158,160 -------- ------- ------- ------- -------- -------- $161,812 $38,054 $32,175 $23,315 -- $(49,470) $205,886 ======== ======= ======= ======= ======== ======== Revenues................ $ 60,221 $63,587 $ 445 $17,190 $ 1,782 $ -- $143,225 Pre tax income (loss)... $(13,039) $10,361 $ 110 $ 3,016 $(1,238) -- $ (790) Net income (loss)....... $(12,509) $ 6,987 $ 74 $ 2,034 $ (835) -- $ (4,249) ======== ======= ======= ======= ======= ======== DECEMBER 31, 1995: - ------------------ Current assets.......... $ 36,774 $ 8,426 $ -- $ 2,859 $ 877 $ 0 $ 48,936 Non-current assets...... 122,860 28,100 -- 17,380 59,119 6,908 234,367 Investment in subs...... 27,008 0 -- 0 0 (27,008) 0 Inter-company........... 2,886 0 -- 0 0 (2,886) 0 -------- ------- ------- ------- -------- -------- $189,528 $36,526 -- $20,239 $59,996 $(22,986) $283,303 ======== ======= ======= ======= ======== ======== Current liabilities..... $ 25,090 $13,278 $ -- $ 2,696 $33,898 $ (11) $ 74,951 Non-current liabilities. 18,741 3,199 -- 0 20,186 480 42,606 Inter-company........... (2,726) 2,726 -- 0 2,886 (2,886) 0 Equity.................. 148,423 17,323 -- 17,543 3,026 (20,569) 165,746 -------- ------- ------- ------- -------- -------- $189,528 $36,526 -- $20,239 $59,996 $(22,986) $283,303 ======== ======= ======= ======= ======== ======== Revenues................ $ 39,429 $63,883 $ -- $17,485 $ 9,775 $ -- $130,572 Pre tax income (loss)... $ (5,601) $ 8,120 -- $ 2,574 $(5,562) -- $ (469) Net income (loss)....... $ (4,241) $ 4,872 -- $ 1,544 $(3,337) -- $ (1,162) ======== ======= ======= ======= ======== DECEMBER 31, 1994: - ------------------ Revenues................ $ 21,016 $64,744 $ -- $17,313 $14,251 $ -- $117,324 Pre tax income (loss)... $ (2,876) $ 7,384 -- $ 1,873 $(1,041) -- $ 5,340 Net income (loss)....... $ (2,032) $ 5,216 -- $ 1,323 $ (735) -- $ 3,772 ======== ======= ======= ======= ========
F-33 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 20--UNAUDITED QUARTERLY INFORMATION The following is a summary of unaudited quarterly financial data for the years ended December 31, 1996 and 1995:
1996 ---------------------------------- DEC. SEPT. JUNE 31, 30, 30, MAR. 31, ------- ------- ------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues................................... $38,698 $30,247 $46,427 $ 27,853 ======= ======= ======= ======== Net income (loss).......................... $ 3,277 $ 603 $ 5,249 $(13,378) ======= ======= ======= ======== Net income (loss) available to (allocated to) common shareholders................... $ 2,795 $ 122 $ 4,768 $(13,859) ======= ======= ======= ======== Per common share: Net income (loss)--primary............... $ 0.15 $ 0.01 $ 0.26 $ (0.74) ======= ======= ======= ======== Net income (loss)--fully diluted......... $ 0.15 $ 0.01 $ 0.25 $ (0.74) ======= ======= ======= ======== Cash dividends........................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 ======= ======= ======= ======== 1995 ---------------------------------- DEC. SEPT. JUNE 31, 30, 30, MAR. 31, ------- ------- ------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues................................... $36,693 $26,595 $42,828 $ 24,456 Net income (loss).......................... $ 212 $(5,637) $ 4,857 $ (594) ======= ======= ======= ======== Net income (loss) available to (allocated to) common shareholders................... $ (270) $(6,118) $ 4,376 $ (1,075) ======= ======= ======= ======== Per common share: Net income (loss)--primary............... $ (0.01) $ (0.33) $ 0.24 $ (0.06) ======= ======= ======= ======== Net income (loss)--fully diluted......... $ (0.01) $ (0.33) $ 0.24 $ (0.06) ======= ======= ======= ======== Cash dividends........................... $ 0.00 $ 0.00 $ 0.00 $ 0.00 ======= ======= ======= ========
NOTE 21--UNAUDITED SUBSEQUENT EVENTS POSSIBLE RESTORATION OF REAL ESTATE INVESTMENT TRUST/PAIRED-SHARE STRUCTURE From 1982 to 1991, the Company was operated as a Real Estate Investment Trust ("REIT") known as Hollywood Park Realty Enterprises, Inc. ("HPRE"), and its stock was paired with, or stapled to, that of Hollywood Park Operating Company ("HPOC"). HPRE was primarily an owner and lessor of real property. HPOC was primarily engaged in the active conduct of racing operations and leased a significant amount of real property from HPRE to conduct those racing operations. Generally, a REIT is required to distribute, as dividends to its stockholders, 95% of its taxable income (other than net capital gains), and such amounts distributed are not subject to federal income tax at the corporate level. Effective as of January 1, 1992, as part of a corporate reorganization, HPRE and HPOC ceased operating in a REIT/Paired- Share Structure, HPOC became a wholly owned subsidiary of HPRE and HPRE was renamed Hollywood Park, Inc. In May 1997, the Company announced that it was exploring the possibility of restoring the REIT/Paired-Share Structure. Any decisions to proceed with restoring the REIT/Paired-Share Structure will depend on a variety of factors, including tax consequences and receipt of board, stockholder, regulatory and other required approvals. The Company has yet to determine whether it will submit a ruling request to the Internal Revenue Service on certain aspects of the restored REIT/Paired-Share Structure. There can be no assurance that the Company will elect to proceed with the restoration of the REIT/Paired-Share Structure, or that the benefits expected from the restoration will be achieved. F-34 HOLLYWOOD PARK, INC. SELECTED FINANCIAL DATA BY OPERATIONAL LOCATION
FOR THE THREE MONTHS ENDED THREE MONTHS ENDED ---------------------------------------------- YEAR ENDED ------------------ DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31, JUNE 30, MARCH 31, 1996 1996 1996 1996 1996 1997 1997 ------------ ------------- -------- --------- ------------ -------- --------- (UNAUDITED) (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUES: Hollywood Park, Inc. and Race Track......... $17,894 $13,496 $28,035 $ 5,701 $65,126 $26,958 $ 5,659 Hollywood Park, Inc.-- Casino Division........ 14,531 15,205 15,173 13,773 58,682 15,323 13,994 HP/Compton, Inc.-- Crystal Park Hotel and Casino................. 445 0 0 0 445 900 600 Turf Paradise, Inc..... 5,828 1,546 3,219 6,597 17,190 3,143 6,562 Sunflower Racing, Inc.. 0 0 0 1,782 1,782 0 0 ------- ------- ------- -------- ------- ------- ------- 38,698 30,247 46,427 27,853 143,225 46,324 26,815 ------- ------- ------- -------- ------- ------- ------- EXPENSES: Hollywood Park, Inc. and Race Track......... 15,131 11,856 19,522 9,335 55,844 18,293 8,617 Hollywood Park, Inc.-- Casino Division........ 12,885 12,676 12,576 12,297 50,434 12,927 12,445 HP/Compton, Inc.-- Crystal Park Hotel and Casino................. 1 0 0 0 1 18 23 Turf Paradise, Inc..... 4,134 2,013 2,700 4,122 12,969 2,670 4,230 Sunflower Racing, Inc.. 0 0 0 1,703 1,703 0 0 ------- ------- ------- -------- ------- ------- ------- 32,151 26,545 34,798 27,457 120,951 33,908 25,315 ------- ------- ------- -------- ------- ------- ------- INCOME (LOSS) BEFORE INTEREST, INCOME TAXES, DEPRECIATION, OTHER NON-RECURRING EXPENSES AND MINORITY INTEREST: Hollywood Park, Inc. and Race Track......... 2,763 1,640 8,513 (3,634) 9,282 8,665 (2,958) Hollywood Park, Inc.-- Casino Division........ 1,646 2,529 2,597 1,476 8,248 2,396 1,549 HP/Compton, Inc.-- Crystal Park Hotel and Casino................. 444 0 0 0 444 882 577 Turf Paradise, Inc..... 1,694 (467) 519 2,475 4,221 473 2,332 Sunflower Racing, Inc.. 0 0 0 79 79 0 0 ------- ------- ------- -------- ------- ------- ------- 6,547 3,702 11,629 396 22,274 12,416 1,500 ------- ------- ------- -------- ------- ------- ------- NON-RECURRING EXPENSES: Write off of investment in Sunflower Racing, Inc.................... 0 0 66 11,346 11,412 0 0 DEPRECIATION AND AMORTIZATION: Hollywood Park, Inc. and Race Track......... 1,433 1,457 1,450 1,393 5,733 1,432 1,425 Hollywood Park, Inc.-- Casino Division........ 751 740 736 675 2,902 900 764 HP/Compton, Inc.-- Crystal Park Hotel and Casino................. 319 0 0 0 319 402 400 Turf Paradise, Inc..... 294 301 301 309 1,205 297 295 Sunflower Racing, Inc.. 0 0 0 536 536 0 0 ------- ------- ------- -------- ------- ------- ------- 2,797 2,498 2,487 2,913 10,695 3,031 2,884 ------- ------- ------- -------- ------- ------- ------- INTEREST EXPENSE: Hollywood Park, Inc. and Race Track......... 24 20 54 63 161 65 64 Sunflower Racing, Inc.. 0 0 0 781 781 0 0 ------- ------- ------- -------- ------- ------- ------- 24 20 54 844 942 65 64 ------- ------- ------- -------- ------- ------- ------- MINORITY INTEREST: HP/Compton, Inc.-- Crystal Park Hotel and Casino................. 15 0 0 0 15 42 22 INCOME (LOSS) BEFORE INCOME TAX EXPENSE (BENEFIT): Hollywood Park, Inc. and Race Track......... 1,306 163 7,009 (5,090) 3,388 7,168 (4,447) Hollywood Park, Inc.-- Casino Division........ 895 1,789 1,861 801 5,346 1,496 785 HP/Compton, Inc.-- Crystal Park Hotel and Casino................. 110 0 0 0 110 438 155 Turf Paradise, Inc..... 1,400 (768) 218 2,166 3,016 176 2,037 Sunflower Racing, Inc.. 0 0 0 (1,238) (1,238) 0 0 Write off of investment in Sunflower Racing, Inc. .................. 0 0 (66) (11,346) (11,412) 0 0 ------- ------- ------- -------- ------- ------- ------- 3,711 1,184 9,022 (14,707) (790) 9,278 (1,470) Income tax expense (benefit)............... 434 581 3,773 (1,329) 3,459 3,675 (575) ------- ------- ------- -------- ------- ------- ------- Net income (loss)....... $ 3,277 $ 603 $ 5,249 $(13,378) $(4,249) $ 5,603 $ (895) ======= ======= ======= ======== ======= ======= ======= Dividend requirements on convertible preferred stock................... $ 482 $ 481 $ 481 $ 481 $ 1,925 $ 481 $ 481 ------- ------- ------- -------- ------- ------- ------- Net income (loss) available to (allocated to) common shareholders........... $ 2,795 $ 122 $ 4,768 $(13,859) $(6,174) $ 5,122 $(1,376) ======= ======= ======= ======== ======= ======= ======= Per common share: Net income (loss)-- primary................ $ 0.15 $ 0.01 $ 0.26 $ (0.74) $ (0.33) $ 0.28 $ (0.07) Net income (loss)-- fully diluted.......... $ 0.15 $ 0.01 $ 0.25 $ (0.74) $ (0.33) $ 0.27 $ (0.07) Number of shares-- primary................. 18,365 18,535 18,613 18,610 18,505 18,462 18,372 Number of shares--fully diluted................. 20,657 20,826 20,904 20,902 20,797 20,754 20,664
F-35 HOLLYWOOD PARK, INC. CALCULATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED DECEMBER 31, (UNAUDITED) ------------------------------------------------- ASSUMING FULL DILUTION PRIMARY (A) ------------------------ ------------------------ 1996 1995 1994 1996 1995 1994 ------- ------- ------ ------- ------- ------ (IN THOUSANDS, EXCEPT PER SHARE DATA) Average number of common shares outstanding.......... 18,365 18,486 18,370 18,365 18,486 18,370 Average common shares due to assumed conversion of the convertible preferred shares...................... 0 0 0 2,291 2,291 2,291 ------- ------- ------ ------- ------- ------ Total shares............... 18,365 18,486 18,370 20,656 20,777 20,661 ======= ======= ====== ======= ======= ====== Net income................... $ 3,277 $ 212 $2,736 $ 3,277 $ 212 $2,736 Less dividend requirements on convertible preferred shares...................... 482 482 481 0 0 0 ------- ------- ------ ------- ------- ------ Net income (loss) available to (allocated to) common shareholders................ $ 2,795 $ (270) $2,255 $ 3,277 $ 212 $2,736 ======= ======= ====== ======= ======= ====== Net income (loss) per share.. $ 0.15 $ (0.01) $ 0.12 $ 0.16 $ 0.01 $ 0.13 ======= ======= ====== ======= ======= ====== FOR THE YEARS ENDED DECEMBER 31, ------------------------------------------------- ASSUMING FULL DILUTION PRIMARY (A) ------------------------ ------------------------ 1996 1995 1994 1996 1995 1994 ------- ------- ------ ------- ------- ------ (IN THOUSANDS, EXCEPT PER SHARE DATA) Average number of common shares outstanding.......... 18,505 18,399 18,224 18,505 18,399 18,224 Average common shares due to assumed conversion of the convertible preferred shares...................... 0 0 0 2,291 2,291 2,291 ------- ------- ------ ------- ------- ------ Total shares............... 18,505 18,399 18,224 20,796 20,690 20,515 ======= ======= ====== ======= ======= ====== Net income (loss)............ $(4,249) $(1,162) $3,772 $(4,249) $(1,506) $3,772 Less dividend requirements on convertible preferred shares...................... 1,925 1,925 1,925 0 0 0 ------- ------- ------ ------- ------- ------ Net income (loss) available to (allocated to) common shareholders................ $(6,174) $(3,087) $1,847 $(4,249) $(1,506) $3,772 ======= ======= ====== ======= ======= ====== Net income (loss) per share.. $ (0.33) $ (0.17) $ 0.10 $ (0.20) $ (0.07) $ 0.18 ======= ======= ====== ======= ======= ======
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED JUNE JUNE 30, 30, ---------------------------- ------------------------------ ASSUMING FULL ASSUMING FULL PRIMARY DILUTION (A) PRIMARY DILUTION (A) -------------- ------------- -------------- -------------- 1997 1996 1997 1996 1997 1996 1997 1996 ------ ------- ------ ------ ------ ------- ------ ------- (IN THOUSANDS, EXCEPT PER SHARE DATA--UNAUDITED) Average number of common shares outstanding..... 18,462 18,613 18,462 18,613 18,366 18,613 18,366 18,613 Average common shares due to assumed conversion of the convertible preferred shares................. 0 0 2,291 2,291 0 0 2,291 2,291 ------ ------- ------ ------ ------ ------- ------ ------- Total shares.......... 18,462 18,613 20,753 20,904 18,366 18,613 20,657 20,904 ====== ======= ====== ====== ====== ======= ====== ======= Net income (loss) ...... $5,603 $5,249 $5,603 $5,249 $4,708 $(8,129) $4,708 $(8,129) Less dividend requirements on convertible preferred shares................. 481 481 0 0 962 962 0 0 ------ ------- ------ ------ ------ ------- ------ ------- Net income (loss) available to (allocated to) common shareholders........... $5,122 $ 4,768 $5,603 $5,249 $3,746 $(9,091) $4,708 $(8,129) ====== ======= ====== ====== ====== ======= ====== ======= Net income (loss) per share.................. $ 0.28 $ 0.26 $ 0.27 $ 0.25 $ 0.20 $ (0.49) $ 0.23 $ (0.39) ====== ======= ====== ====== ====== ======= ====== =======
- ------- (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. F-36 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Members of Crystal Park Hotel and Casino Development Company, LLC: We have audited the accompanying balance sheet of Crystal Park Hotel and Casino Development Company, LLC (a California limited liability company) ("the Company") as of December 31, 1996, and the related statements of operations, members' equity and cash flows for the period from July 18, 1996 (date of inception) to December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Crystal Park Hotel and Casino Development Company, LLC as of December 31, 1996, and the results of its operations and its cash flows for the period from July 18, 1996 to December 31, 1996, in conformity with generally accepted accounting principles. Arthur Andersen LLP Los Angeles, California July 16, 1997 F-37 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC BALANCE SHEETS
AS OF ------------------------ DECEMBER 31, JUNE 30, 1996 1997 ------------ ----------- (UNAUDITED) (IN THOUSANDS) ASSETS ------ Real estate and leasehold interests held for investment: Land and land lease................................ $ 2,663 $ 2,663 Building........................................... 1,404 1,404 Leasehold interests and improvements............... 19,457 19,991 Less accumulated depreciation and amortization..... (271) (937) ------- ------- 23,253 23,121 ------- ------- Cash and cash equivalents............................ 200 687 Rent and other receivables........................... 229 662 Receivable from affiliate............................ 2,748 2,748 Organization expenses, net........................... 451 419 Other assets, net.................................... 5,210 5,099 ------- ------- Total Assets..................................... $32,091 $32,736 ======= ======= LIABILITIES AND MEMBERS' EQUITY ------------------------------- Accounts payable..................................... $ 1 $ 0 Lessee security deposit and other liabilities........ 200 220 ------- ------- 201 220 ------- ------- Members' Equity: HP/Compton, Inc.................................... 28,876 29,486 Redwood Gaming LLC................................. 2,010 2,020 First Park Investments, LLC........................ 1,005 1,010 ------- ------- 31,891 32,516 ------- ------- Total Liabilities and Members' Equity............ $32,091 $32,736 ======= =======
See accompanying notes to financial statements. F-38 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC STATEMENTS OF OPERATIONS
SIX MONTHS INCEPTION TO ENDED JUNE 30, DECEMBER 31, 1997 1996(A) -------------- ------------ (UNAUDITED) (IN THOUSANDS) Revenues: Lease rent........................................ $1,500 $445 Expenses: Administrative.................................... 41 1 Amortization...................................... 136 48 Depreciation...................................... 666 271 ------ ---- 843 320 ------ ---- Net income.......................................... $ 657 $125 ====== ====
- -------- (a) Crystal Park opened for business on October 25, 1996. Crystal Park Hotel and Casino Development Company, LLC was formed on July 18, 1996. See accompanying notes to financial statements F-39 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC STATEMENTS OF MEMBERS' EQUITY
REDWOOD FIRST PARK HP/COMPTON, INC. GAMING LLC INVESTMENTS, LLC TOTAL ---------------- ---------- ---------------- ------- (IN THOUSANDS) Capital contributions... $28,766 $2,000 $1,000 $31,766 Net income.............. 110 10 5 125 ------- ------ ------ ------- BALANCE, DECEMBER 31, 1996................. 28,876 2,010 1,005 31,891 Capital contributions... 384 0 0 384 Net income.............. 592 43 22 657 Capital distributions... (366) (33) (17) (416) ------- ------ ------ ------- BALANCE, JUNE 30, 1997 (UNAUDITED).......... $29,486 $2,020 $1,010 $32,516 ======= ====== ====== =======
See accompanying notes to financial statements. F-40 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC STATEMENTS OF CASH FLOWS FOR THE PERIOD ENDED DECEMBER 31, 1996(A) AND THE SIX MONTHS ENDED JUNE 30, 1997
SIX MONTHS INCEPTION TO ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ----------- (UNAUDITED) (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net income.......................................... $ 125 $ 657 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization....................... 319 802 Decrease (increase) in organization expenses........ (48) 7 Increase in other assets............................ (168) 384 Increase in accounts receivable..................... (229) (433) Increase in accounts payable and accrued liabilities........................................ 201 20 ------- ------ Net cash provided by operating activities......... 200 1,437 ------- ------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to leasehold interests and improvements... 0 (534) ------- ------ Net cash used in investing activities............. 0 (534) ------- ------ CASH FLOWS FROM FINANCING ACTIVITIES: Payments to minority members........................ 0 (50) Payments to majority members........................ 0 (366) ------- ------ Net cash used for financing activities............ 0 (416) ------- ------ Increase in cash and cash equivalents............... 200 487 Cash and cash equivalents at the beginning of the period............................................. 0 200 ------- ------ Cash and cash equivalents at the end of the period.. $ 200 $ 687 ======= ====== Supplemental disclosure of non-cash transactions: Contribution of real estate and improvements by majority member.................................... $23,524 $ 0 ======= ====== Contribution of other assets by majority member..... $ 5,242 $ 384 ======= ====== Contribution by minority members (see Note 6)....... $ 3,000 $ 0 ======= ======
- -------- (a) Crystal Park opened for business on October 25, 1996. Crystal Park Hotel and Casino Development Company, LLC was formed on July 18, 1996. See accompanying notes to financial statements. F-41 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC NOTES TO FINANCIAL STATEMENTS NOTE 1--COMPANY INFORMATION On July 14, 1995, Hollywood Park, Inc. ("Hollywood Park") and Compton Entertainment, Inc. ("CEI") executed an Amended and Restated Agreement Respecting Pyramid Casino (the "Crystal Park Agreement") (Pyramid Casino was subsequently changed to Crystal Park Hotel and Casino ("Crystal Park")), 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 and purchase land located within the City as the card club site. Under the terms of the Crystal Park Agreement, on August 3, 1995, Hollywood Park paid CEI $2,000,000 for CEI's real property rights, including its rights under the DDA ($1,000,000 was also paid for certain predevelopment assets when the card club opened). On August 3, 1995, Hollywood Park paid CEI an additional $500,000 to obtain a five year option to purchase CEI's gaming license ("License Rights Option") (further, an extension fee of $1,499,000 was also paid when the card club opened). If at the end of the five year term of the option to purchase the gaming license, Hollywood Park is not able to own and operate Crystal Park, CEI can elect to either negotiate a new lease or acquire Hollywood Park's and any other investors' rights to Crystal Park for a purchase price equal to fair market value as determined by the Crystal Park Agreement. These payments are reflected as other assets in the accompanying statements. As required by the DDA, on August 3, 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 the Crystal Park are 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. On July 18, 1996, Crystal Park Hotel and Casino Development Company, LLC, a California limited liability company ("Crystal Park LLC"), was formed by Hollywood Park, through its wholly owned subsidiary HP/Compton, Inc., ("HP/C") Redwood Gaming LLC ("Redwood") and First Park Investments, LLC ("First Park") for the purpose of constructing, owning and leasing Crystal Park. Upon formation of Crystal Park LLC, Hollywood Park contributed as its member contribution the amount it funded for initial improvements, as well as those payments reflected as other assets in the accompanying statements. Crystal Park opened on October 25, 1996, with 100 gaming tables, approximately 282 hotel rooms, a restaurant, gift shop, full service health spa and a lobby sports bar and lounge. The hotel operates under a Radisson Hotels International, Inc. ("Radisson") flag, under a 20 year License Agreement between HP/Compton, Inc. and Radisson. HP/C can terminate the License Agreement, at no cost to HP/C, at the end of the third, fifth or tenth year. Under terms of the License Agreement, HP/C has the right to use of the Radisson name and logo in connection with the operation of the hotel, as well as, participation in all Radisson system advertising and marketing programs and use of Radisson's property management system. In exchange thereof, HP/C, will make monthly payments equal to 4% of the hotel's gross room revenue, as defined in the License Agreement ("Gross Room Sales"), and an amount equal to 3.5% of the Gross Room Sales, as well as, operate the hotel to achieve conformity with the Radisson System's standards of quality and uniformity. Current California law does not allow publicly traded companies, such as Hollywood Park, to operate a card club (other than on the same property as a race track); therefore, Crystal Park LLC (the entity which owns the facility) executed a 60 month lease with CEI. Under the terms of the lease, Crystal Park LLC, as the landlord, built and furnished the Crystal Park Hotel and Casino for CEI to operate under a "triple net" lease arrangement, whereby CEI is responsible for all operating expenses. Crystal Park LLC is not responsible for any segment of the daily operations of Crystal Park. If there is a change in California law, allowing Hollywood Park to operate card clubs at sites other than its race track property, Crystal Park LLC would operate the card club in partnership F-42 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC NOTES TO FINANCIAL STATEMENTS--(CONTINUED) with CEI, (the "Crystal Park Partnership") with Crystal Park LLC owning 67% of the business. Under the terms of the Crystal Park Partnership, Crystal Park LLC would receive 90% of the distributable cash flow until it has received its approximately $30,000,000 initial investment in Crystal Park back, together with an annualized 20% return on that investment As of December 31, 1996, Hollywood Park, Redwood and First Park have an 88%, 8%, and 4% member interest, respectively, in Crystal Park LLC. As of June 1997, member interests were retroactively changed to: Hollywood Park (89.8%), Redwood (6.8%), and First Park (3.4%). Crystal Park LLC profits and losses and cash distributions are allocated to each member in accordance with the specific provisions of the operating agreement. These allocations are not necessarily proportionate to the respective member interests. NOTE 2--BASIS OF ACCOUNTING AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The accompanying financial statements have been prepared on an accrual basis in accordance with generally accepted accounting principles. ESTIMATES Financial statements prepared in accordance with generally accepted accounting principles require the use of management estimates, including estimates used to evaluate the recoverability of real estate and leasehold interests held for investment and other assets, as discussed below. These estimates are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those anticipated by Crystal Park LLC's management, including the failure to retain the gaming license or regulatory approvals or the inability to extend the License Rights Option if it lapses. REAL ESTATE AND LEASEHOLD INTERESTS HELD FOR INVESTMENT Depreciation and amortization of building and improvements and leasehold interests are provided using the straight-line method over their estimated useful lives of 40 years. Furniture and equipment is being amortized on a straight line basis over their estimated useful lives of 3 years to 10 years. Real estate and leasehold interests are carried on Crystal Park LLC's balance sheet at depreciated/amortized cost. Whenever there are recognized events or changes in circumstances that affect the carrying amount, management reviews the assets for possible impairment. In accordance with current accounting standards, management uses estimated expected future net cash flows to measure the recoverability of these assets. The estimation of expected future net cash flows is inherently uncertain and relies to a considerable extent on assumptions regarding current and future economic 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 these assets. ORGANIZATION EXPENSES Organization expenses are capitalized and are being amortized on a straight-line basis over the five-year term of the CEI lease. INCOME TAXES Income taxes are not recorded by Crystal Park LLC, and Crystal Park LLC is not subject to Federal or state income taxes. Instead Crystal Park LLC's income or loss is allocated to the members and included in their respective income tax returns. NOTE 3--LEASEHOLD INTERESTS Leasehold interests relate to a capital lease with the City covering the hotel, surrounding parking and expansion parcels at Crystal Park. The lease transfers substantially all benefits and risks incidental to the ownership of the property to Crystal Park LLC. 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. Crystal Park LLC receives a rent payment credit equal to the costs incurred to renovate Crystal Park, and no cash rent payments are expected to be made until the nineteenth year of the lease, or 2014. F-43 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC NOTES TO FINANCIAL STATEMENTS--(CONTINUED) NOTE 4--OTHER ASSETS As described further in Note 1, other assets primarily represent payments to CEI for: Acquisition of rights under the DDA........................... $2,000,000 Certain predevelopment assets................................. 1,000,000 License Rights Option......................................... 1,999,000
The acquisition of rights under the DDA and certain predevelopment assets have been capitalized and are being amortized on a straight-line basis over their estimated useful life of 40 years. The cost of the License Rights Option has been capitalized and will be amortized when exercised or expensed when it lapses. NOTE 5--FUTURE LEASE RENTAL REVENUE Under the terms of the lease with the operator, CEI would pay a monthly rent of $200,000 for the first six months, $350,000 for months 7 through 12 and $759,000 for months 13 through 60. As of December 31, 1996, the future cash rents receivable from the noncancellable lease with CEI in each of the next five years are as follows: 1997.......................................................... $ 4,418,000 1998.......................................................... 9,108,000 1999.......................................................... 9,108,000 2000.......................................................... 9,108,000 2001.......................................................... 7,590,000 ----------- $39,332,000 ===========
The lease agreement contains several prepayment provisions, which, if exercised, could lower the amounts listed above. NOTE 6--RELATED PARTY TRANSACTION Crystal Park LLC has a receivable from a member affiliate at December 31, 1996. When Redwood and First Park made their initial equity contributions of $2,000,000 and $1,000,000, respectively, a bank account had not been established for Crystal Park LLC, so the amounts were deposited with Hollywood Park, a member affiliate. The receivable reflected in the accompanying statements is net of certain lease agreement and other start-up costs that were initially paid by Hollywood Park. NOTE 7--UNAUDITED SUBSEQUENT EVENT Consequent to CEI being in arrears for payment of rent for the month of July 1997 and a portion of the month of June 1997, Crystal Park LLC has commenced an action to terminate the lease with its tenant, CEI. In the event CEI does not bring its rent current, Crystal Park LLC will exercise its right to replace the tenant/operator. Crystal Park LLC has identified a replacement tenant who is presently registered with the California Department of Justice as a card club operator, and who is desirous of leasing Crystal Park. A timely transfer of the City license from CEI, to the replacement operator, would be expected, as the City acts in its own interest to minimize the loss of tax revenues. However, there can be no assurance that the replacement tenant would receive the necessary City and state of California licenses to operate Crystal Park, and if such licenses are not granted to the replacement tenant, that Crystal Park LLC could locate a lessee/operator who would be granted the required licenses. F-44 BOOMTOWN, INC. CONSOLIDATED FINANCIAL STATEMENTS REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS The Board of Directors Boomtown, Inc. We have audited the accompanying consolidated balance sheets of Boomtown, Inc. (the "Company") as of September 30, 1995 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended September 30, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based upon our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Boomtown, Inc. at September 30, 1995 and 1996, and the consolidated results of its operations and its cash flows for each of the three years in the period ended September 30, 1996, in conformity with generally accepted accounting principles. Ernst & Young LLP Reno, Nevada November 15, 1996, except for the first paragraph of Note 13 as to which the date is November 18, 1996 F-45 BOOMTOWN, INC. CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, ------------------------ 1996 1995 -------- -------------- (IN THOUSANDS) ASSETS Current Assets: Cash and cash equivalents (including restricted cash of approximately $2.4 million as of September 30, 1995).............................................. $ 23,101 $ 20,775 Accounts receivable, net............................ 942 924 Income taxes receivable............................. 1,815 1,508 Inventories......................................... 1,725 2,715 Prepaid expenses.................................... 7,333 7,025 Other current assets................................ 1,762 765 -------- -------- Total current assets.............................. 36,678 33,712 Property, plant and equipment, net.................. 145,330 150,955 Goodwill, net....................................... 6,267 6,644 Investment in lease, net............................ 0 13,077 Notes receivable from a related party............... 8,683 27,294 Other assets........................................ 9,030 7,516 -------- -------- $205,988 $239,198 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities: Accounts payable.................................... $ 3,812 $ 3,747 Accrued compensation................................ 3,611 2,930 Other accrued liabilities........................... 8,823 9,740 Accrued interest payable............................ 5,005 4,959 Income taxes payable................................ 751 506 Current portion of long-term debt................... 5,032 2,948 -------- -------- Total current liabilities......................... 27,034 24,830 Long-term debt (net of unamortized discount of approximately $2.5 million, $2.7 million, and $2.3 million as of September 30, 1996, and 1995, and as of March 31, 1997, respectively) September 30, 1996, and 1995, and................................ 103,729 106,547 Deferred income taxes............................... 3,183 1,621 Deferred gain on sale leaseback 112 213 Minority interest................................... 1,542 741 Commitments and contingencies....................... -- -- (see Note 7 and Note 13) Stockholders' equity: Common stock, $0.01 par value, 20,000,000 shares authorized 9,266,193, 9,233,074 and 9,282,690 issued and outstanding as of September 30, 1996 and 1995, and as of March 31, 1997, respectively, net of a note receivable from a stockholder of $221,000........................................... 103,653 103,453 Retained earnings (deficit)......................... (33,265) 1,793 -------- -------- Total stockholders' equity........................ 70,388 105,246 -------- -------- $205,988 $239,198 ======== ========
See accompanying notes. F-46 BOOMTOWN, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, ---------------------------- ------------------ 1996 1995 1994 1997 1996 -------- -------- -------- -------- -------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) REVENUES: Gaming..................... $188,368 $189,306 $ 76,326 $144,353 $139,350 Family entertainment cen- ter....................... 6,300 6,387 3,656 4,035 4,426 Food and beverage.......... 16,314 15,613 7,973 13,036 12,293 Hotel and recreational ve- hicle park................ 7,289 6,584 3,082 5,666 5,479 Showroom................... 823 440 329 623 -- Truck stop, service station and mini-mart............. 14,401 10,811 10,858 9,901 9,815 Other income............... 2,547 2,626 1,151 1,490 2,816 -------- -------- -------- -------- -------- 236,042 231,767 103,375 179,104 174,179 -------- -------- -------- -------- -------- EXPENSES: Gaming..................... 73,479 73,233 30,818 60,665 54,609 Gaming equipment leases.... 6,716 5,811 412 3,299 5,041 Family entertainment cen- ter....................... 3,332 3,274 1,762 2,550 2,390 Food and beverage.......... 19,213 17,639 8,179 17,159 14,569 Hotel and recreational ve- hicle park................ 3,002 3,168 1,706 2,545 2,211 Showroom................... 683 308 2,130 426 -- Truckstop, service station and mini-mart............. 13,038 9,722 9,661 9,037 8,869 Marketing and promotion.... 22,439 19,593 7,524 19,154 16,556 General and administrative. 70,620 75,296 25,760 45,496 52,751 Pre-opening expenses....... 0 0 15,787 -- -- Discontinued projects/future develop- ment...................... 1,603 6,054 0 1,802 920 Loss on sale of Boomtown Las Vegas................. 36,563 0 0 1,271 36,563 Depreciation and amortiza- tion...................... 10,618 10,422 5,891 11,636 8,135 -------- -------- -------- -------- -------- 261,306 224,520 109,630 175,040 202,614 -------- -------- -------- -------- -------- Income (loss) from operations.................. (25,264) 7,247 (6,255) 4,064 (28,435) Interest expense, net of capitalized interest........ (13,838) (13,434) (5,632) (10,439) (10,362) Interest and other income.... 4,193 3,081 2,624 2,355 2,346 Loss on marketable securities.................. 0 0 (1,691) -- -- Gain (loss) on sale of assets...................... 0 0 0 (109) 240 -------- -------- -------- -------- -------- Loss before minority interests , extraordinary item and income taxes....... (34,909) (3,106) (10,954) (4,129) (36,211) Minority interests........... 645 1,105 352 (96) 878 -------- -------- -------- -------- -------- Loss before extraordinary item and income taxes....... (34,264) (2,001) (10,602) (4,225) (35,333) Income tax expense (benefit). 794 876 (2,779) (2,103) (50) -------- -------- -------- -------- -------- Loss before extraordinary item........................ (35,058) (2,877) (7,823) (2,122) (35,283) Extraordinary loss, net of tax effect.................. 0 0 229 8,420 -- -------- -------- -------- -------- -------- Net loss..................... $(35,058) $ (2,877) $ (8,052) $(10,542) $(35,283) ======== ======== ======== ======== ======== Per common share: Income (loss) before extraordinary item........ $ (3.79) $ (0.31) $ (0.90) $ (0.21) $ (3.82) ======== ======== ======== ======== ======== Extraordinary loss......... $ 0.00 $ 0.00 ($ 0.03) $ (0.86) $ -- ======== ======== ======== ======== ======== Net loss................... $ (3.79) $ (0.31) $ (0.93) $ (1.07) $ (3.82) ======== ======== ======== ======== ======== Number of common shares...... 9,248 9,228 8,690 9,830 9,243 ======== ======== ======== ======== ========
See accompanying notes. F-47 BOOMTOWN, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED SEPTEMBER 30, 1996, 1995 AND 1994
COMMON STOCK RETAINED TOTAL ------------------- EARNINGS STOCKHOLDERS' SHARES(#) AMOUNT($) (DEFICIT) EQUITY --------- --------- --------- ------------- (IN THOUSANDS) BALANCES, SEPTEMBER 30, 1993....... 8,506 $ 88,313 $ 12,722 $101,035 Issuance of common stock warrants........................ 0 2,995 0 2,995 Employer 401(k) contributions.... 4 75 0 75 Common stock issued for additional interest in Blue Diamond Hotel & Casino, Inc. (Boomtown Las Vegas)............ 714 11,964 0 11,964 Net loss......................... 0 0 (8,052) (8,052) ----- -------- -------- -------- BALANCES, SEPTEMBER 30, 1994....... 9,224 103,347 4,670 108,017 Employer 401(k) contributions.... 9 105 0 105 Net loss......................... 0 0 (2,877) (2,877) ----- -------- -------- -------- BALANCES, SEPTEMBER 30, 1995....... 9,233 103,452 1,793 105,245 Employer 401(k) contributions.... 33 200 0 200 Net loss......................... 0 0 (35,058) (35,058) ----- -------- -------- -------- BALANCES, SEPTEMBER 30, 1996....... 9,266 $103,652 $(33,265) $ 70,387 ===== ======== ======== ========
See accompanying notes. F-48 BOOMTOWN, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED YEARS ENDED SEPTEMBER 30, JUNE 30, ----------------------------- ------------------ 1996 1995 1994 1997 1996 -------- -------- --------- -------- -------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss.................. $(35,058) $ (2,877) $ (8,052) $(10,542) $(35,283) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Lease expense recorded in exchange for limited partnership interest..... 1,500 2,000 389 0 1,500 Minority interests........ (645) (1,105) (351) (1,542) (878) Gain (loss) on sale of property, plant and equipment................ 191 164 (57) 117 0 Depreciation and amortization............. 10,618 10,422 5,891 11,638 8,135 Loss on sale of Boomtown Las Vegas................ 36,563 0 0 1,271 36,563 Deferred income taxes..... 2,598 1,614 (4,145) 2,028 1,199 CHANGES IN OPERATING ASSETS AND LIABILITIES: Accounts receivable, net.. (256) 397 (1,011) 228 0 Income taxes receivable... (440) (1,508) 0 1,561 (1,604) Inventories............... 154 301 (2,453) (28) 275 Prepaid expenses.......... (208) 93 (4,971) 2,041 1,319 Accounts payable, net..... 149 (5,406) 7,950 (308) 377 Income taxes payable...... 330 24 213 (8,611) 1,096 Accrued compensation...... 681 1,320 631 1,189 (1,397) Other accrued liabilities. (1,048) 4,189 4,467 2,966 57 Accrued interest payable.. 0 0 0 11,938 0 Discount on bonds......... 0 0 0 2,448 0 Other changes, net........ (1,278) 312 1,318 (4,199) (1,163) -------- -------- --------- -------- -------- Net cash provided by (used in) operating activities.............. 13,851 9,940 (181) 12,195 10,195 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, plant and equipment................ 215 7,953 17,464 0 406 Additions to property, plant and equipment...... (5,679) (15,146) (114,729) (9,718) (7,168) Payments for future development costs........ 0 1,871 (1,775) 0 0 Loans to related parties.. 0 0 (7,794) 0 0 Payments for purchase of land option at Biloxi property................. (200) 0 Change in construction related payables......... (84) (1,472) 680 (16) -------- -------- --------- -------- -------- Net cash used in investing activities.... (5,548) (6,794) (106,154) (9,918) (6,779) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from short-term borrowings............... 0 5,000 0 0 0 Repayment of short-term borrowings............... 0 (5,000) 0 0 0 Prepaid property lease.... (2,480) 0 0 0 (2,480) Proceeds from long-term debt..................... 377 8,794 100,240 1,381 2,457 Payment of long-term debt. (3,874) (2,363) (107) (6,548) (2,581) Distributions to minority interests................ 0 (193) 0 0 0 -------- -------- --------- -------- -------- Net cash (used in) provided by financing activities.............. (5,977) 6,238 100,133 (5,167) (2,605) -------- -------- --------- -------- -------- Increase (decrease) in cash and cash equivalents....... 2,326 9,384 (6,202) (2,890) 812 Cash and cash equivalents at the beginning of the period..................... 20,775 11,391 17,593 23,101 20,775 -------- -------- --------- -------- -------- Cash and cash equivalents at the end of the period...... $ 23,101 $ 20,775 $ 11,391 $ 20,211 $ 21,587 ======== ======== ========= ======== ========
See accompanying notes. F-49 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION AND CONSOLIDATION--The consolidated financial statements include the accounts of Boomtown, Inc. (the "Company" or "Boomtown"), a Delaware corporation and all of its controlled subsidiaries and partnerships. The significant operating subsidiaries include gaming operations in Reno, Las Vegas ("Blue Diamond"), Biloxi ("Mississippi Partnership") and New Orleans ("Louisiana Partnership"). All significant intercompany accounts and transactions have been eliminated. INTERIM FINANCIAL INFORMATION--The interim financial information is unaudited. In the opinion of management, all adjustments considered necessary for a fair presentation of the consolidated results of operations and consolidated cash flows for the nine months ended June 30, 1997 and 1996, have been included. All adjustments to the interim financial information were of a normal recurring nature and consistent with the adjustments made in the consolidated financial statements for the fiscal years ended September 30, 1994, 1995, and 1996, respectfully. The Company's operations are seasonal and thus operating results for the nine months ended June 30, 1997 should not be considered indicative of the results that may be expected for the fiscal year ending September 30, 1997. BOOMTOWN'S MERGER WITH HOLLYWOOD PARK, INC. ("HOLLYWOOD PARK")--On April 23, 1996, Boomtown entered into an Agreement and Plan of Merger (the "Merger Agreement") with Hollywood Park relating to the strategic combination of Hollywood Park and Boomtown. Pursuant to the Merger Agreement and subject to the terms and conditions set forth therein, Boomtown would become a wholly owned subsidiary of Hollywood Park (the "Merger"). Pursuant to the Merger Agreement, at the effective date of the Merger (the "Effective Date"), each issued and outstanding share of Boomtown Common Stock will be converted into the right to receive 0.625 (the "Exchange Ratio") of a share of Hollywood Park Common Stock. The Merger is intended to be structured as a tax-free reorganization for income tax purposes and will be accounted for as a purchase for financial reporting purposes. USE OF ESTIMATES--The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles which require the Company's management to make estimates and assumptions that affect the amounts reported therein. Actual results could vary from such estimates. CASH AND CASH EQUIVALENTS--Cash and cash equivalents consist of cash on hand and in banks, interest bearing deposits and highly liquid investments with original maturities of three months or less. Cash equivalents are carried at cost which approximates market. The Company paid interest of approximately $107,000 (net of $5,895,000 capitalized), $13,111,000 (net of $701,000 capitalized), and $13,793,000 (none capitalized) and income taxes of approximately $1,089,000, $746,000, and $688,500 during the years ended September 30, 1994, 1995 and 1996, respectively. Long-term debt incurred for the purchase of property and equipment during the years ended September 30, 1994, 1995 and 1996 amounted to approximately $6,296,000, $1,677,000 and $2,763,000, respectively. CONCENTRATIONS OF CREDIT RISK--The Company places its cash in short-term investments which potentially subject the Company to concentrations of credit risk. Such investments are made with financial institutions having a high credit quality and are collateralized by securities issued by the United States Government and other investment grade securities. INVENTORIES--Inventories consist primarily of fuel and petroleum products, food and beverage stock and hotel linens, uniforms and supplies and are stated at the lower of cost (determined using the first-in, first-out method) or market. F-50 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DEPRECIATION AND AMORTIZATION--Depreciation and amortization of property, plant and equipment is provided on the straight-line method over the lesser of the estimated useful lives of the respective assets or the lease term. The estimated useful lives for each class of property, plant and equipment are as follows: Buildings and improvements..................................... 20-35 years Furniture and fixtures......................................... 7-10 years Gaming equipment............................................... 5-10 years Outdoor signs.................................................. 10-20 years Other assets................................................... 3-15 years
In connection with the Swap Agreement (see Note 4) Blue Diamond's property and equipment were written down to net realizable value as of September 30, 1996 and depreciation and amortization ceased. INTANGIBLES--Goodwill relates to the acquisition of the Reno property in 1988 and the investment in lease (at September 30, 1995) which resulted when the Company purchased the remaining 50% ownership interest in Blue Diamond (Note 4). Also, as more fully discussed in Note 4, Blue Diamond had an option to purchase the Resort during a period of six months beginning in May 1996, and ending in November 1996. However, through execution of the "Swap Agreement" as discussed in Note 4, Roski and Boomtown entered into an agreement to terminate the "Property Lease", whereby Boomtown would immediately cease operations of the Blue Diamond Resort simultaneous with the closing of Boomtown's merger with Hollywood Park, Inc., as previously discussed. As a result of the Swap Agreement, the investment in lease was expensed in fiscal 1996. Additional goodwill was recorded subsequent to September 30, 1996, related to the Company's purchase of the minority partner's interest in Louisiana--I Gaming, L.P. in December 1996 (Note 13) (unaudited). Goodwill is being amortized on the straight-line method over twenty-five years. Accumulated amortization at September 30, 1995 and 1996 was approximately $3,314,000 and $3,145,000, respectively. The carrying value of intangibles is periodically evaluated by management and if facts and circumstances (including undiscounted cash flows) indicate an impairment, the amount is reduced and an impairment loss is recorded. GAMING REVENUES AND PROMOTIONAL ALLOWANCES--In accordance with industry practice, the Company recognizes as gaming revenues the net win from gaming activities, which is the difference between gaming wins and losses. Revenues in the accompanying consolidated statements of operations exclude the retail value of rooms, food and beverage and other promotional allowances provided to customers without charge. The estimated costs of providing such promotional allowances have been classified as gaming operating expenses through interdepartmental allocations as follows (in thousands):
YEARS ENDED SEPTEMBER 30, ---------------------- 1994 1995 1996 ------ ------- ------- Food and beverage................................... $5,433 $11,638 $12,746 Hotel............................................... 172 400 299 Other............................................... 43 167 210 ------ ------- ------- Total............................................... $5,648 $12,205 $13,255 ====== ======= =======
STOCK BASED COMPENSATION--The Company accounts for its stock option plans in accordance with the provisions of the Accounting Principles Board's Opinion No. 25 (APB 25), "Accounting for Stock Issued to Employees". In 1995, the Financial Accounting Standards Board released Statement of Financial Accounting Standard No. 123 (SFAS 123), "Accounting for Stock Based Compensation". SFAS 123 provides an alternative to APB 25 and is effective for fiscal years beginning after December 15, 1995. The Company expects to continue F-51 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) to account for its stock plans in accordance with APB 25. Accordingly, SFAS 123 is not expected to have a material impact on the Company's consolidated financial position or results of operations. ADVERTISING COSTS--Advertising costs are expensed as incurred. Advertising expenses for the years ended September 30, 1994, 1995 and 1996 totaled approximately $2.6 million, $6.7 million and $6.3 million, respectively. FUTURE DEVELOPMENT COSTS--The Company capitalizes costs associated with new gaming projects until 1) the project is no longer considered viable and the costs are expensed or 2) the likelihood of the project is relatively certain and the costs are reclassified to pre-opening and expensed when operations commence. During the year ended September 30, 1995, the Company expensed approximately $6.1 million of future development costs. During fiscal 1996, future development costs were approximately $1.6 million and included costs associated with its pending merger with Hollywood Park, Inc. and its proposed gaming project in the state of Indiana. These amounts are classified as discontinued projects and future development costs in the accompanying statements of operations. PRE-OPENING EXPENSES--Pre-opening expenses were associated with the acquisition, development and opening of the Company's new casino resorts. These amounts were expensed in fiscal 1994, when the casinos commenced operations and include items that were capitalized as incurred prior to opening and items that are directly related to the opening of the property and are non-recurring in nature. INCOME TAXES--The Company accounts for income taxes under Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes", which requires the Company to record deferred income taxes for temporary differences that are reported in different years for financial reporting and for income tax purposes and classifies deferred tax liabilities and assets into current and non-current amounts based on the classification of the related assets and liabilities. MINORITY INTEREST--Minority interest represents the minority limited partners' proportionate share of the equity and operations of the consolidated partnerships. NET LOSS PER SHARE--Net loss per share is computed using the weighted average number of shares of Common Stock outstanding and common equivalent shares from stock options and warrants are excluded from the computation because their effect is antidilutive. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, Earnings per Share, which is required to be adopted on December 31, 1997. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of stock options will be excluded. The impact of Statement 128 on the calculation of primary and fully diluted earnings per share is not expected to be material. Fully diluted loss per share amounts are the same as primary per share amounts for the periods presented. RECLASSIFICATIONS--Certain reclassifications have been made to the 1994, 1995 and 1996 consolidated financial statements to conform to the 1997 presentation. 2. ISSUANCE OF COMMON STOCK AND WARRANTS During October 1992, the Company sold 2,901,786 shares of common stock in an initial public offering which generated net proceeds of approximately $26 million after deducting underwriting discounts and expenses. In addition, a stockholder of the Company (the "Selling Stockholder") sold 835,714 shares of common stock in the public offering and received proceeds to repay a subordinated term note and $2 million to redeem all of its outstanding preferred stock held by the Selling Stockholder. F-52 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In connection with the Company's initial public offering, the Company sold to the underwriters for an aggregate of $25,000, warrants to purchase 162,500 shares of the Company's common stock at $12 per share. The warrants expire October 1997 and 50% became exercisable in October 1993 and the remaining 50% became exercisable in October 1994. At any time after October 1994 and prior to the expiration of the warrants, the holders have a one time right to demand a registration of the underlying shares, with expenses of such registration to be paid by the Company. During June 1993, the Company sold 2,223,380 shares of common stock in a public offering which generated net proceeds of approximately $57.2 million after deducting underwriting discounts and expenses. The proceeds were used to fund a portion of the construction costs of the new gaming facilities and for general corporate purposes. In addition, a stockholder of the Company sold 1,686,620 shares of common stock in the public offering and received proceeds, net of underwriting discounts, of $43.9 million. During November 1993, in connection with the placement of the First Mortgage Notes (Note 5), the Company issued 472,500 warrants to purchase Common Stock at $21.19 per share. The warrants became exercisable on December 10, 1993, and expire on November 1, 1998. 3. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consists of the following (in thousands):
SEPTEMBER 30, ----------------- 1995 1996 -------- -------- Buildings and improvements.............................. $102,979 $105,097 Equipment............................................... 24,834 29,834 Boat.................................................... 18,925 18,925 Land and land improvements.............................. 17,397 17,690 Furniture and fixtures.................................. 13,166 13,428 Construction-in-progress................................ 1,631 1,370 -------- -------- 178,932 186,344 Less accumulated depreciation and amortization.......... 27,977 35,949 Write-down of assets in connection with the Swap Agreement (see Note 4)................................. -- 5,065 -------- -------- $150,955 $145,330 ======== ========
The construction-in-progress amounts at September 30, 1995 and 1996, relate primarily to the costs associated with the on-going construction of the land- based facility in Harvey, Louisiana. Amortization of leased assets is included in depreciation and amortization expense. 4. RELATED PARTY TRANSACTIONS STOCKHOLDER NOTE--The note receivable from a stockholder was issued in connection with the stockholder's purchase of the Company's common stock and therefore has been presented as a reduction of stockholders' equity in the accompanying consolidated balance sheets. This note, as amended, bears interest at 6% with interest and principal payable in four annual installments commencing April 7, 1998 (unaudited). F-53 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) IVAC NOTE--Prior to the commencement of operations at Boomtown Las Vegas, the Company loaned IVAC, a California general partnership controlled by Edward P. Roski ("Roski") and a member of the Company's Board of Directors (the "Stockholder"), approximately $27.3 million (the "IVAC Notes") for purposes of constructing the Blue Diamond Resort (the "Resort"). One of the notes has a principal balance of $7.5 million and the other note, a variable principal note, has a principal balance of $19.8 million at September 30, 1995 and 1996, and both notes bear interest at 10%. These notes were written down to their net realizable value under the Swap Agreement of approximately $8.5 million at September 30, 1996. The IVAC Notes are secured by separate deeds of trust on the resort, which deeds of trust are subordinate to separate deeds of trust securing Blue Diamond and the Company's obligations in connection with the Indenture. As defined in the terms of the IVAC Notes, interest became payable upon commencement of Blue Diamond's Las Vegas operations. Interest income related to the IVAC Notes amounted to approximately $2,729,000 during the years ended September 30, 1995 and 1996, respectively and offsets a portion of the rent discussed in the following paragraph. Interest receivable from IVAC at September 30, 1995 and 1996 amounted to approximately $227,000, respectively. Prior to commencing gaming operations at the Las Vegas site on May 20, 1994, the Company owned 50% of Blue Diamond and the Stockholder owned the remaining 50% of Blue Diamond. After commencement of operations of Blue Diamond, the Company exercised its option to purchase all of the stockholder's ownership interest in Blue Diamond for 714,286 shares of the Company's common stock. Blue Diamond is leasing the resort from IVAC for an initial term of five years with certain renewal options in certain very limited circumstances. Blue Diamond had an option to purchase the resort from IVAC exercisable during a period of six months beginning in May 1996, in exchange for, at IVAC's option, either 1) shares of the Company's common stock (which would be at a minimum of 2.5 million shares) or 2) cash (which amount would be a minimum of $33 million). At the time of exercise, the investment in lease would be capitalized as a part of the resort purchase price. In addition, the Company's loans to IVAC including accrued interest (preceding paragraph) would be capitalized as part of the resort purchase price. TERMINATION OF LAS VEGAS PROPERTY LEASE--On August 12, 1996, Boomtown, Blue Diamond, Hollywood Park, Roski, IVAC and Majestic Realty entered into the Blue Diamond Swap Agreement (the "Swap Agreement") pursuant to which the parties agreed that, upon consummation of the Merger, and contingent upon the closing of the Merger, Boomtown and Blue Diamond (or any transferee thereof as set forth in the Swap Agreement) would exchange their entire interest in the Blue Diamond Resort (the "Resort") (including the IVAC Loans), and effectively transfer all interest in the Resort to Roski, in exchange for a $5.0 million unsecured promissory note (the "First Note") and will have an unsecured promissory note (the "Second Note") equal in amount to the note to be issued by Hollywood Park to Roski for the purchase of his Boomtown Common Stock referred to in a following paragraph (valued at approximately $3.5 million) and assumption by Roski, IVAC or an affiliate of certain liabilities (the "Swap"). The First Note has an interest rate equal to the prime rate plus one and one half percent (1.5%) per annum and will provide 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 (as such term is defined in the Swap Agreement). The Second Note will have an interest rate equal to the prime rate plus one-half percent (.5%) per annum and will provide for a payment of all principal plus accrued interest on the date that is three (3) years after the Exchange Date. Consummation of the Swap is subject to obtaining all necessary Governmental approvals, including gaming approval. In exchange for its interest in the Resort, the Company will receive notes from Roski payable to Boomtown with an estimated value totaling $8.5 million, an estimated cash payment of $2.1 million, release from lease obligations under the Resort lease, Roski's assumption of certain liabilities and note obligations totaling approximately $3.8 million and the ongoing expenses of the Resort. Additionally, Roski will assume all operating leases including any residual balances due under such leases. The Swap Agreement requires approvals from F-54 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) applicable gaming authorities and Boomtown intends to seek the consent of the holders of a majority of the outstanding principal amount on the Notes where defined. The Swap would be effected immediately following the Merger which is expected to be completed by the end of the first quarter of calendar 1997. In accordance with the terms of the Swap Agreement, with certain exceptions set forth in the Swap Agreement, the Company will continue to operate the property until consummation of the Merger. Boomtown and Blue Diamond will be responsible for the liabilities of the Resort prior to the Swap and Roski will be responsible for the liabilities of the Resort subsequent to the Swap. In addition, Roski will resign from Boomtown's Board of Directors, effective as of the Exchange Date. Subject to certain conditions set forth in the Swap Agreement, the Swap may be effectuated through any structure agreed upon by Boomtown and Hollywood Park. If the Swap were not consummated for any reason, Boomtown would continue to operate the property through the expiration of the lease term in July 1999, and the IVAC Notes would be required to be repaid to Boomtown at such time. Additionally, on August 12, 1996, Hollywood Park and Roski further entered into a Stock Purchase Agreement (the "Stock Purchase Agreement") pursuant to which Hollywood Park will, concurrently with the Swap, purchase the stock in Boomtown held by Roski ("Roski Stock") for its market price on the date of the Swap (estimated to be $3.5 million). The purchase price will be paid through the issuance of an unsecured promissory note having an interest rate equal to the prime rate plus one percent (1%) per annum and providing for four equal annual principal payments plus accrued interest and maturing on the date that is four years after the Exchange Date. The Stock Purchase Agreement may also be terminated by Hollywood Park in the event that Boomtown and Hollywood Park, in accordance with the provisions set forth in the Swap Agreement, elect to utilize a structure to effect the Swap which would require Roski to retain the Roski Stock. The Company took a non-cash, pre-tax charge of $36.6 million related to the Swap Agreement. The charge is comprised of the write-off of the Company's investment in lease of $12.7 million, an $18.9 million write-down of the related party notes receivable to $8.5 million and the write-down of the remaining net assets less the liabilities assumed by Roski of $5.0 million. In the event that the actual amount of the Second Note is less than $3.5 million the Company will incur an additional loss on the sale of Blue Diamond. The Company owns an 85% interest in the Mississippi Partnership. As a result of executing a lease for the property upon which the Mississippi Partnership's Biloxi, Mississippi gaming facility is located (Note 7), a 15% limited partnership interest was transferred to an individual (the "Lessor") in lieu of base rent payments for the first two years. After three years of operation, either the Company or the Lessor may exercise an option to convert the Lessor's ownership interest into the Company's common stock or cash, at the option of the Lessor, at an amount calculated per the agreement which is based upon a multiple of earnings. The Company owned a 92.5% interest in the Louisiana Partnership. The remaining 7.5% limited partnership interest was owned by the Lessor identified in the preceding paragraph (the "Partner"). Quarterly distributions to all partners will be required in both the Mississippi Partnership and the Louisiana Partnership based upon the pro-rata share of cash flows generated, as defined. Subsequent to year-end Boomtown entered into an agreement to purchase the Partner's 7.5% partnership interest (see Note 13). F-55 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. LONG-TERM DEBT Long-term debt consists of the following (in thousands):
SEPTEMBER 30, ----------------- 1995 1996 -------- -------- 11.5% first mortgage notes (net of unamortized discount of approximately $2.7 million, $2.4 million, and $2.3 millions as of September 30, 1995, 1996 and March 31, 1997, respectively).......................... $100,842 $101,052 13% note payable........................................ 4,336 3,227 Capital lease obligations............................... 1,126 2,734 11.5% notes payable..................................... 2,431 1,300 12.25% note payable..................................... 760 448 -------- -------- 109,495 108,761 Less amounts due within one year........................ 2,948 5,032 -------- -------- $106,547 $103,729 ======== ========
On November 24, 1993, the Company completed the private placement of $103.5 million of 11.5% First Mortgage Notes Due November 2003 (the "Notes"). Interest on the Notes is payable semi-annually. The Notes will be redeemable at the option of the Company, in whole or in part, on or after November 1, 1998, at a premium to the face amount ($103.5 million) which decreases on each subsequent anniversary date, plus accrued interest to the date of redemption. The Notes are secured by substantially all of the Company's assets. The Indenture governing the Notes places certain business, financial and operating restrictions on the Company and its subsidiaries including, among other things, the incurrence of additional indebtedness, issuance of preferred equity interests and entering into operating leases; limitations on dividends, repurchases of capital stock of the Company and redemptions of subordinated debt; limitations on amending existing partnership and facility construction agreements; and limitations on the use of proceeds from the issuance of the Notes. The 13%, 11.5% and 12.25% notes payable are secured by property, plant and equipment with net book values of approximately $17,296,000, $2,922,000 and $718,000, at September 30, 1996. The notes mature in January 1999, September 1997, and January 1998, respectively. The capital lease obligations are secured by equipment with a net book value of $3,632,000 at September 30, 1996. The capital lease obligations mature between September 1997 and January 1998. Principal maturates of long-term debt by fiscal year as of September 30, 1996 are as follows (in thousands): 1997.............................................................. $ 5,032 1998.............................................................. 2,084 1999.............................................................. 593 2000.............................................................. -- 2001.............................................................. -- Thereafter........................................................ 103,500 -------- $111,209 ========
F-56 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 6. INCOME TAXES The (benefit) provision for income taxes consists of the following (in thousands):
YEARS ENDED SEPTEMBER 30, ----------------------- 1994 1995 1996 ------- ------- ----- Current: Federal........................................ $ 947 $(1,805) $(669) State.......................................... 195 768 870 ------- ------- ----- 1,142 (1,037) 201 Deferred (primarily federal)................... (3,921) 1,913 593 ------- ------- ----- $(2,779) $ 876 $ 794 ======= ======= =====
The difference between the Company's (benefit) provision for income taxes as presented in the accompanying consolidated statements of operations and a provision (benefit) for income taxes computed at the federal statutory rate is comprised of the items shown in the following table as a percentage of pre-tax earnings (loss):
YEARS ENDED SEPTEMBER 30, --------------------- 1994 1995 1996 ----- ----- ----- Income tax (benefit) provision at the statutory rate............................................ (34.0)% (34.0)% (34.0)% Goodwill amortization............................ 1.6 8.3 0.8 Meals and entertainment.......................... 1.3 17.5 0.4 Loss on investments.............................. 5.4 0.0 0.0 Loss on sale of Blue Diamond..................... 0.0 0.0 31.7 State income taxes, net of federal benefit....... (1.4) 41.0 1.8 Merger costs..................................... 0.0 0.0 1.3 Operating loss benefit limitation................ 0.0 8.0 0.0 Others, net...................................... 0.9 3.0 0.3 ----- ----- ----- (26.2)% 43.8 % 2.3 % ===== ===== =====
F-57 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The significant components of the deferred income tax assets and liabilities included in the accompanying consolidated balance sheets are as follows (in thousands):
SEPTEMBER 30, ----------------- 1995 1996 ------- -------- Deferred income tax assets: Pre-opening costs, net of amortization............... $ 3,768 $ 2,607 Compensation accrued for stock appreciation rights and stock option plans.............................. 1,062 1,062 Loss on sale of Blue Diamond......................... 0 1,722 Alternative minimum tax credit carryforwards......... 887 1,071 Capital loss carryforwards........................... 575 6,911 Operating loss carryforwards......................... 160 160 Merger expenses...................................... 0 402 Accrued expenses..................................... 1,410 1,829 Less valuation allowance--loss carryforwards and merger expenses..................................... (735) (7,473) ------- -------- Total deferred income tax assets................... 7,127 8,291 ------- -------- Deferred income tax liabilities: Excess of book basis over tax basis of assets acquired............................................ (3,232) (3,187) Depreciation......................................... (3,692) (5,466) Prepaid expenses..................................... (1,322) (1,101) State deferreds...................................... (0) (249) ------- -------- Total deferred income tax liabilities.............. (8,246) (10,003) ------- -------- Net deferred income tax liability.................... $(1,119) $ (1,712) ======= ========
7. COMMITMENTS AND CONTINGENCIES OPERATING LEASES--The Company and its subsidiaries lease facilities, billboards and certain equipment under noncancelable operating lease arrangements with terms in excess of one year. The aggregate future minimum annual rental commitments as of September 30, 1996 under operating leases having noncancelable lease terms in excess of one year are as follows (in thousands):
RELATED PARTY (NOTE 4) OTHER ------------- ------- 1997................................................. $ 5,429 $10,257 1998................................................. 5,429 3,437 1999................................................. 3,456 1,568 2000................................................. 0 451 2001................................................. 0 340 Thereafter........................................... 0 871 ------- ------- $14,314 $16,924 ======= =======
TERMINATION OF LAS VEGAS PROPERTY LEASE--As more fully discussed in Note 4 the Company entered into the Swap Agreement pursuant to which Boomtown will be released from its obligations under the Resort Lease. BARGE LEASE--The Mississippi Partnership sold the barge in Biloxi, Mississippi and the building upon the barge housing the casino to HFS Gaming Corporation ("HFS"), a Delaware corporation. $2.4 million of the $11 million sales price was held by the Company to be used for the development and construction at the F-58 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Mississippi casino site. Simultaneously with the sale, the Mississippi Partnership leased the barge and building for 25 years and was granted the option to purchase the leased asset for fair market value at the end of the lease or upon the occurrence of certain events as defined in the lease agreement. In the event of default by the Mississippi Partnership, HFS may terminate the lease or require the Mississippi Partnership to repurchase the assets for fair market value. HFS agreed to provide certain marketing services for the Mississippi Partnership. The Mississippi Partnership will pay HFS aggregate rent under the lease and payments for services under the marketing agreement equal to approximately 20% of the annual adjusted earnings before interest, taxes, depreciation and amortization, as defined, for the Partnership (including the proposed hotel). As the lease payments represent contingent rentals, they are excluded from the future minimum annual rental commitments schedule above. HFS subsequently transferred its contractual rights to National Gaming Corporation, Inc. ("NGC"). In November 1995, Boomtown executed an agreement with NGC whereby the $2.4 million was returned to NGC in return for reduction of the EBITDA distributions from 20% to 16%. Additionally, the Company secured an option to buy the barge from NGC as well as to buy out the EBITDA participation at a cost approximating the original investment made by HFS less the $2.4 million that was paid. The option terminates on March 31, 1997, but is renewable for an additional two years for $100,000 a year. TIDELANDS LEASE--The Mississippi Partnership leases submerged tidelands at the casino site from the State of Mississippi. Annual rent is $525,000 and the term of the lease is ten years with a five-year option to renew. Rent in the second five-year period of the lease will be determined in accordance with Mississippi law. Annual rent in the five-year renewal term will be based on an appraisal obtained by the State of Mississippi. LAND LEASE WITH A RELATED PARTY--The Company signed an agreement to lease property through the Mississippi Partnership intended for the development, construction and operation of the Mississippi gaming facility. The Mississippi Partnership invested $2 million as a long-term deposit on the lease and committed to annual rentals of base rent (estimated at $2 million) and percentage rent (5% of adjusted gaming win over $25 million), plus $200,000 per year during the first ten years of the lease. The Mississippi Partnership exchanged a 15% interest with the lessor in lieu of base rent payments for the first two years. Rent expense is being charged to operations for the two year period and the lessor's limited partner capital account is being credited. The lease term is 99 years and is cancelable upon one year's notice. RENTAL EXPENSE--Included in the accompanying consolidated statements of operations, rental expense was approximately, $3,879,000 (including $389,000 in contingent rentals), $16,102,000 (including $511,000 in contingent rentals) and $19,243,000 (including $729,000 in contingent rentals) during the years ended September 30, 1994, 1995 and 1996, respectively. During the years ended September 30, 1994, 1995, and 1996, $2,418,000, $8,140,000 and $8,363,000, respectively, of rental expense was with related parties. SELF-INSURANCE--The Company maintains a plan of partial self-insurance for medical and dental coverage for substantially all full-time employees and their dependents. Claims aggregating between $50,000 and $75,000 or more per individual during the policy year are fully covered by insurance. Management has established reserves considered adequate to cover estimated future payments on claims incurred through September 30, 1996. GAMING LICENSE REQUIREMENTS--In October 1994, the Mississippi Gaming Commission adopted a regulation that requires, as a condition of licensure or license renewal, for a gaming establishment's plan to include various expenditures including parking facilities and infrastructure facilities amounting to at least 25% of the casino cost. Although the Company believes they have satisfied this requirement, there can be no assurance the Mississippi Gaming Commission will not require further development on the casino site including hotel rooms and additional parking facilities. Additionally, there can be no assurance that the Partnership will be successful in completing such a project or that the Partnership would be able to obtain a waiver if the Partnership decides not to build. F-59 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 8. FUNFLIGHT PROGRAM The Company operates a gaming junket program under the name Boomtown FunFlights. This program contracts with agents in various cities to book passengers on a chartered airplane for either overnight or "turn-around" flights to Boomtown Reno. The agents are paid a commission for each passenger booked. The passenger pays a nominal "boarding fee" which is recorded as revenue upon the passenger's arrival at the casino. The Company pays all costs associated with this program. 9. STOCK OPTION PLANS STOCK OPTION PLAN--On March 8, 1991, the Company's Board of Directors adopted a non-qualified stock option plan for officers and key employees (the "Option Plan"). The Option Plan authorized the grant of up to 198,744 shares of the Company's common stock. All available shares under the Option Plan were granted retroactive to October 1, 1989 to one individual at $.66 per share subject to certain contingent exercisability provisions. This option was amended in 1992, to provide full vesting and exercisability as of June 30, 1992, and it expires in March 2001. The Option Plan was amended and restated on September 10, 1992 to provide for the granting to employees of the Company of incentive stock options and for the granting of non-statutory stock options and stock purchase rights to employees and consultants of the Company. The options granted will be for various terms not exceeding ten years and will vest over periods determined at the date of grant. The exercise price for incentive stock options granted will be not less than the fair market value of the common stock at the date of grant. At September 30, 1996, the total number of shares reserved for issuance under the Option Plan is 1,892,066 of which options to purchase 1,726,742 shares have been granted at exercise prices ranging from $.66 to $6.25 per share. At September 30, 1996, options to purchase 586,992 shares of the Company's common stock at exercise prices ranging from $.66 to $6.25 per share were exercisable. During the year ended September 30, 1996 the Company's Board of Directors repriced certain non-executive options of the Option Plan totaling 165,000 shares to $9.00 from prices ranging from $11.50 to $20.75. Subsequently a repricing occurred concurrent with the Merger Agreement (April 23, 1996) whereby virtually all options outstanding, under the Option Plan as of such date were repriced to $6.25. 1992 DIRECTORS' OPTION PLAN--On September 10, 1992, the Company's Board of Directors adopted a directors' option plan (the "Directors' Plan") whereby each non-employee director is granted an option to purchase 3,900 shares of the Company's' common stock upon joining the Board and an option to purchase 1,300 shares of common stock on each anniversary date thereafter during their tenure as a director. The options granted have a ten-year term and vest ratably over a three-year period. The exercise price is the fair market value of the common stock on the date of grant. Options granted under the Directors' Plan may be exercised only (1) while the optionee director is serving as a director on the Company's Board, (2) within twelve months after termination by death or disability, or (3) within three months after termination as a director for any other reason. A total of 45,000 share have been granted under this plan at original exercise prices ranging from $4.88 to $26.50 per share. At September 30, 1996, options to purchase 19,064 shares of the Company's common stock at prices ranging from $12.00 to $26.50 were exercisable under this plan. 1993 EMPLOYEE STOCK BONUS PLAN--On February 25, 1993, the Company's Board of Directors adopted a Stock Bonus Plan (the "Bonus Plan") which covers certain employees of the Company. The Company has authorized and reserved 5,000 shares of common stock for granting under the Bonus Plan. The shares granted under the plan vest ratably over a four-year period. At September 30, 1996, the Company has not granted any shares under the Bonus Plan. F-60 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 10. 401(k) PLAN On January 1, 1993, the Company's Board of Directors approved a voluntary savings and investment plan (the "401(k) Plan"). The 401(k) Plan is available to all eligible employees of the Company and subsidiaries. Under the 401(k) Plan the Company will match 50% of employees' contributions up to a maximum of 5% of the employees' wages. The Company's 401(k) Plan expense was approximately, $233,000, $384,000 and $623,000 during the years ended September 1994, 1995, and 1996, respectively. 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: CASH AND CASH EQUIVALENTS: The carrying amount reported on the accompanying consolidate balance sheets for cash and cash equivalents approximates their fair value. NOTES RECEIVABLE: The fair value of the Company's notes receivable at September 30, 1995 was estimated by discounting the future cash flows using interest rates determined by management to reflect the credit risk and remaining maturities of the related notes receivable. The September 30, 1996 value was based on the negotiated price with Roski as discussed in Note 4. 11.5% FIRST MORTGAGE NOTES: The fair value of the Company's other long-term notes are estimated based upon market quotes of notes with similar characteristics and remaining maturities. OTHER LONG-TERM DEBT: The fair values of the Company's notes payable and capital lease obligations are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing instruments. The carrying amounts and fair values of the Company's financial instruments at September 30, 1995 and 1996 are as follows (in thousands):
SEPTEMBER 30, 1995 ------------------- CARRYING AMOUNT FAIR VALUE -------- ---------- Cash and cash equivalents.............................. $ 20,775 $ 20,775 Notes receivable....................................... 27,294 26,652 11.5% first mortgage notes............................. 100,842 95,738 Other long-term debt................................... 8,653 8,390 SEPTEMBER 30, 1996 ------------------- CARRYING AMOUNT FAIR VALUE -------- ---------- Cash and cash equivalents.............................. $ 23,101 $ 23,101 Notes receivable....................................... 8,683 7,947 11.5% first mortgage notes............................. 101,052 106,605 Other long-term debt................................... 7,709 7,606
F-61 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 12. SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION (UNAUDITED) In connection with the Notes issued in November 1993 (Note 5), the subsidiaries of the Company (guarantor entities) have guaranteed the Notes. Summarized consolidating financial information follows: SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION AS OF AND FOR THE YEAR ENDED SEPTEMBER 30, 1996 (IN THOUSANDS)
GUARANTOR ENTITIES ----------------------------------- BLUE DIAMOND BOOMTOWN BOOMTOWN, HOTEL & HOTEL & NON-WHOLLY ELIMINATION'S & BOOMTOWN INC. CASINO, CASINO, OWNED RECLASSIFICATIONS INC. (PARENT CO.) INC.(1) INC.(2) SUBSIDIARIES(3) DR(CR)(4) (CONSOLIDATED) ------------ -------- -------- --------------- ----------------- -------------- Current assets.......... $ 24,346 $ 4,756 $ 6,779 $ 11,170 $ (10,373) $ 36,678 Advances to affiliates.. 112,391 -- -- -- (112,391) -- Non-current assets...... 44,360 3,080 59,576 96,087 (33,793) 169,310 -------- -------- ------- -------- --------- -------- $181,097 $ 7,836 $66,355 $107,257 $(156,557) $205,988 ======== ======== ======= ======== ========= ======== Current liabilities..... $ 6,652 $ 11,054 $ 4,523 $ 15,178 $ (10,373) $ 27,034 Non-current liabilities. 106,159 -- 209 2,460 (261) 108,567 Advances from parent.... -- 33,785 11,479 67,127 (112,391) -- Equity.................. 68,286 (37,003) 50,144 22,492 (33,532) 70,387 -------- -------- ------- -------- --------- -------- $181,097 $ 7,836 $66,355 $107,257 $(156,557) $205,988 ======== ======== ======= ======== ========= ======== Revenues................ $ -- $ 44,721 $67,618 $123,703 $ -- $236,042 Income (loss) from operations............. $(21,455) $(26,007) $ 3,602 $ 18,596 $ -- $(25,264) Equity in earnings (loss) of consolidated subsidiaries and partnerships........... $(12,559) $ -- $ -- $ -- $ 12,559 $ -- Net loss................ $(22,499) $(24,194) $ 1,496 $ 9,494 $ 645 $(35,058) Net cash provided by (used in) operating activities............. $ 1,503 $ (3,606) $ (308) $ 13,781 $ -- $ 11,370 Net cash used in investing activities... (544) (1,928) (3,075) -- (5,547) Net cash provided by (used in) financing activities............. (1,857) 4,083 4,564 (10,287) -- (3,497) -------- -------- ------- -------- --------- -------- Net increase (decrease) in cash and cash equivalents............ (354) (67) 2,328 419 -- 2,326 Cash and cash equivalents: Beginning of year..... 10,811 2,630 1,334 6,000 -- 20,775 -------- -------- ------- -------- --------- -------- End of year........... $ 10,457 $ 2,563 $ 3,662 $ 6,419 $ -- $ 23,101
- -------- Notes to Summarized Consolidating Financial Information: (1) Blue Diamond Hotel & Casino, Inc. is a wholly-owned subsidiary that is consolidated in the accompanying consolidated financial statements. F-62 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) (2) Boomtown Hotel and Casino, Inc. is a wholly-owned subsidiary that is consolidated in the accompanying consolidated financial statements. These amounts do not include the operations of the Company's wholly-owned subsidiaries which are general partners of the Company's non-wholly owned subsidiaries. The operations of such wholly-owned subsidiaries are insignificant and have been included in the column "Non-wholly owned Subsidiaries". (3) "Non-wholly Owned Subsidiaries" include Boomtown, Inc.'s wholly-owned subsidiaries in Mississippi and Louisiana and 100% of the assets, liabilities and equity of the limited partnerships formed to operate the gaming facilities in those states. (4) Eliminations consist of Boomtown, Inc.'s (a) investment in the guarantor entities, (b) advances to the guarantor and non-guarantor entities and subsidiaries and (c) equity in earnings (loss) of consolidated subsidiaries and partnerships. The advances are subordinated in right of payment to the guarantees of the Notes. F-63 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SUMMARIZED CONSOLIDATING FINANCIAL INFORMATION AS OF AND FOR THE NINE MONTHS ENDED JUNE 30, 1997 (IN THOUSANDS, UNAUDITED)
GUARANTOR ENTITIES --------------------------------------------------------- BOOMTOWN, BLUE DIAMOND BOOMTOWN LOUISIANA-I MISSISSIPPI-I ELIMINATION'S & BOOMTOWN, INC. HOTEL & HOTEL & GAMING, GAMING, RECLASSIFICATIONS INC. (PARENT CO.) CASINO, INC.(1) CASINO, INC.(2) L.P.(3) L.P.(4) DR(CR)(5) (CONSOLIDATED) ------------ --------------- --------------- ----------- ------------- ----------------- -------------- Current assets... $ 22,294 $ 5,239 $ 6,592 $ 5,422 $ 5,535 $ (14,850) $ 30,232 Advances to affiliates...... 111,239 -- -- -- -- (111,239) -- Non-current assets.......... 46,408 1,996 60,093 61,217 41,809 (37,348) 174,175 -------- -------- ------- ------- ------- --------- -------- $179,941 $ 7,235 $66,685 $66,639 $47,344 $(163,437) $204,407 ======== ======== ======= ======= ======= ========= ======== Current liabilities..... $ 3,522 $ 14,338 $ 6,197 $ 8,674 $ 9,647 $ (14,850) $ 27,528 Non-current liabilities..... 115,630 -- 109 1,085 23 -- 116,847 Advances from parent.......... -- 35,947 12,566 20,261 42,465 (111,239) -- Equity........... 60,789 (43,050) 47,813 36,619 (4,791) (37,348) 60,032 -------- -------- ------- ------- ------- --------- -------- $179,941 $ 7,235 $66,685 $66,639 $47,344 $(163,437) $204,407 ======== ======== ======= ======= ======= ========= ======== Revenues......... $ -- $ 35,275 $45,824 $56,349 $41,656 $ -- $179,104 Income (loss) from operation.. $ (998) $ (5,735) $(2,499) $12,754 $ 2,897 $ -- $ 6,419 Equity in earnings (loss) of consolidated subsidiaries.... $ 809 $ (809) $ -- Net income (loss).......... $(11,351) $ (6,046) (2,330) $10,403 $(1,122) $ (96) $(10,542) Net cash provided by (used in) operating activities...... (9,796) (517) 4,939 14,095 3,474 -- 12,195 Net cash used in investing activities...... -- (414) (5,332) (1,719) (2,453) -- (9,918) Net cash provided by (used in) financing activities...... 4,822 1,628 713 (11,444) (886) -- (5,167) -------- -------- ------- ------- ------- --------- -------- Net increase (decrease) in cash and cash equivalents..... (4,974) 697 320 932 135 -- (2,890) Cash and cash equivalents: Beginning of year........... 10,457 2,563 3,662 3,512 2,907 -- 23,101 -------- -------- ------- ------- ------- --------- -------- End of period... $ 5,483 $ 3,260 $ 3,982 $ 4,444 $ 3,042 $ -- $ 20,211 ======== ======== ======= ======= ======= ========= ========
- -------- Notes to Summarized Consolidating Financial Information: (1) Blue Diamond Hotel & Casino, Inc. is a wholly-owned subsidiary that is consolidated in the accompanying consolidated financial statements. (2) Boomtown Hotel & Casino, Inc. is a wholly-owned subsidiary that is consolidated in the accompanying consolidated financial statements. These amounts do not include the operations of the Company's wholly-owned subsidiaries which are general partners of the Company's non wholly-owned subsidiaries. (3) Louisiana-I Gaming, L.P. is a wholly-owned subsidiary (as of November 18, 1996) that is consolidated in the Company's consolidated financial statements. (4) Mississippi-I Gaming, L.P. is a non wholly-owned subsidiary of the Company that is consolidated in the Company's consolidated financial statements. (5) Eliminations consist of Boomtown, Inc.'s (a) investment in the guarantor entities, (b) advances to the guarantor and non-guarantor subsidiaries and (c) equity earnings (loss) of consolidated subsidiaries and partnerships. The advances are subordinated in right of payment to the guarantees of the Notes. F-64 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 13. SUBSEQUENT EVENTS ACQUISITION OF LOUISIANA PARTNERSHIP MINORITY INTEREST--On November 18, 1996 the Company entered into an agreement with Eric Skrmetta, the lessor, in which the Company agreed to pay $5,673,000 in return for Skrmetta's 7.5% interest in the Louisiana Partnership in addition to releasing the Company from any and all claims, liabilities and causes of action of any kind arising from or related to the Partnership agreement. Terms of the agreement, required Boomtown to make a deposit of $500,000 by December 5, 1996 and the remaining $5,173,000 to be paid not later than August 10, 1997. Additionally, the $5,173,000 shall be reduced by a discount for the time that the amount or any portion thereof is paid in full prior to August 10, 1997. MERGER WITH HOLLYWOOD PARK (UNAUDITED)--On June 30, 1997, pursuant to the Merger Agreement dated as of April 23, 1996, by and among Hollywood Park, HP Acquisition, Inc., a wholly owned subsidiary of Hollywood Park, and Boomtown, HP Acquisition, Inc. was merged with and into Boomtown. See Recent Developments--"Hollywood Park--Boomtown Merger and Disposition of Boomtown Blue Diamond Resort." SWAP AGREEMENT CONSUMMATION (UNAUDITED)--On July 1, 1997, Boomtown completed a swap pursuant to the Swap Agreement. See Recent Developments--"Hollywood Park--Boomtown Merger and Disposition of Boomtown Blue Diamond Resort." EARLY EXTINGUISHMENT OF FIRST MORTGAGE NOTES (UNAUDITED)--Concurrently with the closing of the Merger and the Swap, Hollywood Park supplied the funds necessary to enable Boomtown to repurchase and retire an aggregate of approximately $102.7 million in principal amount of Boomtown's First Mortgage Notes (the "Notes") leaving an aggregate of approximately $1.4 million in principal amount of the Notes outstanding. See Recent Developments-- "Improvements to Boomtown's Financial Condition." BARGE AND BUILDING SHELL PURCHASE (UNAUDITED)--On August 4, 1997, Hollywood Park executed a purchase agreement pursuant to which one of the Hollywood Park entities repurchased the barge and the building shell at Boomtown Biloxi for a total cost of $5,250,000. A payment of $1,500,000 was made on August 4, 1997, with the balance payable in three equal annual installments of $1,250,000. F-65 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE ISSUERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF ANY OFFER TO BUY, ANY SECURITIES OFFERED HEREBY TO ANY PERSON IN OR BY ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPRESSION THAT THERE HAS NOT BEEN A CHANGE IN THE INFORMATION SET FORTH IN THIS PROSPECTUS OR IN THE AFFAIRS OF THE ISSUERS SINCE THE DATE HEREOF. ----------------- TABLE OF CONTENTS
PAGE ---- Available Information.................................................... i Documents Incorporated by Reference...................................... ii Prospectus Summary....................................................... 1 Risk Factors............................................................. 14 Use of Proceeds.......................................................... 23 The Exchange Offer....................................................... 23 Certain Federal Income Tax Considerations................................ 31 Capitalization........................................................... 32 Selected Historical and Pro Forma Financial Data......................... 33 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 37 Unaudited Pro Forma Combined Consolidated Condensed Financial Statements. 50 Business................................................................. 56 Management............................................................... 78 Security Ownership of Certain Beneficial Owners and Management........... 81 Description of Other Indebtedness........................................ 83 Description of Notes..................................................... 85 Plan of Distribution..................................................... 114 Book-Entry; Delivery and Form............................................ 115 Independent Auditors..................................................... 117 Legal Matters............................................................ 117 Index to Financial Statements............................................ F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $125,000,000 [LOGO OF HOLLYWOOD PARK] SERIES B 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 --------------------------------- PROSPECTUS --------------------------------- , 1997 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 145 of the Delaware General Corporation Law ("DGCL") provides that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director, officer, employee or agent of the corporation or is or was serving at its request in such capacity in another corporation or business association, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Section 102(b)(7) of the DGCL permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any transaction from which the director derived an improper personal benefit. As permitted by Section 102(b)(7) of the DGCL, each Issuer's Certificate of Incorporation, as amended, includes a provision that limits a director's personal liability to such Issuer or its stockholders for monetary damages for breaches of his or her fiduciary duty as a director. Article XIII of each Issuer's Certificate of Incorporation, as amended, provides that no director of such Issuer shall be personally liable to such Issuer or its stockholders for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL. As permitted by Section 145 of the DGCL, each Issuer's Bylaws provide that, to the fullest extent permitted by the DGCL, directors, officers and certain other persons who are made, or are threatened to be made, parties to, or are involved in, any action, suit or proceeding will be indemnified by such Issuer with respect thereto. Hollywood Park, Inc. maintains insurance policies under which its directors and officers are insured, within the limits and subject to the limitations of the policies, against expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been directors or officers of Hollywood Park, Inc. ITEM 21. EXHIBITS A list of exhibits included as part of the Registration Statement is set forth below:
EXHIBIT NO. DESCRIPTION ------- ----------- 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 on 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.
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EXHIBIT NO. DESCRIPTION ------- ----------- 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. 3.3 Certificate of Incorporation of Hollywood Park Operating Company 3.4 Amended By-laws of Hollywood Park Operating Company 3.5** Certificate of Incorporation of Hollywood Park Fall Operating Company 3.6** By-laws of Hollywood Park Fall Operating Company 3.7** Articles of Incorporation of Hollywood Park Food Services, Inc. 3.8** By-laws of Hollywood Park Food Services, Inc. 3.9** Articles of Incorporation of HP/Compton, Inc. 3.10** By-laws of HP/Compton, Inc. 3.11** Articles of Organization of Crystal Park Hotel and Casino Development Company, LLC 3.12** Operating Agreement of Crystal Park Hotel and Casino Development Company, LLC 3.13** Restated Articles of Incorporation of Turf Paradise, Inc. 3.14** By-laws of Turf Paradise, Inc. 3.15** Certificate of Incorporation of HP Yakama, Inc. 3.16** By-laws of HP Yakama, Inc. 3.17** Certificate of Incorporation of Boomtown, Inc. 3.18** By-laws of Boomtown, Inc. 3.19** Certificate of Amended and Restated Articles of Incorporation of Boomtown Hotel & Casino, Inc. 3.20** Revised and Restated By-laws of Boomtown Hotel & Casino, Inc. 3.21** Articles of Incorporation of Bayview Yacht Club, Inc. 3.22** By-laws of Bayview Yacht Club, Inc. 3.23** Certificate of Mississippi Limited Partnership of Mississippi I- Gaming, L.P. 3.24** Limited Partnership Agreement of Mississippi I-Gaming, L.P. 3.25** Articles of Incorporation of Louisiana Gaming Enterprises, Inc. 3.26** By-laws of Louisiana Gaming Enterprises, Inc. 3.27** Certificate of Partnership in Commendam of Louisiana I-Gaming, a Louisiana Partnership in Commendem 3.28** Amended and restated Partnership Agreement of Louisiana I-Gaming, a Louisiana Partnership in Commendam 4.5 Convertible Preferred Stock Depositary Stock Agreement between Hollywood Park, Inc. and Chase Mellon Shareholder Services, dated February 9, 1993, is hereby incorporated by reference to the Company's Registration Statement on Form S-1 dated January 29, 1993. 4.7 Hollywood Park 1996 Stock Option Plan is hereby incorporated by reference to Appendix D to the Notice of Annual Meeting to Shareholders and Proxy Statement, dated September 20, 1996, relating to the Annual Meeting of Stockholders of Hollywood Park, Inc. held on October 30, 1996. 4.8 Hollywood Park 1993 Stock Option Plan is hereby incorporated by reference to Appendix A to the Notice of Annual Meeting to shareholders and Proxy Statement relating to the Annual Meeting of Stockholders of Hollywood Park, Inc. held on May 17, 1993.
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EXHIBIT NO. DESCRIPTION ------- ----------- 4.9 Indenture, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc. and The Bank of New York, as trustee, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 4.10 Form of Series B 9 1/2% Senior Subordinated Note due 2007 (Included in Exhibit 4.9). 5** Opinion of Irell & Manella LLP 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 as of 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 the quarter ended June 30, 1994. 10.6 Amendment of Oil and Gas Lease dated January 10, 1995, by and between Hollywood Park, Inc. and Casex Co., Nunn Ltd., and Vortex Energy & Minerals is hereby incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1994. 10.7 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. 10.8 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. 10.9 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. 10.10 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. 10.11 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. 10.12 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.
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EXHIBIT NO. DESCRIPTION ------- ----------- 10.13 First Amendment to Lease by and between HP/Compton, Inc., and Compton Entertainment, Inc., dated March 12, 1996, is here by incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 10.14 Second Amendment to Lease by and between Crystal Park Hotel and Casino Development Company LLC, and Compton Entertainment, Inc., dated September 13, 1996, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 10.15 Assignment, Assumption and Consent Agreement, by and among HP/Compton, Inc., and Crystal Park Hotel and Casino Development Company LLC, Hollywood Park, Inc. and The Community Redevelopment Agency of the City of Compton, dated July 18, 1996, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 10.16 Consent of Compton Entertainment, Inc., and Rouben Kandilian, by and between Hollywood Park, Inc., and Compton Entertainment, Inc., dated August 29, 1996, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 10.17 License Agreement, dated June 27, 1996, by and between HP/Compton, Inc., and Radisson Hotels International, Inc. is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. 10.18 Operating Agreement for Crystal Park Hotel and Casino Development Company LLC, dated July 18, 1996, effective August 28, 1996, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 10.19 Blue Diamond Swap Agreement by and among Boomtown, Inc., Blue Diamond Hotel & Casino, Inc., Hollywood Park, Inc., Edward P. Roski, Jr., IVAC and Majestic Realty Co., dated August 12, 1996, is hereby incorporated by reference to the Company's Registration Statement on Form S-4 filed September 18, 1996. 10.20 Stock Purchase Agreement, by and between Hollywood Park, Inc. and Edward P. Roski, Jr., dated August 12, 1996, is hereby incorporated by reference to the Company's Registration Statement on Form S-4 dated September 18, 1996. 10.21 Reducing Revolving Loan Agreement dated March 27, 1997, among Hollywood Park, Inc., and Bank of Scotland, Bankers Trust Company, Societe Generale, 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, 1997. 10.22 Amendment No. 1 to Reducing Revolving Loan Agreement, dated June 30, 1997, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.23 Amendment No. 2 to Reducing Revolving Loan Agreement, dated July 30, 1997, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.24 Agreement of Limited Partnership for Huron Gaming, LP, a Delaware Limited Partnership, Kansas Project, dated July 14, 1997, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.25 Amended and Restated Agreement of Limited Partnership of Mississippi-I Gaming, L.P., is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.26 Amended Equity Conversion Agreement, dated July 18, 1994, by and between Boomtown, Inc., and Eric Skrmmetta, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
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EXHIBIT NO. DESCRIPTION ------- ----------- 10.27 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as Landlord and Mississippi-I Gaming, L.P. as Tenant, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.28 First Amendment to Ground Lease dated October 19, 1993, between Raphael Skrmetta and Mississippi-I Gaming, L.P, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.29 Second Amendment to Ground Lease dated October 19, 1993, between Raphael Skrmetta and Mississippi-I Gaming, L.P, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.30 Purchase Agreement, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC, Hollywood Park Fall Operating Company, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., and the Initial Purchasers named therein, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.31 Registration Rights Agreement, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC, Hollywood Park Fall Operating Company, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., and the Initial Purchasers named therein, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 12.1 Calculation of Historical Ratio of Earnings to Fixed Charges 12.2 Calculation of Pro Forma Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of Hollywood Park, Inc. 23.1** Consent of Irell & Manella LLP (included in Exhibit 5). 23.2 Consent of Arthur Andersen LLP 23.3** Consent of Ernst & Young LLP 24.1 Powers of Attorney of officers and directors of Hollywood Park, Inc. (appearing on signature pages hereto). 24.2 Powers of Attorney of officers and directors of Hollywood Park Operating Company (appearing on signature pages hereto). 24.3 Powers of Attorney of officers and directors of Hollywood Park Fall Operating Company (appearing on signature pages hereto). 24.4 Powers of Attorney of officers and directors of Hollywood Park Food Services, Inc. (appearing on signature pages hereto). 24.5 Powers of Attorney of officers and directors of HP/Compton, Inc. (appearing on signature pages hereto). 24.6 Powers of Attorney of directors of HP/Compton, Inc. in the capacity of manager of Crystal Park Hotel and Casino Development Company, LLC (appearing on signature pages hereto). 24.7 Powers of Attorney of officers and directors of Turf Paradise, Inc. (appearing on signature pages hereto). 24.8 Powers of Attorney of officers and directors of HP Yakama, Inc. (appearing on signature pages hereto).
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EXHIBIT NO. DESCRIPTION ------- ----------- 24.9 Powers of Attorney of officers and directors of Boomtown, Inc. (appearing on signature pages hereto). 24.10 Powers of Attorney of officers and directors of Boomtown Hotel & Casino, Inc. (appearing on signature pages hereto). 24.11 Powers of Attorney of officers and directors of Bayview Yacht Club, Inc. (appearing on signature pages hereto). 24.12 Powers of Attorney of directors of Bayview Yacht Club, Inc. in the capacity of General Partner of Mississippi I-Gaming, L.P. (appearing on signature pages hereto). 24.13 Powers of Attorney of officers and directors of Louisiana Gaming Enterprises, Inc. (appearing on signature pages hereto). 24.14 Powers of Attorney of directors of Louisiana Gaming Enterprises, Inc. in the capacity of General Partner of Louisiana I-Gaming, a Louisiana Partnership in Commendam (appearing on signature pages hereto). 25.1 Statement Regarding Eligibility of Trustee 99 Form of Letter of Transmittal
- -------- ** To be filed by amendment ITEM 22. UNDERTAKINGS 1. The undersigned Registrants hereby undertake: (a)(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or most recent post- effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20 percent change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) To respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. II-6 (c) To supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. (d) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Issuers' annual report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (e) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of each Issuer pursuant to the foregoing provisions, or otherwise, the Issuers has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of an action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Issuers will, unless in the opinion of their counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (f) The undersigned Registrants hereby undertake to file an application for the purpose of determining the eligibility of the trustee to act under subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Trust Indenture Act. II-7 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. HOLLYWOOD PARK, INC., a Delaware corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan President--Sports and Entertainment, Executive Vice President, Treasurer and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ R.D. Hubbard Chairman of the Board and August 27, 1997 ____________________________________ Chief Executive Officer R.D. Hubbard (Principal Executive Officer) /s/ Harry Ornest Vice Chairman of the Board August 27, 1997 ____________________________________ Harry Ornest /s/ G. Michael Finnigan Executive Vice President and August 27, 1997 ____________________________________ Chief Financial Officer G. Michael Finnigan (Principal Financial and Accounting Officer) /s/ Richard Goeglein Director August 27, 1997 ____________________________________ Richard Goeglein /s/ Peter L. Harris Director August 27, 1997 ____________________________________ Peter L. Harris /s/ J.R. Johnson Director August 27, 1997 ____________________________________ J.R. Johnson
II-8
SIGNATURE TITLE DATE --------- ----- ---- /s/ Robert T. Manfuso Director August 27, 1997 ____________________________________ Robert T. Manfuso /s/ Timothy J. Parrott Director August 27, 1997 ____________________________________ Timothy J. Parrott /s/ Lynn P. Reitnouer Director August 27, 1997 ____________________________________ Lynn P. Reitnouer Director August , 1997 ____________________________________ Warren B. Williamson /s/ Herman Sarkowsky Director August 27, 1997 ____________________________________ Herman Sarkowsky /s/ Delbert W. Yocam Director August 27, 1997 ____________________________________ Delbert W. Yocam
II-9 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. HOLLYWOOD PARK OPERATING COMPANY, a Delaware corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Executive Vice President, Treasurer and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ R.D. Hubbard Chairman of the Board and August 27, 1997 ____________________________________ Chief Executive Officer R.D. Hubbard (Principal Executive Officer) /s/ Harry Ornest Vice Chairman of the Board August 27, 1997 ____________________________________ Harry Ornest /s/ G. Michael Finnigan Executive Vice President and August 27, 1997 ____________________________________ Chief Financial Officer G. Michael Finnigan (Principal Financial and Accounting Officer) ____________________________________ Director August , 1997 Warren B. Williamson
II-10 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. HOLLYWOOD PARK FALL OPERATING COMPANY, a Delaware corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Executive Vice President, Treasurer and Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ R.D. Hubbard Director and President August 27, 1997 ____________________________________ (Principal Executive R.D. Hubbard Officer) /s/ Harry Ornest Director August 27, 1997 ____________________________________ Harry Ornest ____________________________________ Director August , 1997 Warren B. Williamson /s/ G. Michael Finnigan Executive Vice President, August 27, 1997 ____________________________________ Treasurer and Assistant G. Michael Finnigan Secretary (Principal Financial and Accounting Officer)
II-11 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. HOLLYWOOD PARK FOOD SERVICES, INC., a California corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Executive Vice President, Treasurer and Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ R.D. Hubbard Director and President August 27, 1997 ____________________________________ (Principal Executive R.D. Hubbard Officer) /s/ Harry Ornest Director August 27, 1997 ____________________________________ Harry Ornest ____________________________________ Director August , 1997 Warren B. Williamson /s/ G. Michael Finnigan Executive Vice President, August 27, 1997 ____________________________________ Treasurer and Assistant G. Michael Finnigan Secretary (Principal Financial and Accounting Officer)
II-12 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. HP/COMPTON INC., a California corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ R.D. Hubbard Director and President August 27, 1997 ____________________________________ (Principal Executive R.D. Hubbard Officer) /s/ G. Michael Finnigan Vice President and Chief August 27, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
II-13 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. CRYSTAL PARK HOTEL & CASINO DEVELOPMENT COMPANY, LLC By: its Manager HP/COMPTON, INC., a California corporation /s/ G. Michael Finnigan By: _______________________________ G. Michael Finnigan Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- HP/COMPTION, INC. MANAGER of Crystal Park August 27, 1997 Hotel & Casino Development Company, LLC /s/ R.D. Hubbard Director and President of August 27, 1997 ____________________________________ HP/Compton, Inc. R.D. Hubbard
II-14 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. TURF PARADISE, INC., an Arizona corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Vice President, Treasurer and Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ R.D. Hubbard Director, President and August 27, 1997 ____________________________________ Chief Executive Officer R.D. Hubbard (Principal Executive Officer) /s/ G. Michael Finnigan Director, Vice President, August 27, 1997 ____________________________________ Treasurer and Assistant G. Michael Finnigan Secretary (Principal Financial and Accounting Officer) /s/ Donald M. Robbins Director, Vice President and August 27, 1997 ____________________________________ Secretary Donald M. Robbins
II-15 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. HP YAKAMA, INC., a Delaware corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Vice President, Treasurer and Assistant Secretary Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ R.D. Hubbard Director, President and August 27, 1997 ____________________________________ Chief Executive Officer R.D. Hubbard (Principal Executive Officer) /s/ Bruce Rimbo Director August 27, 1997 ____________________________________ Bruce Rimbo /s/ G. Michael Finnigan Director, Vice President, August 27, 1997 ____________________________________ Treasurer and Assistant G. Michael Finnigan Secretary (Principal Financial and Accounting Officer)
II-16 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. BOOMTOWN, INC., a Delaware corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Timothy J. Parrott Chairman of the Board and August 27, 1997 ____________________________________ Chief Executive Officer Timothy J. Parrott (Principal Executive Officer) /s/ Phil E. Bryan Director, President and August 27, 1997 ____________________________________ Chief Operating Officer Phil E. Bryan /s/ Robert F. List Director, Executive Vice August 27, 1997 ____________________________________ President and Secretary Robert F. List /s/ G. Michael Finnigan Vice President, and Chief August 27, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
II-17 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. BOOMTOWN HOTEL & CASINO, INC., a Nevada corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Timothy J. Parrott Chairman of the Board and August 27, 1997 ____________________________________ Chief Executive Officer Timothy J. Parrott (Principal Executive Officer) /s/ Phil E. Bryan Director, President and August 27, 1997 ____________________________________ Chief Operating Officer Phil E. Bryan /s/ Robert F. List Director, Senior Vice August 27, 1997 ____________________________________ President, Secretary and Robert F. List Treasurer /s/ G. Michael Finnigan Vice President, and Chief August 27, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
II-18 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. BAYVIEW YACHT CLUB, INC., a Mississippi corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Timothy J. Parrott Chairman of the Board and August 27, 1997 ____________________________________ Chief Executive Officer Timothy J. Parrott (Principal Executive Officer) /s/ Robert F. List Director, Secretary and August 27, 1997 ____________________________________ Treasurer Robert F. List /s/ G. Michael Finnigan Vice President, and Chief August 27, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
II-19 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. MISSISSIPPI-I GAMING, L.P. By: its General Partner BAYVIEW YACHT CLUB, INC., a Mississippi corporation /s/ G. Michael Finnigan By: ___________________________ G. Michael Finnigan Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- BAYVIEW YACHT CLUB, INC. GENERAL PARTNER August 27, 1997 Mississippi-I Gaming, L.P. /s/ Timothy J. Parrott Director, Chairman and August 27, 1997 ______________________________________ Chief Executive Officer Timothy J. Parrott of Bayview Yacht Club, Inc. /s/ Robert F. List Director, Secretary and August 27, 1997 ______________________________________ Treasurer of Bayview Robert F. List Yacht Club, Inc.
II-20 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. LOUISIANA GAMING ENTERPRISES, INC., a Louisiana corporation /s/ G. Michael Finnigan By: _________________________________ G. Michael Finnigan Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ Timothy J. Parrott Chairman of the Board and August 27, 1997 ____________________________________ Chief Executive Officer Timothy J. Parrott (Principal Executive Officer) /s/ Robert F. List Director, Executive Vice August 27, 1997 ____________________________________ President and Secretary Robert F. List /s/ G. Michael Finnigan Vice President, and Chief August 27, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
II-21 POWER OF ATTORNEY Each person whose signature to the Registration Statement appears below hereby appoints R.D. Hubbard and G. Michael Finnigan and each of them, either one of whom may act without joinder of the other, as his or her attorney-in- fact to sign on his or her behalf individually and in the capacity stated below and to file all amendments and post-effective amendments to this Registration Statement, which amendments may make such changes in and additions to this Registration Statement as such attorney-in-fact may deem appropriate or necessary. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Los Angeles, State of California on the 27th day of August, 1997. LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM By: its General Partner LOUISIANA GAMING ENTERPRISES, INC., a Louisiana corporation /s/ G. Michael Finnigan By: ___________________________ G. Michael Finnigan Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- LOUISIANA GAMING ENTERPRISES, INC. GENERAL MANAGER of August 27, 1997 Louisiana-I Gaming, a Louisiana Partnership in Commendam /s/ Timothy J. Parrott Director, Chairman and August 27, 1997 ______________________________________ Chief Executive Officer Timothy J. Parrott of Louisiana Gaming Enterprises, Inc. /s/ Robert F. List Director, Executive Vice August 27, 1997 ______________________________________ President and Secretary Robert F. List of Louisiana Gaming Enterprises, Inc.
II-22 EXHIBIT INDEX
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGE ------- ----------- ------------ 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 on 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. 3.3 Certificate of Incorporation of Hollywood Park Operating Company 3.4 Amended By-laws of Hollywood Park Operating Company 3.5** Certificate of Incorporation of Hollywood Park Fall Operating Company 3.6** By-laws of Hollywood Park Fall Operating Company 3.7** Articles of Incorporation of Hollywood Park Food Services, Inc. 3.8** By-laws of Hollywood Park Food Services, Inc. 3.9** Articles of Incorporation of HP/Compton, Inc. 3.10** By-laws of HP/Compton, Inc. 3.11** Articles of Organization of Crystal Park Hotel and Casino Development Company, LLC 3.12** Operating Agreement of Crystal Park Hotel and Casino Development Company, LLC 3.13** Restated Articles of Incorporation of Turf Paradise, Inc. 3.14** By-laws of Turf Paradise, Inc. 3.15** Certificate of Incorporation of HP Yakama, Inc. 3.16** By-laws of HP Yakama, Inc. 3.17** Certificate of Incorporation of Boomtown, Inc. 3.18** By-laws of Boomtown, Inc. 3.19** Certificate of Amended and Restated Articles of Incorporation of Boomtown Hotel & Casino, Inc. 3.20** Revised and Restated By-laws of Boomtown Hotel & Casino, Inc. 3.21** Articles of Incorporation of Bayview Yacht Club, Inc. 3.22** By-laws of Bayview Yacht Club, Inc. 3.23** Certificate of Mississippi Limited Partnership of Mississippi I-Gaming, L.P. 3.24** Limited Partnership Agreement of Mississippi I-Gaming, L.P. 3.25** Articles of Incorporation of Louisiana Gaming Enterprises, Inc. 3.26** By-laws of Louisiana Gaming Enterprises, Inc. 3.27** Certificate of Partnership in Commendam of Louisiana I- Gaming, a Louisiana Partnership in Commendem
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGE ------- ----------- ------------ 3.28** Amended and restated Partnership Agreement of Louisiana I-Gaming, a Louisiana Partnership in Commendam 4.5 Convertible Preferred Stock Depositary Stock Agreement between Hollywood Park, Inc. and Chase Mellon Shareholder Services, dated February 9, 1993, is hereby incorporated by reference to the Company's Registration Statement on Form S-1 dated January 29, 1993. 4.7 Hollywood Park 1996 Stock Option Plan is hereby incorporated by reference to Appendix D to the Notice of Annual Meeting to Shareholders and Proxy Statement, dated September 20, 1996, relating to the Annual Meeting of Stockholders of Hollywood Park, Inc. held on October 30, 1996. 4.8 Hollywood Park 1993 Stock Option Plan is hereby incorporated by reference to Appendix A to the Notice of Annual Meeting to shareholders and Proxy Statement relating to the Annual Meeting of Stockholders of Hollywood Park, Inc. held on May 17, 1993. 4.9 Indenture, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc. and The Bank of New York, as trustee, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 4.10 Form of Series B 9 1/2% Senior Subordinated Note due 2007 (Included in Exhibit 4.9). 5** Opinion of Irell & Manella LLP 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 as of 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 the quarter ended June 30, 1994. 10.6 Amendment of Oil and Gas Lease dated January 10, 1995, by and between Hollywood Park, Inc. and Casex Co., Nunn Ltd., and Vortex Energy & Minerals is hereby incorporated by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGE ------- ----------- ------------ 10.7 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. 10.8 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. 10.9 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. 10.10 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. 10.11 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. 10.12 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. 10.13 First Amendment to Lease by and between HP/Compton, Inc., and Compton Entertainment, Inc., dated March 12, 1996, is here by incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 10.14 Second Amendment to Lease by and between Crystal Park Hotel and Casino Development Company LLC, and Compton Entertainment, Inc., dated September 13, 1996, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 10.15 Assignment, Assumption and Consent Agreement, by and among HP/Compton, Inc., and Crystal Park Hotel and Casino Development Company LLC, Hollywood Park, Inc. and The Community Redevelopment Agency of the City of Compton, dated July 18, 1996, is hereby incorporated by reference to the Company's Quarterly Report on Form 10- Q for the quarter ended September 30, 1996. 10.16 Consent of Compton Entertainment, Inc., and Rouben Kandilian, by and between Hollywood Park, Inc., and Compton Entertainment, Inc., dated August 29, 1996, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996. 10.17 License Agreement, dated June 27, 1996, by and between HP/Compton, Inc., and Radisson Hotels International, Inc. is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996. 10.18 Operating Agreement for Crystal Park Hotel and Casino Development Company LLC, dated July 18, 1996, effective August 28, 1996, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGE ------- ----------- ------------ 10.19 Blue Diamond Swap Agreement by and among Boomtown, Inc., Blue Diamond Hotel & Casino, Inc., Hollywood Park, Inc., Edward P. Roski, Jr., IVAC and Majestic Realty Co., dated August 12, 1996, is hereby incorporated by reference to the Company's Registration Statement on Form S-4 filed September 18, 1996. 10.20 Stock Purchase Agreement, by and between Hollywood Park, Inc. and Edward P. Roski, Jr., dated August 12, 1996, is hereby incorporated by reference to the Company's Registration Statement on Form S-4 dated September 18, 1996. 10.21 Reducing Revolving Loan Agreement dated March 27, 1997, among Hollywood Park, Inc., and Bank of Scotland, Bankers Trust Company, Societe Generale, 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, 1997. 10.22 Amendment No. 1 to Reducing Revolving Loan Agreement, dated June 30, 1997, is hereby incorporated by reference to the Company's Quarterly Report on Form 10- Q for the quarter ended June 30, 1997. 10.23 Amendment No. 2 to Reducing Revolving Loan Agreement, dated July 30, 1997, is hereby incorporated by reference to the Company's Quarterly Report on Form 10- Q for the quarter ended June 30, 1997. 10.24 Agreement of Limited Partnership for Huron Gaming, LP, a Delaware Limited Partnership, Kansas Project, dated July 14, 1997, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.25 Amended and Restated Agreement of Limited Partnership of Mississippi-I Gaming, L.P., is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 10.26 Amended Equity Conversion Agreement, dated July 18, 1994, by and between Boomtown, Inc., and Eric Skrmmetta, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.27 Ground Lease, dated October 19, 1993, between Raphael Skrmetta as Landlord and Mississippi-I Gaming, L.P. as Tenant, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.28 First Amendment to Ground Lease dated October 19, 1993, between Raphael Skrmetta and Mississippi-I Gaming, L.P, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.29 Second Amendment to Ground Lease dated October 19, 1993, between Raphael Skrmetta and Mississippi-I Gaming, L.P, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 10.30 Purchase Agreement, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC, Hollywood Park Fall Operating Company, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., and the Initial Purchasers named therein, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGE ------- ----------- ------------ 10.31 Registration Rights Agreement, dated August 1, 1997, by and among the Company, HPOC, Hollywood Park Food Services, Inc., HP/Compton, Inc., Crystal Park Hotel and Casino Development Company, LLC, Hollywood Park Fall Operating Company, HP Yakama, Inc., Turf Paradise, Inc., Boomtown, Inc., Boomtown Hotel & Casino, Inc., Louisiana-I Gaming, Louisiana Gaming Enterprises, Inc., Mississippi-I Gaming, L.P., Bayview Yacht Club, Inc., and the Initial Purchasers named therein, is hereby incorporated by reference to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997. 12.1 Calculation of Historical Ratio of Earnings to Fixed Charges 12.2 Calculation of Pro Forma Ratio of Earnings to Fixed Charges 21.1 Subsidiaries of Hollywood Park, Inc. 23.1** Consent of Irell & Manella LLP (included in Exhibit 5). 23.2 Consent of Arthur Andersen LLP 23.3** Consent of Ernst & Young LLP 24.1 Powers of Attorney of officers and directors of Hollywood Park, Inc. (appearing on signature pages hereto). 24.2 Powers of Attorney of officers and directors of Hollywood Park Operating Company (appearing on signature pages hereto). 24.3 Powers of Attorney of officers and directors of Hollywood Park Fall Operating Company (appearing on signature pages hereto). 24.4 Powers of Attorney of officers and directors of Hollywood Park Food Services, Inc. (appearing on signature pages hereto). 24.5 Powers of Attorney of officers and directors of HP/Compton, Inc. (appearing on signature pages hereto). 24.6 Powers of Attorney of directors of HP/Compton, Inc. in the capacity of manager of Crystal Park Hotel and Casino Development Company, LLC (appearing on signature pages hereto). 24.7 Powers of Attorney of officers and directors of Turf Paradise, Inc. (appearing on signature pages hereto). 24.8 Powers of Attorney of officers and directors of HP Yakama, Inc. (appearing on signature pages hereto). 24.9 Powers of Attorney of officers and directors of Boomtown, Inc. (appearing on signature pages hereto). 24.10 Powers of Attorney of officers and directors of Boomtown Hotel & Casino, Inc. (appearing on signature pages hereto). 24.11 Powers of Attorney of officers and directors of Bayview Yacht Club, Inc. (appearing on signature pages hereto). 24.12 Powers of Attorney of directors of Bayview Yacht Club, Inc. in the capacity of General Partner of Mississippi I-Gaming, L.P. (appearing on signature pages hereto). 24.13 Powers of Attorney of officers and directors of Louisiana Gaming Enterprises, Inc. (appearing on signature pages hereto). 24.14 Powers of Attorney of directors of Louisiana Gaming Enterprises, Inc. in the capacity of General Partner of Louisiana I-Gaming, a Louisiana Partnership in Commendam (appearing on signature pages hereto). 25.1 Statement Regarding Eligibility of Trustee 99 Form of Letter of Transmittal
- -------- ** To be filed by amendment EX-3.3 2 CERTIFICATE OF INCORPORATION OF HOLLYWOOD PARK Exhibit 3.3 State of Delaware Office of the Secretary of State ______________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "HOLLYWOOD PARK OPERATING COMPANY", FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF OCTOBER, A.D. 1981, AT 10 O'CLOCK A.M. /s/ Edward J. Freel ____________________________________ Edward J. Freel, Secretary of State AUTHENTICATION: DATE: CERTIFICATE OF INCORPORATION OF HOLLYWOOD PARK OPERATING COMPANY -------------------------------- ARTICLE I --------- The name of the Corporation is: Hollywood Park Operating Company. ARTICLE II ---------- The address of its registered office in the State of Delaware is 100 West Tenth Street, Wilmington, County of New Castle. The name of its registered agent is The Corporation Trust Company. ARTICLE III ----------- The nature of the business to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV ---------- The amount of the total authorized capital stock of the corporation is 10,000 shares which are divided into two classes as follows: 2,500 shares of Preferred Stock having a par value of $1.00 per share; and 7,500 shares of Common Stock having a par value of $0.10 per share. The designations, voting powers, preferences and relative participating, optional or other special rights, and qualifications, limitations or restrictions of the above classes of stock are as follows: A. Preferred Stock --------------- The Board of Directors is expressly authorized, from time to time, (1) to fix the number of shares of one or more series of Preferred Stock; (2) to determine the designation of any such series; (3) to determine or alter, without limitation or restriction, the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock; and (4) within the limits or restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, to increase or decrease (but not below the number of shares then outstanding) the number of shares of any such series subsequent to the issue of shares of that series. B. Common Stock. ------------ (i) Subject to the preferential rights of the Preferred Stock, the holders of the Common Stock shall be entitled to receive, to the extent permitted by law, such dividends as may be declared from time to time by the Board of Directors. (ii) In the event of the voluntary or involuntary liquidation, dissolution, distribution of assets or winding up of the corporation, after distribution in full of the preferential amount to be distributed to the holders of shares of the Preferred Stock, holders of the Common Stock shall be entitled to receive all the remaining assets of the corporation of whatever kind available for distribution to stockholders, ratably in proportion to the number of shares of Common Stock held by them respectively. A consolidation, merger or reorganization of the corporation with any other corporation or corporations, or a sale of all or substantially all of the assets of the corporation, shall not be considered a dissolution, liquidation or winding up of the corporation within the meaning of these provisions. (iii) Except as may be otherwise required by law, each share of Common Stock shall entitle the holder to one vote in respect of each matter voted by the stockholders. ARTICLE V --------- Any and all right, title, interest and claim in or to any dividends declared by the corporation, whether in cash, stock, or otherwise, which are unclaimed by the stockholder entitled thereto for a period of six years after the close of business on the payment date, shall be and is deemed to be extinguished and abandoned; and such unclaimed dividends in the possession of the corporation, its transfer agents or other agents or depositories shall at such time become the absolute property of the corporation, free and clear of any and all claims of any persons whatsoever. ARTICLE VI ---------- In furtherance and not in limitation of the power conferred by statute, the Board of Directors is expressly authorized to make, alter, mend or repeal the by-laws of the corporation. ARTICLE VII ----------- Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and/or between this corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three- fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this corporation, as the case may be, and also on this corporation. ARTICLE VIII ------------ The corporation shall indemnify its officers and directors to the full extent permitted by the Delaware General Corporation Law. ARTICLE IX ---------- Elections of directors need not be by written ballot unless the by-laws of the corporation so provide. ARTICLE X --------- The corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. ARTICLE XI ---------- The name and mailing address of the incorporator is as follows: NAME MAILING ADDRESS ---- --------------- Candace K. Fullmer Suite 4100# 55 E. Monroe St. Chicago, Illinois 60603 ARTICLE XII ----------- The affirmative vote or written consent of the holders of 70% of all outstanding shares of all classes of stock of the Corporation entitled to vote thereon, considered for the purposes of this Article TWELFTH as one class, shall be required: (a) for the adoption of any agreement for the merger of the Corporation with or into any other corporation or for the consolidation of the Corporation with any other corporation; (b) to authorize any sale, lease, transfer or exchange of all or substantially all of the assets of the Corporation to any other person (as hereinafter defined); (c) to authorize the dissolution of the Corporation; (d) to alter, amend or repeal this Article TWELFTH. For the purposes of this Article TWELFTH, the term person shall mean any corporation, partnership, association, or any other business entity, trust, estate or individual. This Article TWELFTH shall not apply to a merger if no vote of stockholders of the Corporation is necessary under Delaware law to authorize it. IN WITNESS WHEREOF, I have signed this Certificate of Incorporation this 23rd day of October, 1981. /s/ Candace K. Fullmer ______________________________ Candace K. Fullmer State of Delaware Office of the Secretary of State ______________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "HOLLYWOOD PARK OPERATING COMPANY", FILED IN THIS OFFICE ON THE TWELFTH DAY OF APRIL, A.D. 1982, AT 10 O'CLOCK A.M. /s/ Edward J. Freel ___________________________________ Edward J. Freel, Secretary of State AUTHENTICATION: DATE: CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF HOLLYWOOD PARK OPERATING COMPANY -------------------------------- Hollywood Park Operating Company, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: FIRST: That the Board of Directors of said corporation, by the unanimous written consent of its members, filed with the minutes of the Board, adopted resolutions proposing the following amendment to the Certificate of Incorporation of said Corporation: RESOLVED, that the first sentence of Article IV of the Certificate of Incorporation of the Corporation be amended to be and read as follows: "The amount of the total authorized capital stock of the corporation is 4,750,000 shares which are divided into two classes as follows: 250,000 shares of Preferred Stock having a par value of $1.00 per share; and 4,500,000 shares of Common Stock having a par value of $0.10 per share." FURTHER RESOLVED, that the aforesaid proposed amendment shall be submitted for the approval of the holders of a majority of the outstanding shares of capital stock of the Corporation, and, following such approval, that the proper officers are hereby authorized and directed to execute and file such documents and to take such other actions as they deem necessary or appropriate to effectuate said amendment. SECOND: That in lieu of a meeting and vote of stockholders, the stockholders have given unanimous written consent to said amendment In accordance with the provisions of Section 228 of the General Corporation Law of the State of Delaware. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Sections 228 and 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, said Hollywood Park Operating Company has caused this certificate to be signed by its Chairman and attested by its Secretary this 8th day of April, 1982. /s/ Vernon O. Underwood ______________________________ VERNON O. UNDERWOOD Attest: /s/ James E. Kenney _________________________ JAMES E. KENNEY State of Delaware Office of the Secretary of State ______________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "HOLLYWOOD PARK OPERATING COMPANY", FILED IN THIS OFFICE ON THE NINTH DAY OF DECEMBER, A.D. 1985, AT 9 O'CLOCK A.M. /s/ Edward J. Freel ____________________________________ Edward J. Freel, Secretary of State AUTHENTICATION: DATE: CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF HOLLYWOOD PARK OPERATING COMPANY -------------------------------- Marjorie L. Everett and James E. Kenney certify that: 1. They are the Chairman of the Board and Secretary, respectively, of Hollywood Park Operating Company, a Delaware corporation. 2. The first sentence of Article IV of the Certificate of Incorporation of this Corporation is amended to read as follows: "The amount of the total authorized capital stock of the corporation is 10,250,000 shares, which are divided into two classes as follows: 250,000 shares of Preferred Stock having a par value of $1.00 per share; and 10,000,000 shares of Common Stock having a par value of $0.10 per share." 3. The foregoing amendment of the Certificate of Incorporation has been duly approved by the board of directors. 4. The foregoing amendment of the Certificate of Incorporation has been duly approved by the required vote of shareholders in accordance with Section 242 of the General Corporation Law of the State of Delaware. The total number of outstanding shares of the corporation is 3,834,382. The number of shares voting in favor of the amendment was 2,625,977. The vote required was a majority of the outstanding stock entitled to vote thereon. We declare under penalty of perjury that the matters stated in this certificate are true and correct of our own knowledge and that this Certificate is signed on behalf of Hollywood Park Operating Company this 26th day of August, 1985. /s/ Marjorie L. Everett ______________________________ MARJORIE L. EVERETT Chairman of the Board /s/ James E. Kenney ______________________________ JAMES E. KENNEY Secretary State of Delaware Office of the Secretary of State ______________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF RENEWAL OF "HOLLYWOOD PARK OPERATING COMPANY", FILED IN THIS OFFICE ON THE EIGHTH DAY OF SEPTEMBER, A.D. 1986, AT 10 O'CLOCK A.M. /s/ Edward J. Freel ____________________________________ Edward J. Freel, Secretary of State AUTHENTICATION: DATE: CERTIFICATE FOR RENEWAL AND REVIVAL OF CERTIFICATE OF INCORPORATION Hollywood Park Operating Company, a corporation organized under the laws of Delaware, The Certificate of Incorporation of which was filed in the office of the Secretary of State on the 26th day of October, 1981, the Certificate of Incorporation of which was voided for non-payment of taxes, now desires to procure a restoration, renewal and revival of its Certificate of Incorporation, and hereby certifies as follows: 1. The name of this corporation is Hollywood Park Operating Company. 2. Its registered office in the State of Delaware is located at Corporation Trust Center, 1209 Orange Street, City of Wilmington, County of New Castle and the name of its registered agent at such address is The Corporation Trust Company. 3. The date when the restoration, renewal, and revival of the Certificate of Incorporation of this company is to commence is the 28th day of February A.D. 1986, same being prior to the date of the expiration of the Certificate of Incorporation. This renewal and revival of the Certificate of Incorporation of this corporation is to be perpetual. 4. This corporation was duly organized under the Laws of the State of Delaware and carried on the business authorized by its Certificate of Incorporation until the 1st day of March A.D. 1986, at which time its Certificate of Incorporation became inoperative and void for non-payment of taxes and this certificate for renewal and revival is filed by authority of the duly elected directors of the corporation is accordance with the laws of the State of Delaware. IN WITNESS WHEREOF, said Hollywood Park Operating Company in compliance with Section 312 of Title 8 of the Delaware Code has caused this certificate to be signed by __________________ its last and acting _______________ President, and attested by ____________________ its last and acting _____________________ Secretary, this 9th. day of July, 1986. Hollywood Park Operating Company By /s/ Marjorie L. Everett ______________________________ Marjorie L. Everett Last and Acting President ATTEST: By /s/ James E. Kenney _________________________ James E. Kenney Last and Acting Secretary State of Delaware Office of the Secretary of State ______________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT OF "HOLLYWOOD PARK OPERATING COMPANY", FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY OF OCTOBER, A.D. 1987, AT 10:35 O'CLOCK A.M. /s/ Edward J. Freel ____________________________________ Edward J. Freel, Secretary of State AUTHENTICATION: DATE: THIRD CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF HOLLYWOOD PARK OPERATING COMPANY -------------------------------- Marjorie L. Everett and Warren B. Williamson certify that: 1. They are the Chairman of the Board and Secretary, respectively, of Hollywood Park Operating Company, a Delaware corporation. 2. The Certificate of Incorporation of this Corporation is amended to add a new Article XIII as follows: "ARTICLE XIII No director of the Company shall be personally liable to the Company or its shareholders for monetary damages for breach of fiduciary duty by such director for corporate actions as a director; provided, however, that this Article XIII shall not eliminate or limit the liability of a director to the extent provided by applicable law (1) for any breach of the director's duty of loyalty to the Company or its shareholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (3) under Section 174 of the General Corporation Law of Delaware, or (4) for any transaction from which the director derived an improper personal benefit. No amendment to repeal this Article XIII shall apply to, or have any effect on, the liability or alleged liability of any director of the Company for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal." 3. The foregoing amendment of the Certificate of Incorporation has been duly approved by the board of directors. 4. The foregoing amendment of the Certificate of Incorporation has been duly approved by the required vote of its shareholders in accordance with Section 242 of the General Corporation Law of the State of Delaware. The total number of outstanding shares of the corporation is 3,824,383. The number of shares voting in favor of the amendment was 2,417,504. The vote required was a majority of the outstanding stock entitled to vote thereon. We declare under penalty of perjury of the laws of the State of California that the matters stated in this Certificate are true and correct of our own knowledge and that this Certificate is signed on behalf of Hollywood Park Operating Company this 2nd day of September, 1987. /s/ Marjorie L. Everett ______________________________ MARJORIE L. EVERETT Chairman of the Board /s/ Warren B. Williamson ______________________________ WARREN B. WILLIAMSON Secretary State of Delaware Office of the Secretary of State ______________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF DESIGNATION OF "HOLLYWOOD PARK OPERATING COMPANY", FILED IN THIS OFFICE ON THE TWENTIETH DAY OF APRIL, A.D. 1988, AT 9 O'CLOCK A.M. /s/ Edward J. Freel ____________________________________ Edward J. Freel, Secretary of State AUTHENTICATION: DATE: FORM OF CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF SERIES A PREFERRED STOCK OF HOLLYWOOD PARK OPERATING COMPANY Pursuant to Section 151 of the General Corporation Law of the State of Delaware We, Marjorie L. Everett, Chairman of the Board, and Donald Robbins, Assistant Secretary, of Hollywood Park Operating Company, a corporation organized and existing under the General Corporation Law of the State of Delaware, in accordance with the provisions of Section 103 thereof, DO HEREBY CERTIFY: That pursuant to the authority conferred upon the Board of Directors by the Certificate of Incorporation of the said Corporation, as amended, the said Board of Directors on April 13, 1988, adopted the following resolution creating a series of 50,000 shares of Preferred Stock designated as Series A Junior Participating Preferred Stock: RESOLVED, that pursuant to the authority vested in the Board of Directors of this Corporation in accordance with the provisions of its Certificate of Incorporation, a series of Preferred Stock of the Corporation be and it hereby is created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: Section 1. Resignation and Amount. The shares of such series shall be ---------------------- designated as "Series A Junior Participating Preferred Stock", par value $1.00 per share, and the number of shares constituting such series shall be 50,000. Section 2. Dividends and Distributions. --------------------------- (A) Subject to the prior and superior rights of the holders of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividers, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for that purpose, quarterly dividends payable in cash on the first day of March, June, September and December in each year (each such date being referred to herein as a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $5.00 or (b) subject to the provision for adjustment hereinafter set forth, 100 times the aggregate per share amount of all cash dividends, and 100 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock (as hereinafter defined) since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after April 13, 1988 (the "Rights Declaration Date") (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in paragraph (A) above immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $5.00 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. (C) Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share- by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. Section 3. Voting Rights. The holders of shares of Series A Junior ------------- Participating Preferred Stock shall have the following voting rights: (A) Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 100 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. (B) Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. (C) (i) If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (herein called a "default period") which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each default period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) Directors. (ii) During any default period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to subparagraph (iii) of this Section 3(C) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of Directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing default period, they shall have the right, voting as a class, to elect Directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) Directors or, if such right is exercised at an annual meeting, to elect two (2) Directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of Directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect Directors in any default period and during the continuance of such period, the number of Directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior ---- ----- Participating Preferred Stock. (iii) Unless the holders of Preferred Stock shall, during an existing default period, have previously exercised their right to elect Directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this paragraph (C) (iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this paragraph (C) (iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. (iv) In any default period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of Directors until the holders of Preferred Stock shall have exercised their right to elect two (2) Directors voting as a class, after the exercise of which right (x) the Directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the default period and (y) any vacancy in the Board of Directors may (except as provided in paragraph (C) (ii) of this Section 3) be filled by vote of a majority of the remaining Directors theretofore elected by the holders of the class of stock which elected the Director whose office shall have become vacant. References in this paragraph (C) to Directors elected by the holders of a particular class of stock shall include Directors elected by such Directors to fill vacancies as provided in clause (y) of the foregoing sentence. (v) Immediately upon the expiration of a default period, (x) the right of the holders of Preferred Stock as a class to elect Directors shall cease, (y) the term of any Directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of Directors shall be such number as may be provided for in the Certificate of Incorporation or By-Laws irrespective of any increase made pursuant to the provisions of paragraph (C) (ii) of this Section 3 (such number being subject, however, to change thereafter in any manner provided by law or in the Certificate of Incorporation or By-Laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining Directors. (D) Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. Section 4. Certain Restrictions. -------------------- (A) Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not (i) declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; (ii) declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; (iii) redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either an to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; (iv) purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. (B) The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under paragraph (A) of this Section 4, purchase or otherwise acquire such shares at such time and in such manner. Section 5. Reacquired Shares. Any shares of Series A Junior ----------------- Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any -------------------------------------- liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received $5.00 per share, plus an amount equal to all accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the "Series A Liquidation Preference"). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the "Common Adjustment") equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 100 (as appropriately adjusted as set forth in subparagraph C below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the "Adjustment Number"). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. (B) In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. (C) In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock that were outstanding after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 7. Consolidation, Merger, etc. In case the Corporation shall -------------------------- enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provisions for adjustment hereinafter set forth) equal to 100 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, or (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. Section 8. No Redemption. The shares of Series A Junior Participating ------------- Preferred Stock shall not be redeemable. Section 9. Banking. The Series A Junior Participating Preferred Stock ------- shall rank junior to all other series of the Corporation's Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. Section 10. Amendment. The Certificate of Incorporation of the --------- Corporation shall not be further amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect then adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. Section 11. Fractional Shares. Series A Junior Participating Preferred ----------------- Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holders fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. Section 12. Definition of Common Stock. As used herein "Common Stock" -------------------------- shall mean the paired shares of Common Stock, par value $.10 per share, of this Corporation and Hollywood Park Realty Enterprises, Inc. IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do affirm the foregoing as true under the penalties of perjury this 13th day of April, 1988. /s/ Marjorie L. Everett ______________________________ Chairman of the Board Attest: /s/ Donald M. Robbins ______________________________ Assistant Secretary State of Delaware Office of the Secretary of State ______________________________ I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF MERGER, WHICH MERGES: "HP SUB, INC.", A DELAWARE CORPORATION, WITH AND INTO "HOLLYWOOD PARK OPERATING COMPANY" UNDER THE NAME OF "HOLLYWOOD PARK OPERATING COMPANY", A CORPORATION ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE, AS RECEIVED AND FILED IN THIS OFFICE THE SECOND DAY OF JANUARY, A.D. 1992, AT 8:30 O'CLOCK A.M. /s/ Edward J. Freel ____________________________________ Edward J. Freel, Secretary of State AUTHENTICATION: DATE: STATE OF DELAWARE SECRETARY OF STATE DIVISION OF CORPORATIONS FILED 08:30 AM 01/02/1992 920025067 - 925079 CERTIFICATE OF MERGER MERGING HP SUB, INC. WITH AND INTO HOLLYWOOD PARK OPERATING COMPANY Hollywood Park Operating Company, a corporation organized and existing under and by virtue of the Delaware General Corporation Law, does hereby certify that: 1. The name and state of incorporation of each of the constituent corporations in the merger is as follows: Name State of Incorporation ---- ---------------------- Hollywood Park Operating Delaware Company HP Sub, Inc. Delaware 2. An Agreement of Merger dated as of August 5, 1991, between the parties to the merger has been approved, adopted, certified, executed and acknowledged by each of the constituent corporations in accordance with Section 251 of the Delaware General Corporation Law. 3. The name of the surviving corporation in the merger will be Hollywood Park Operating Company. 4. The Certificate of Incorporation of the surviving corporation is amended in the merger to read in its entirety as set forth in Exhibit A attached hereto. 5. The executed Agreement of Merger is on file at the principal place of business of the surviving corporation, which is 1050 South Prairie Avenue, Inglewood, California 90301. 6. A copy of the Agreement of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation. IN WITNESS WHEREOF, HOLLYWOOD PARK OPERATING COMPANY has caused this Certificate of Merger to be duly executed by its Vice Chairman and attested to by its Assistant Secretary this 26th day of December, 1991. HOLLYWOOD PARK OPERATING COMPANY By: /s/ Harry Ornest ____________________________ Harry Ornest Vice Chairman ATTEST: /s/ Donald M. Robbins _________________________ Donald M. Robbins Assistant Secretary EXHIBIT A --------- CERTIFICATE OF INCORPORATION OF HOLLYWOOD PARK OPERATING COMPANY ONE: The name of this corporation is: Hollywood Park --- Operating Company. TWO: The address of its registered office in the State of Delaware is --- Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. THREE: The nature of the business or purposes to be conducted or promoted ----- is to engage in any lawful act or activity for which corporations may be organized under the Delaware General corporation Law ("DGCL"). FOUR: This corporation is authorized to issue one class of stock which ---- will be designated Common Stock; the total number of shares which the corporation shall have authority to issue is One Hundred (100), and the par value of each of such shares is one cent ($.01). FIVE: The following provisions are inserted for the management of the ---- business and the conduct of the affairs of the corporation, and for further definition, limitation and regulation of the powers of the corporation and of its directors and stockholders: A. The business and affairs of the corporation shall be managed by or under the direction of the Board of Directors. In addition to the powers and authority expressly conferred upon them by the DGCL or by this Certificate of Incorporation or the Bylaws of the corporation, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the corporation. B. The Board of Directors may adopt, amend or repeal the Bylaws of this corporation. C. Election of directors need not be by written ballot. SIX: The officers of the corporation shall be chosen in such a manner, --- shall hold their offices for such terms and shall carry out such duties as are determined solely by the Board of Directors, subject to the right of the Board of Directors to remove any officer or officers at any time with or without cause. SEVEN: No director of the corporation shall be personally liable to the ----- corporation or its stockholders for monetary damages for any breach of fiduciary duty by such a director as a director. Notwithstanding the foregoing sentence, a director shall be liable to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the DGCL or (iv) for any transaction from which such director derived an improper personal benefit. No amendment to or repeal of this Article SEVEN shall apply to or have any effect on the liability or alleged liability of any director of the corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. If the DGCL is amended hereafter to further eliminate or limit the personal liability of directors, the liability of a director of this corporation shall be limited or eliminated to the fullest extent permitted by the DGCL, as amended. EIGHT: A. Right to Indemnification. Each person who was or is made a ----- ------------------------ party to or is threatened to be made a party to or is involuntarily involved in any action, suit of proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he or she is or was a director or officer of the corporation, or is or was serving (during his or her tenure as director and/or officer) at the request of the corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, whether the basis of such Proceeding is an alleged action or inaction in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the corporation to the fullest extent authorized by the DGCL (or other applicable law), as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection with such Proceeding. Such director or officer shall have the right to be paid by the corporation for expenses incurred in defending any such Proceeding in advance of its final disposition; provided, however, that, if the DGCL (or other applicable law) requires, the payment of such expenses in advance of the final disposition of any such Proceeding shall be made only upon receipt by the corporation of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it should be determined ultimately that he or she is not entitled to be indemnified under this Article EIGHT or otherwise. B. Right of Claimant to Bring Suit. If a claim under paragraph A of ------------------------------- this Article EIGHT is not paid in full by the corporation within ninety (90) days after a written claim has been received by the corporation, the claimant may at any time thereafter bring suit against the corporation to recover the unpaid amount of the claim, together with interest thereon, and, if successful in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim, including reasonable attorneys' fees incurred in connection therewith. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL (or other applicable law) for the corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the corporation. Neither the failure of the corporation (or of its full Board of Directors, its directors who are not parties to the Proceeding with respect to which indemnification is claimed, its stockholders, or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the DGCL (or other applicable law), nor an actual determination by any such person or persons that such claimant has not met such applicable standard of conduct, shall be a defense to such action or create a presumption that the claimant has not met the applicable standard of conduct. C. Non-Exclusivity of Rights. The rights conferred by this Article ------------------------- EIGHT shall not be exclusive of any other right which any director, officer, representative, employee or other agent may have or hereafter acquire under the DGCL or any other statute, or any provision contained in the corporation's Certificate of Incorporation or Bylaws, or any agreement, or pursuant to a vote of stockholders or disinterested directors, or otherwise. D. Insurance and Trust Fund. In furtherance and not in limitation ------------------------ of the powers conferred by statute: (1) the corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under the provisions of law; and (2) the corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing indemnification to the fullest extent permitted by law and including as part thereof provisions with respect to any or all of the foregoing, to ensure the payment of such amount as may become necessary to effect indemnification as provided therein, or elsewhere. E. Indemnification of Employees and Agents of the Corporation. The ---------------------------------------------------------- corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, including the right to be paid by the corporation the expenses incurred in defending any Proceeding in advance of its final disposition, to any employee or agent of the corporation to the fullest extent of the provisions of this Section or otherwise with respect to the indemnification and advancement of expenses of directors and officers of the corporation. F. Effect of Repeal or Modification. Any repeal or modification of -------------------------------- this Article EIGHT shall not change the rights of an officer or director to indemnification with respect to any action or omission occurring prior to such repeal or modification. NINE: The corporation reserves the right to repeal, alter, amend, or ---- rescind any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation. TEN: The name and mailing address of the sole incorporator is as follows: --- Ashok Mukhey Irell & Manella 1800 Avenue of the Stars Suite 900 Los Angeles, California 90067 EX-3.4 3 AMENDED BY-LAWS OF HOLLYWOOD PARK OPERATING CO. EXHIBIT 3.4 AMENDED BYLAWS OF HOLLYWOOD PARK OPERATING COMPANY AS OF AUGUST 10, 1992 TABLE OF CONTENTS -----------------
Page ---- ARTICLE I. OFFICES.................................... 1 Section 1.1 The Registered Office and Principal Executive Office............. 1 Section 1.2 Other Offices.......................... 1 ARTICLE II. MEETINGS OF STOCKHOLDERS................... 1 Section 2.1 Annual Meetings........................ 1 Section 2.2 Special Meetings....................... 1 Section 2.3 Notice of Special Meeting.............. 1 Section 2.4 Place of Meeting....................... 2 Section 2.5 Notice of Annual Meetings.............. 2 Section 2.6 Voting Lists........................... 2 Section 2.7 Persons Entitled to Vote............... 2 Section 2.8 Record Date............................ 2 Section 2.9 Quorum and Adjournments................ 3 Section 2.10 Order of Business...................... 3 Section 2.11 Voting Rights.......................... 3 Section 2.12 Action by Written Consent.............. 3 ARTICLE III. BOARD OF DIRECTORS......................... 4 Section 3.1 General Powers......................... 4 Section 3.2 Number, Classification, Qualification and Term of Office....... 4 Section 3.3 Election of Directors.................. 4 Section 3.4 Resignations........................... 4 Section 3.5 Vacancies, etc......................... 4 ARTICLE IV. MEETINGS OF THE BOARD OF DIRECTORS......... 5 Section 4.1 Place of Meetings...................... 5 Section 4.2 Regular Meetings....................... 5 Section 4.3 Special Meetings....................... 5 Section 4.4 Quorum................................. 5 Section 4.5 Informal Action; Telephonic Participation.......................... 5 Section 4.6 Compensation........................... 6 Section 4.7 Director Emeritus...................... 6 Section 4.8 Right to Indemnification............... 6 Section 4.9 Right of Claimant to Bring Suit........ 7 Section 4.10 Non-Exclusivity of Rights.............. 7 Section 4.11 Insurance and Trust Fund............... 7 Section 4.12 Indemnification of Employees and Agents of the Corporation.......... 8 Section 4.13 Amendment.............................. 8
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Page ---- ARTICLE V. COMMITTEES OF DIRECTORS.................... 8 Section 5.1 Appointment and Powers................. 8 Section 5.2 Standing Audit Committee............... 9 Section 5.3 Standing Executive Committee........... 9 Section 5.4 Committee Minutes...................... 9 ARTICLE VI. OFFICERS................................... 9 Section 6.1 Number and Qualifications.............. 9 Section 6.2 Election and Term of Office............ 10 Section 6.3 Other Officers and Agents.............. 10 Section 6.4 Removal................................ 10 Section 6.5 Resignations........................... 10 Section 6.6 Chairman of the Board.................. 10 Section 6.7 President.............................. 11 Section 6.8 Chief Operating Officer................ 11 Section 6.9 Treasurer.............................. 12 Section 6.10 Assistant Treasurer.................... 12 Section 6.11 Secretary.............................. 12 Section 6.12 Assistant Secretary.................... 12 Section 6.13 Controller............................. 13 Section 6.14 Salaries............................... 13 ARTICLE VII. STOCK...................................... 13 Section 7.1 Certificate of Shares.................. 13 Section 7.2 Transfer of Stock...................... 13 Section 7.3 Lost, Stolen, Destroyed or Mutilated Certificates................. 13 Section 7.4 Registered Stockholders................ 14 Section 7.5 Regulations............................ 14 ARTICLE VIII. CORPORATE RECORDS -- INSPECTION........... 14 Section 8.1 Records................................ 14 Section 8.2 Inspection of Books and Records........ 14 ARTICLE IX. AMENDMENTS................................. 15 Section 9.1 Amendments............................. 15 Section 9.2 Recordation............................ 15 ARTICLE X. CORPORATE SEAL............................. 15
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Page ---- ARTICLE XI. CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC.............................. 15 Section 11.1 Execution of Contracts, etc............ 15 Section 11.2 Loans.................................. 15 Section 11.3 Checks................................. 16 Section 11.4 Fiscal Year............................ 16 Section 11.5 Stock in Other Corporations............ 16 Section 11.6 Bank Accounts and Deposits............. 16 ARTICLE XII. THE TURF CLUB.............................. 16
-iii- AMENDED BYLAWS OF HOLLYWOOD PARK OPERATING COMPANY (the "Corporation") As of August 10, 1992 ARTICLE I --------- OFFICES ------- SECTION 1.1 The Registered Office and Principal Executive Office. The ---------------------------------------------------- registered office of the Corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle, and the registered agent of the Corporation in said State shall be The Corporation Trust Company. The principal executive office of the Corporation shall be located at 1050 South Prairie Avenue, Inglewood, California, or at such other place within or without the State of California as may be fixed by the Board of Directors. SECTION 1.2 Other Offices. The Corporation may also maintain an office or ------------- offices at such other place or places as the Board of Directors may from time to time appoint. ARTICLE II ---------- MEETINGS OF SHAREHOLDERS ------------------------ SECTION 2.1 Annual Meetings. The annual meeting of stockholders of the --------------- Corporation shall be held on such date and at such time as may be designated from time to time by the Board of Directors. At the annual meeting directors shall be elected and any other business may be transacted which is within the power of the stockholders and allowed by law. SECTION 2.2 Special Meeting. Special meetings of the stockholders, for --------------- any purpose or purposes, unless otherwise prescribed by statute, may be called by the Chairman of the Board or the President and shall be called by the Secretary at the request in writing of a majority of the Board of Directors or by the holders of a majority of shares entitled to vote at the meeting. Such request shall state the purpose or purposes of the proposed meeting. SECTION 2.3 Notice of Special Meeting. Upon receipt of a request for a ------------------------- special meeting of stockholders in writing from a person or persons entitled to call any such meeting, the officer receiving such notice forthwith shall cause written notice to be given to the stockholders entitled to vote at such meeting, that a meeting will be held at the time requested by the person or persons requesting a meeting, which date shall be not less than thirty-five (35) nor more than sixty (60) days after the receipt by such officer of the request. Business conducted at any special meeting of stockholders shall be limited to the purposes stated in the notice. SECTION 2.4 Place of Meeting. All meetings of stockholders shall be held ---------------- at such places, within or without the State of Delaware, as may from time to time be designated in the respective notices or waivers or notice thereof. SECTION 2.5 Notice of Annual Meetings. The Secretary or Assistant ------------------------- Secretary shall give written or printed notice of the annual meeting stating the place, date and hour of the meeting to each stockholder entitled to vote at such meeting not less than ten (10) nor more than sixty (60) days before the date of the meeting. SECTION 2.6 Voting Lists. The officer who has charge of the stock ledger ------------ of the corporation shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or if not so specified at the place where the meeting is to be held. The list shall also be produced and maintained at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder. SECTION 2.7 Persons Entitled to Vote. Except as otherwise provided by ------------------------ law, and except when a record date has been fixed, only persons in whose names shares entitled to vote stand on the stock records of the Corporation at the close of business on the business day next preceding the day on which notice is given, shall be entitled to notice of a stockholders' meeting, or to vote at such meeting. SECTION 2.8 Record Date. The Board of Directors may fix a time in the ----------- future as a record date for the determination of the stockholders entitled to notice of, and to vote at, any meeting of shareholders or entitled to receive any dividend or distribution, or to any change, conversion, or exchange of shares. The record date so fixed shall be not more than sixty (60) days nor less than ten (10) days prior to the date of the meeting or event for the purposes for which it is fixed. When a record date is so fixed, only stockholders of record on that date are entitled to notice of and to vote at the meeting or to receive the dividend, distribution, or allotment of rights, or to exercise the rights, as the case may be, notwithstanding -2- any transfer of any shares on the books of the Corporation after the record date. In the event any meeting of stockholders is adjourned for more than forty-five (45) days, the Board shall fix a new record date for purposes of giving notice of, and determining the holders of shares entitled to vote at, such adjourned meeting. SECTION 2.9 Quorum and Adjournments. The holders of a majority of the ----------------------- shares issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Except as otherwise provided by statute or in the Certificate of Incorporation of the Corporation, the affirmative vote of a majority of the shares represented at a meeting at which a quorum is present, shall be the act of the stockholders. SECTION 2.10 Order of Business. The order of business at each meeting of ----------------- the stockholders shall be determined by the Chairman of the Board as the chairman of the meeting, but such order of business may be changed by the vote of a majority in voting interest of those present in person or by proxy at such meeting and entitled to vote thereat. SECTION 2.11 Voting Rights. Each stockholder will at every meeting of the ------------- stockholders be entitled to one vote in person or by proxy for each share of the capital stock having voting power held by such stockholder, but no proxy shall be voted after eleven (11) months from its date, unless the proxy document provides for a longer period. SECTION 2.12 Action by Written Consent. Unless otherwise provided in the ------------------------- Certificate of Incorporation, any action which is required to be or may be taken at any annual or special meeting of stockholders of the Corporation may be taken without a meeting, without prior notice to stockholders and without a vote if consents in writing, setting forth the action so taken, shall have been signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or to take such action at a meeting at which all shares entitled to vote thereon were present and voted. -3- ARTICLE III ----------- BOARD OF DIRECTORS ------------------ SECTION 3.1 General Powers. The property, business and affairs of the -------------- Corporation shall be managed by or under the direction of the Board. SECTION 3.2 Number, Classification, Qualification and Term of Office. The -------------------------------------------------------- Board of Directors shall consist of one (1) or more members. The exact number of directors shall be fixed and may be changed from time to time by a resolution duly adopted by the Board of Directors or the stockholders, except as otherwise provided by law or the Certificate of Incorporation. The directors shall be elected for a term expiring at the next annual meeting or thereafter when their successors are elected and qualified. SECTION 3.3 Election of Directors. At each meeting of the stockholders --------------------- for the purpose of election of directors at which a quorum is present, the persons, up to the number of directors to be elected thereat receiving the greatest number of votes shall be the directors. If demanded by a stockholder of the Corporation present in person or by proxy at such meeting and entitled to vote thereat or so directed by the chairman of such meeting, such election shall be by ballot. Unless an election by ballot shall be so demanded or directed, the election may be conducted in any manner approved at such meeting. SECTION 3.4 Resignations. Any director may resign at any time by giving ------------ written notice of his resignation to the Chairman of the Board or the Secretary. Any such resignation shall take effect at the time specified therein, or if the time when it shall become effective shall not be specified therein, then it shall take effect immediately upon its receipt by such Chairman of the Board or Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 3.5 Vacancies, etc. Vacancies and newly increased directorships --------------- resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director and the directors so chosen shall hold office until the next election of directors, and until their successors shall be elected and qualified. If there are no directors in office, then an election of directors may be held in the manner provided by statute. -4- ARTICLE IV ---------- MEETINGS OF THE BOARD OF DIRECTORS ---------------------------------- SECTION 4.1 Place of Meetings. The Board of Directors of the Corporation ----------------- may hold meetings, both regular and special, either within or without the States of Delaware and California. SECTION 4.2 Regular Meetings. A regular meeting of the Board of Directors ---------------- shall be held without other notice than this bylaw, immediately after, and at the same place, as the annual meeting of stockholders at which time the Board shall elect its officers. The Board of Directors may provide, by resolution, the time and place, within or without the States of Delaware and California for the holding of additional regular meetings without other notice than such resolution. SECTION 4.3 Special Meetings. Special meetings of the Board may be called ---------------- by the Chairman of the Board or by the President upon forty-eight (48) hours' written notice by mail before the date of the meeting or twenty-four (24) hours' notice delivered personally or by telephone, telegram, or telecopy to each director, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of the majority of the directors then in office. SECTION 4.4 Quorum. At all meetings of the Board, a majority of directors ------ shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. SECTION 4.5 Informal Action; Telephonic Participation. Unless otherwise ----------------------------------------- restricted by the Certificate of Incorporation or these by-laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board or of any such committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board or committee. Any director may participate in a meeting of the Board or of any committee thereof by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and, participation in a meeting by such means shall constitute presence in person at such meeting. -5- SECTION 4.6 Compensation. The Board of Directors shall have the authority ------------ to fix the compensation of directors. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as a director. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like compensation for attending committee meetings if approved by a resolution adopted by a majority of the members of the Board of Directors. SECTION 4.7 Director Emeritus. The Board of Directors, by a majority-vote ----------------- may designate any person who has served as a director of the Corporation as Director Emeritus, upon resignation or other retirement or termination of any such director's tenure of office. The Director Emeritus shall not, however, be entitled to attend any meetings of the Board of Directors or of any committee thereof without special invitation nor shall such Director Emeritus have any vote or voice in management other than merely as a stockholder, if he be such a stockholder. SECTION 4.8 Right to Indemnification. Each person who was or is made a ------------------------ party to or is threatened to be made a party to or is involuntarily involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he or she is or was a director or officer of the Corporation, or is or was serving (during his or her tenure as director and/or officer) at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, whether the basis of such Proceeding is an alleged action or inaction in an official capacity as a director or officer or in any other capacity while serving as a director or officer, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law ("DGCL") (or other applicable law), as the same exists or may hereafter be amended, against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection with such Proceeding. Such director or officer shall have the right to be paid by the Corporation for expenses incurred in defending any such Proceeding in advance of its final disposition; provided, however, that, if the DGCL (or other applicable law) requires, the payment of such expenses in advance of the final disposition of any such Proceeding shall be made only upon receipt by the Corporation of an undertaking by or on behalf of such director or officer to repay all amounts so advanced if it should be determined -6- ultimately that he or she is not entitled to be indemnified under this Section 4.8 or otherwise. SECTION 4.9 Right of Claimant to Bring Suit. If a claim under this ------------------------------- Article is not paid in full by the Corporation within ninety (90) days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim, together with interest thereon, and, if successful in whole or in part, the claimant shall also be entitled to be paid the expense of prosecuting such claim, including reasonable attorneys' fees incurred in connection therewith. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any Proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the DGCL (or other applicable law) for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (or of its full Board of Directors, its directors who are not parties to the Proceeding with respect to which indemnification is claimed, its stockholders, or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable stand ard of conduct set forth in the DGCL (or other applicable law), nor an actual determination by any such person or persons that such claimant has not met such applicable standard of conduct, shall be a defense to such action or create a presumption that the claimant has not met the applicable standard of conduct. SECTION 4.10 Non-Exclusivity of Rights. The rights conferred by this ------------------------- Article shall not be exclusive of any other right which any director, officer, representative, employee or other agent may have or hereafter acquire under the DGCL or any other statute, or any provision contained in the Corporation's Certificate of Incorporation or Bylaws, or any agreement, or pursuant to a vote of stockholders or disinterested directors, or otherwise. SECTION 4.11 Insurance and Trust Fund. In furtherance and not in ------------------------ limitation of the powers conferred by statute: (1) the Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against any liability asserted against him and incurred by him in any such capacity, -7- or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of law; and (2) the Corporation may create a trust fund, grant a security interest and/or use other means (including, without limitation, letters of credit, surety bonds and/or other similar arrangements), as well as enter into contracts providing indemnification to the fullest extent permitted by law and including as part thereof provisions with respect to any or all of the foregoing, to ensure the payment of such amount as may become necessary to effect indemnification as provided therein, or elsewhere. SECTION 4.12 Indemnification of Employees and Agents of the Corporation. ---------------------------------------------------------- The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, including the right to be paid by the Corporation the expenses incurred in defending any Proceeding in advance of its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this Section or otherwise with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. SECTION 4.13 Amendment. Sections 4.8 through 4.12 of this Article are --------- also contained in Article EIGHT of the Corporation's Certificate of Incorporation, and accordingly, may be altered, amended or repealed only to the extent and at the time the comparable Certificate Article is altered, amended or repealed. Any repeal or modification of this Article shall not change the rights of an officer or director to indemnification with respect to any action or omission occurring prior to such repeal or modification. ARTICLE V --------- COMMITTEES OF DIRECTORS ----------------------- SECTION 5.1 Appointment and Powers. The Board of Directors may, by ---------------------- resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. No such committee shall have the power or authority to amend the Certificate of Incorporation, adopt an agreement of merger or consolidation, recommend to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommend to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amend the bylaws of the Corporation; or to declare a dividend or authorize the issuance of stock. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Each committee shall have only such -8- powers and authority as are established by these bylaws or as the Board of Directors designates by resolution adopted by a majority of the whole Board, which powers and authority shall not be inconsistent with the Certificate of Incorporation or applicable law. The members of each committee shall be selected by the Chairman of the Board. SECTION 5.2 Standing Audit Committee. The Board of Directors may, but ------------------------ need not, by resolution adopted by a majority of the whole Board, designate a standing audit committee to be comprised of not less than three (3) directors, which committee may recommend a certified public accounting firm to conduct the annual audit of the Corporation, and submit such recommendation to the full Board of Directors for approval and appointment. It shall be the duty of such committee to confer with the Corporation's certified public accounting firm from time to time and discuss the audit work and the details thereof with such certified public accounting firm. The Audit Committee may also perform the following duties: 1. Review the management letter of the Corporation's certified public accounting firm; 2. Meet and consult with the Corporation's financial officers to discuss internal controls and procedures and implement recommendations of the Board of Directors relating to financial matters; 3. Review staffing of the Corporation's accounting and financial departments and make recommendations to the Board relating to these departments; and 4. Review the Corporation's budgets and long range financial planning. SECTION 5.3 Standing Executive Committee. The Chairman of the Board shall ---------------------------- appoint at least three (3) members of the Board to comprise an Executive Committee. The Executive Committee shall have such powers not inconsistent with these Bylaws, the Certificate of Incorporation or any mandatory statutes as the Board of Directors shall determine by resolution. SECTION 5.4 Committee Minutes. Each committee shall keep regular minutes ----------------- of its meetings and report the same to the Board of Directors. ARTICLE VI ---------- OFFICERS -------- SECTION 6.1 Number and Qualifications. The officers of the Corporation ------------------------- shall be chosen by the Board of Directors and -9- shall be a Chairman of the Board, a President, a Secretary, a Treasurer and a Controller. The Board of Directors may also choose an Executive Vice President, and one or more Assistant Secretaries and Assistant Treasurers, and a Chief Operating Officer. The Chairman of the Board, and the President shall be chosen from among the members of the Board, but membership on the Board shall not be a prerequisite to the holding of any other office. Any number of offices may be held by the same person unless the Certificate of Incorporation or these Bylaws otherwise provide. SECTION 6.2 Election and Term of Office. The principal officers of the --------------------------- Corporation shall be chosen annually by the Board. Each principal officer shall hold office until his successor shall have been duly chosen and shall qualify or until his earlier death or his earlier resignation or removal in the manner hereinafter provided. SECTION 6.3 Other Officers and Agents. The Board of Directors may appoint ------------------------- such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board. SECTION 6.4 Removal. Any officer of the Corporation may be removed, ------- either with or without cause, at any time, by resolution adopted by a majority of the whole Board or by any committee of officers upon whom such power of removal may be conferred by the Board. SECTION 6.5 Resignations. Any officer of the Corporation may resign at ------------ any time by giving written notice of his resignation to the Board or the Chairman of the Board or the Secretary. Any such resignation shall take effect at the time specified therein, or if the time when it shall become effective shall not be specified therein, then it shall take effect immediately upon its receipt by the Board or the Chairman of the Board or Secretary; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6.6 Chairman of the Board. The Chairman of the Board shall be the --------------------- Chief Executive Officer of the Corporation and shall, if present, preside at all meetings of the stockholders and of the Board of Directors. The Chairman of the Board shall appoint all committees. If the Chairman of the Board is unable or declines to act as Chief Executive Officer, then the President shall become the Chief Executive Officer of the Corporation. The Chief Executive Officer shall be the principal executive officer of the Corporation and shall in general supervise and control all of the business and affairs of the Corporation. He shall preside at all meetings of the stockholders and of the Board of Directors and shall see that orders and resolutions of the Board of Directors are -10- carried into effect. He may sign bonds, mortgages, certificates for shares and all other contracts and documents whether or not under the seal of the Corporation except in cases where the signing and execution thereof shall be expressly delegated by law, by the Board of Directors or by these Bylaws to some other officer or agent of the Corporation. He shall have general powers of supervision and shall be the final arbiter of all differences between officers of the Corporation and his decision as to any matter affecting the Corporation shall be final and binding between the officers of the Corporation subject only to actions of the Board of Directors. He may also delegate such of his duties to the President or such other officers as the Chairman of the Board from time to time deems appropriate. SECTION 6.7 President. In the absence of any Chief Executive Officer as --------- the succession to that position is prescribed in these Bylaws or in the event of the inability or refusal of any such Chief Executive Officer to act, the President shall perform the duties of the Chief Executive Officer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. He shall, at all times, have concurrent power with the Chief Executive Officer to sign bonds, mortgages, certificates for shares and other contracts and documents whether or not under the seal of the Corporation except in cases where the signing and execution thereof shall be expressly delegated by law, by the Board of Directors, or by these Bylaws to some other officer or agent of the Corporation. The President shall also perform such other duties as the Chief Executive Officer of the Board of Directors may from time to time prescribe. SECTION 6.8 Chief Operating Officer. The Chief Operating Officer shall be ----------------------- an employee of the Corporation and shall serve at the pleasure of the Board of Directors. The Chief Operating Officer may, but need not be, a member of the Board of Directors, but in either event, shall be reportable to and act under the direction of the Chairman of the Board and the Board of Directors. The Chief Operating Officer shall supervise the daily operations and affairs of the Corporation under the direction of the Chairman of the Board or such other persons as the Chairman of the Board may appoint from time to time for that purpose and shall, within the limits specified in this section, control all of the Corporation's racing activities, supervise its employees and personnel, administer the Corporation's operating policies, and make such daily operating decisions as are reasonably necessary for effective management. The Chief Operating Officer shall have no authority to sign bonds, mortgages, certificates for shares or other documents or to obligate the Corporation for any sum in excess of $25,000.00 except as shall be expressly delegated by the Board of Directors or by these Bylaws. The Chief Operating Officer shall make such reports to the Board of -11- Directors and to the Chairman of the Board as may be directed by those entities and shall make a detailed report to the Chairman of the Board and to the Board of Directors on the results of racing operations and on the financial affairs of the Corporation no less frequently than monthly. SECTION 6.9 Treasurer. The Treasurer shall have the custody of the --------- corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as treasurer and of the financial condition of the Corporation. SECTION 6.10 Assistant Treasurer. The Assistant Treasurer shall, in the ------------------- absence of the Treasurer or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Chairman of the Board or the Board of Directors may from time to time prescribe or perform such duties of the Treasurer as the Treasurer of the Corporation may delegate from time to time. SECTION 6.11 Secretary. The Secretary (or Assistant Secretary if --------- appropriately delegated) shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book for that purpose and shall perform like duties for the standing committee when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or the Chief Executive Officer. He shall have custody of the corporate seal of the Corporation, and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or such Assistant Secretary. The Chairman of the Board or the Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. SECTION 6.12 Assistant Secretary. The Assistant Secretary, shall, in the ------------------- absence of the Secretary or in the event of his inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Chairman of the Board or the Board of Directors, or the Secretary may from time to time prescribe. -12- SECTION 6.13 Controller. The Controller shall keep or cause to be kept ---------- correct records of the business and transactions of the Corporation and shall, upon request, at all reasonable times exhibit or cause to be exhibited such records to any of the directors of the Corporation at the place where such records are maintained. He shall perform such other duties as from time to time may be assigned to him by the Chairman of the Board or the Board of Directors. SECTION 6.14 Salaries. The salaries of all officers and agents of the -------- Corporation shall be fixed by the Board of Directors. ARTICLE VII ----------- STOCK ----- SECTION 7.1 Certificate of Shares. Every owner of shares in the --------------------- Corporation shall be entitled to have a certificate in such form, not inconsistent with the Certificate of Incorporation or any law, as shall be prescribed by the Board of Directors, certifying the number of shares, and class or series, owned by him in the Corporation. Every certificate for shares shall be signed by the Chairman of the Board, or President and the Secretary or the Assistant Secretary. Subject to the restrictions provided by law, signatures may be facsimile and shall be effective irrespective of whether any person whose signature appears on the certificates shall have ceased to be such officer before the certificate is delivered by the Corporation. Such certificate issued shall bear all statements or legends required by law to be affixed thereto. SECTION 7.2 Transfer of Stock. Upon surrender to the Corporation or any ----------------- transfer agent of the Corporation of a certificate for shares of the Corporation duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 7.3 Lost, Stolen, Destroyed or Mutilated Certificates. The holder ------------------------------------------------- of any shares of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of the certificates therefor. The Board of Directors shall direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, or upon the surrender of any mutilated certificate, if the Corporation shall not theretofore have received notice that the certificate alleged to have been lost, destroyed or stolen has been acquired by a bona fide purchaser thereof, and the Board of Directors may, -13- at its discretion, require the owner of the lost, stolen, or destroyed certificate or his legal representatives to give the Corporation a bond in such sum, limited or unlimited, in such form and with such surety or sureties as the Board of Directors shall, in its uncontrolled discretion, determine, to indemnify the Corporation against any claim that may be made against it on account of alleged loss, theft or destruction of any such certificate or the issuance of such new certificates. SECTION 7.4 Registered Stockholders. Except as otherwise provided by law, ----------------------- the Corporation shall be entitled to recognize as the exclusive owner of shares of the Corporation for all purposes as regards the Corporation, the person in whose name the shares stand registered on its books as the owner and such person exclusively shall be entitled to receive dividends and to vote as such owner. To the extent permissible under law, the Corporation shall be entitled to hold liable for calls and assessments a person registered on its books as the owner of the shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any person, whether or not it shall have express or other notice thereof. SECTION 7.5 Regulations. The Board of Directors shall have power and ----------- authority to make all such rules and regulations not inconsistent with law or with the Certificate of Incorporation as may be deemed expedient concerning the issue, transfer and registration of certificates for shares of the capital stock of the Corporation, and may appoint transfer agents, transfer clerks and registrars thereof. ARTICLE VIII ------------ CORPORATE RECORDS -- INSPECTION ------------------------------- SECTION 8.1 Records. The Corporation shall maintain adequate and correct ------- accounts, minutes of the Board, and proceedings of the stockholders, books and records of its business and properties. All of such books, records and accounts shall be kept at the Corporation's principal executive office, as fixed by the Board of Directors from time to time. SECTION 8.2 Inspection of Books and Records. All books and records of the ------------------------------- Corporation shall, to the extent provided by law, be open to inspection of directors, stockholders, and voting trust certificate holders, in the manner provided by law. -14- ARTICLE IX ---------- AMENDMENTS ---------- SECTION 9.1 Amendments. These Bylaws, or any of them, may be altered, ---------- amended or repealed, or new Bylaws may be made, at any annual or special meeting, by the stockholders having voting power, or at any regular or special meeting of the Board of Directors, by vote of a majority of the whole Board, provided that the proposed action in respect thereof shall be stated in the notice of such meeting. Bylaws made, altered or amended by the Board shall be subject to alteration, amendment or repeal by the stockholders. SECTION 9.2 Recordation. If any Bylaw is adopted, amended or repealed, ----------- such action shall be recorded in the by-law section of the minute book in the appropriate place. ARTICLE X --------- CORPORATE SEAL -------------- SECTION 10.1 The corporate seal shall be circular in form, and shall have inscribed thereon the name of the Corporation, the date of its incorporation, and the word "Delaware". ARTICLE XI ---------- CONTRACTS, CHECKS, DRAFTS, BANK ACCOUNTS, ETC. ---------------------------------------------- SECTION 11.1 Execution of Contracts, etc. Except as otherwise provided in --------------------------- these Bylaws, the Board may authorize any officer or officers, agent or agents, or employee or employees of the Corporation to enter into any contract or execute and deliver any instrument in the name and on behalf of the Corporation, and such authority may be general or confined to specific instances, and, unless so authorized by the Board or except as otherwise provided in these Bylaws, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or to any amount. SECTION 11.2 Loans. No loan shall be contracted on behalf of the ----- Corporation, and no negotiable paper shall be issued, endorsed or accepted in its name, unless authorized by the Board or except as otherwise provided in these Bylaws. Such authority may be general or confined to specific instances. When so authorized, the officer or officers thereunto authorized may effect loans and advances at any time for the Corporation from any bank, trust company or other institution, or from any firm, corporation, or individual, and for such loans and advances may make, execute and deliver -15- promissory notes or other evidences of indebtedness of the Corporation, and, when authorized as aforesaid as security for the payment of any and all loans, advances, indebtedness and liabilities of the Corporation, may mortgage, pledge, hypothecate or transfer any real or personal property at any time owned or held by the Corporation, and to that end execute instruments of mortgage or pledge or otherwise transfer such property. SECTION 11.3 Checks. All checks or demands for money and notes of the ------ Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. SECTION 11.4 Fiscal Year. The fiscal year of the Corporation shall end on ----------- December 31 of each succeeding year. SECTION 11.5 Stock in Other Corporations. Shares of any other corporation --------------------------- which may from time to time be held by the Corporation may be represented and voted at any meeting of stockholders of such corporation by the Chairman of the Board as Chief Executive Officer, or by any proxy appointed in writing as the Chairman of the Board, or by any other person or persons thereunto authorized by the Board of Directors. Shares belonging to the Corporation need not stand in the name of the Corporation, but may be held for the benefit of the Corporation in the individual name of the treasurer or of any other nominee designated for the purpose by the Board of Directors. SECTION 11.6 Bank Accounts and Deposits. The Board may from time to time -------------------------- authorize the opening and keeping of general and special bank accounts with such banks, trust companies or other depositories as the Board may select or as may be selected by any officer or officers or agent or agents of the Corporation to whom power in that respect shall have been delegated by the Board. All funds of the Corporation not otherwise employed shall be deposited from time to time in one or more of such banks, trust companies or other depositories to the credit of the Corporation or otherwise as the Board, the Chairman of the Board or the President shall direct. The Board may make such other provisions in respect of such bank accounts not inconsistent with the provisions of these By-Laws as it may deem expedient. ARTICLE XII ----------- THE TURF CLUB ------------- SECTION 12.1 The Board of Directors shall set apart certain space in its main building on its premises generally described at 1050 South Prairie Avenue, Inglewood, California, for the members of the Turf Club. -16- SECTION 12.2 The membership of the Turf Club shall consist of two classes: (a) Life Members; and (b) Associate Members. SECTION 12.3 Life Members. Life members shall be those natural persons ------------ who acquired shares of the common stock of Hollywood Turf Club, directly, and by original subscription from this corporation, and who thereafter continue to remain the owners on the books of Hollywood Park, Inc., a Delaware corporation, of not less than six hundred (600) shares of said corporation which were received, in exchange for such shares of Hollywood Turf Club. SECTION 12.4 Associate Members. Associate members shall be those natural ----------------- persons to whom are extended the facilities of the Turf Club for a specified racing season. SECTION 12.5 No one stockholder shall be entitled to more than one Life Membership. In the event shares of the capital stock of Hollywood Turf Club shall have been subscribed for by, and originally issued directly by Hollywood Turf Club in the names of, husband and wife, or any two or more persons, jointly, or as joint tenants with right of survivorship, or as tenants in common, such two or more persons shall, as between themselves, designate which of such persons shall be registered as a Life Member in the membership book of the Turf Club, and the Hollywood Turf Club, on receipt of such advice, shall record such Life Membership accordingly. SECTION 12.6 Each applicant for an Associate Membership shall sign an application on a form to be prescribed by the Board of Directors and at said time pay a membership fee in an amount fixed by the then effective resolution of the Board. No application for membership need be made by Life Members so long as they shall remain the owners of record on the books of Hollywood Park, Inc. of at least six hundred (600) shares of the common stock thereof, nor shall Life Members be required to pay any fee for their membership. SECTION 12.7 To be eligible for Associate Membership in the Turf Club, the applicant must be in good standing in the community in which he resides and, if required by the Board of Directors, shall present evidence thereof satisfactory to the Board. SECTION 12.8 Admission, Suspension or Expulsion of Members. --------------------------------------------- (a) The Board of Directors is hereby authorized to consider and determine all questions relating to the admission, election, appointment, withdrawal, suspension or expulsion of members of the Turf Club. Pursuant to the foregoing, the Board may suspend or expel any Associate Member for any conduct on or off the premises of the Hollywood Turf -17- Club which, in the sole judgment of a majority of the Board of Directors, is or may be detrimental to the best interest of racing or is likely to bring the Corporation or the Turf Club in disrepute, or for any willful violation of any of these by-laws relating to the Turf Club, or any reasonable house rules promulgated pursuant thereto. In the event of any such suspension or expulsion the Board shall refund the unearned portion of the paid membership fee. The Board shall be the sole judge in the matter of suspension or expulsion of Associate Members and its determination shall be final. No Associate Membership shall be effective until the applicant shall have been approved by the Board of Directors. (b) Any Life Member may be suspended or expelled by the Board for any willful violation of any of the provisions of these by-laws relating to the Turf Club, or any house rules promulgated pursuant thereto, or for any conduct on or off the Club premises which, in the judgment of the Board of Directors, is or may be detrimental to the best interest of racing or which, in the judgment of the Board, is likely to bring the Turf Club or the Hollywood Turf Club in disrepute. The Secretary shall cause to be delivered or mailed to such offending Life Member a written notice specifying the charge or charges preferred against him at least five (5) days prior to the date set by the Board of Directors for hearing such charge or charges. The member shall have the right to appear before the Board, make such defense thereto as in his judgment may be warranted by the facts and present witnesses or other evidence on his behalf. A two-thirds majority of the voting power of the entire Board shall be required to suspend or expel any Life Member and no such Life Member shall be expelled or suspended except in the manner in this Article provided. Upon the expulsion of a Life Member, his membership in the Turf Club shall be cancelled. The determination by the Board in the matter of expulsion of Life Members shall be final. SECTION 12.9 Members shall be responsible for any damage caused by them to the property, facilities and equipment set apart for the use of the Turf Club. SECTION 12.10 The Board of Directors may by resolution fix the number of persons who may be admitted to Associate Membership in the Turf Club, and may likewise by resolution fix and determine upon the number of guests that may be extended the privileges of the Turf Club by any member on any particular day or days, and may likewise fix and determine upon all admission prices and otherwise provide for the orderly conduct and administration of the social and recreational activities of the Turf Club, to the end that the facilities of the Club may be enjoyed to the fullest extent by the members thereof. -18- SECTION 12.11 Each membership in the Turf Club is personal to the owner thereof and no membership is or shall be transferable by operation of law or otherwise. All membership rights terminate with the death of the owner or upon the expiration of the period for which they were granted. If a Life Member shall cease to be the record owner of at least six hundred (600) shares of the common stock of Hollywood Park, Inc., his membership in the Turf Club shall terminate automatically; provided, however, that such termination shall not prevent any such person from being thereafter elected to Associate Membership under such conditions and for such a membership fee as the Board of Directors may by resolution prescribe. SECTION 12.12 The Board of Directors shall cause to be mailed to each Life Member entitled thereto, two (2) coupon books, and to each associate Member, one (1) coupon book, in ample time prior to race meets, or within a reasonable time after the acquisition of a membership in the Turf Club, as the case may be, to admit members to the parking facilities, enclosure, grandstand, public club house, and to the quarters of the Turf Club, such coupon books to be in such form and to contain such coupons, admission tickets, and other matters and things as the Board of Directors may determine upon. Membership certificates shall not be issued. No part of the earnings of the Turf Club shall inure to the benefit of or ever be distributed to, any person by reason of holding membership in the Turf Club. Such membership shall entitle the holder thereof to use and enjoy, subject to these by-laws, the facilities set apart for the Turf Club, in common with all other members, and no membership shall entitle the holder to any property interest in the assets or properties used by the Turf Club. SECTION 12.13 If any application for Associate Membership be rejected, the membership and application fee shall be returned. SECTION 12.14 The Corporation shall keep a membership book containing the names and addresses of each member of each class, and in any case where a membership has been terminated such fact shall be recorded in the book, together with the date on which the membership ceased. SECTION 12.15 The Board of Directors may designate a Membership Committee of at least three (3) members of the Board for the purpose of recommending to the Board of Directors applicants for Associate Membership in the Turf Club; it may also designate a House Committee and such other committees as, in the judgment of the Board, the needs of the Turf Club may require. All such committees shall serve at the pleasure of the Board. -19- The undersigned, constituting the Board of Directors of HP Sub, Inc., hereby adopt the foregoing Bylaws as the Bylaws of said corporation. Dated: August 5, 1991 /s/ Thomas Gamel ______________________________ Thomas Gamel /s/ R. D. Hubbard ______________________________ R. D. Hubbard /s/ Harry Ornest ______________________________ Harry Ornest /s/ Warren Williamson ______________________________ Warren Williamson THIS IS TO CERTIFY: That I am the duly elected, qualified and acting Secretary of HP Sub, Inc. and that the foregoing Bylaws were adopted as the Bylaws of said corporation on the 5th day of August, 1991 by the Board of Directors of said corporation. Dated: August 5, 1991 /s/ Donald Robbins _____________________________ Donald Robbins -20- EX-12.1 4 CALCULATION OF HISTORICAL RATIO OF EARNINGS EXHIBIT 12.1 HOLLYWOOD PARK, INC. CALCULATION OF HISTORICAL RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS, EXCEPT THE RATIO)
SIX MONTHS ENDED YEARS ENDED DECEMBER 31, JUNE 30, --------------------------------------- -------------------- 1992 1993 1994 1995 1996 1996 1997 ------- ------ ------ ------ ------- -------- -------- Earnings: Pre tax income (loss). $ 6,663 $7,418 $5,340 $ (469) $ (790) $ (8,129) $ 4,708 Fixed charges......... 4,883 1,517 3,061 4,515 2,422 1,617 229 Less capitalized interest............. 0 0 0 (593) (1,446) (719) 0 ------- ------ ------ ------ ------- -------- ------- Total Earnings...... $11,546 $8,935 $8,401 $3,453 $ 186 $ (7,231) $ 4,937 ======= ====== ====== ====== ======= ======== ======= Fixed charges: Capitalized interest(a).......... 0 0 0 593 1,446 719 0 Interest expense...... 4,883 1,517 3,061 3,922 942 898 129 Amortization of debt discount (premium)... 0 0 0 0 0 0 0 Amortization of debt issuance costs....... 0 0 0 0 0 0 0 Portion of rent expense representative of the interest factor...... 0 0 0 0 $ 34 0 100 ------- ------ ------ ------ ------- -------- ------- Total fixed charges. $ 4,883 $1,517 $3,061 $4,515 $ 2,422 $ 1,617 $ 229 ======= ====== ====== ====== ======= ======== ======= Ratio of earnings to fixed charges........ 2.36 5.89 2.74 -- (2) -- (2) -- (2) 21.56 ======= ====== ====== ====== ======= ======== =======
- ------- (1) In computing the ratio of earnings to fixed charges: (a) earnings have been based on income from continuing operations before income taxes and fixed charges (exclusive of interest capitalized) and (b) fixed charges consist of interest and amortization of debt discount and expense (including amounts capitalized) and the estimated interest portion of rents. (2) The Company's earnings were not sufficient to cover its fixed charge requirements by $1.1 million, and $2.2 million for the years ended December 31, 1995, and 1996, respectively, and by $8.8 million for the six months ended June 30, 1996. EX-12.2 5 CALCULATION OF PRO FORMA RATIO OF EARNINGS EXHIBIT 12.2 HOLLYWOOD PARK, INC. CALCULATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES (IN THOUSANDS, EXCEPT THE RATIO)
SIX MONTHS YEAR ENDED ENDED DECEMBER 31, JUNE 30, 1996 1997 ------------ ---------- Earnings: Pre tax income (loss)............................... $(33,107) $ 9,760 Fixed charges....................................... 20,520 8,964 Less capitalized interest........................... (1,446) 0 -------- ------- Total Earnings.................................... $(14,033) $18,724 ======== ======= Fixed charges: Capitalized interest(a)............................. 1,446 0 Interest expense.................................... 15,468 7,398 Amortization of debt discount (premium)............. 0 0 Amortization of debt issuance costs................. 444 222 Portion of rent expense representative of the interest factor.................................... 3,162 1,344 -------- ------- Total fixed charges............................... $ 20,520 $ 8,964 ======== ======= Ratio of earnings to fixed charges.................. -- (2) 2.09 ======== =======
- -------- (1) In computing the ratio of earnings to fixed charges: (a) earnings have been based on income from continuing operations before income taxes and fixed charges (exclusive of interest capitalized) and (b) fixed charges consist of interest and amortization of debt discount and expense (including amounts capitalized) and the estimated interest portion of rents. (2) The Company's earnings were not sufficient to cover its fixed charge requirements by $34.6 million for the year ended December 31, 1996. EX-21.1 6 SUBSIDIARIES OF HOLLYWOOD PARK Exhibit 21.1 Direct and Indirect Subsidiaries of Hollywood Park, Inc. -------------------------------------------------------- Hollywood Park Operating Company, a Delaware corporation; Hollywood Park Fall Operating Company, a Delaware corporation; Hollywood Park Food Services, Inc., a Delaware corporation; HP/Compton, Inc., a California corporation; Crystal Park Hotel and Casino Development Company LLC, a California Limited Liability Company; Sunflower Racing, Inc., a Kansas corporation; SR Food and Beverage, Inc., a Kansas corporation; Turf Paradise, Inc., an Arizona corporation; Boomtown, Inc., a Delaware corporation; Boomtown Hotel & Casino, Inc., a Nevada corporation; Bayview Yacht Club, Inc., a Mississippi corporation; Mississippi-I Gaming, L.P.; Louisiana Gaming Enterprises, Inc.; Louisiana-I Gaming, a Louisiana Partnership in Commendam EX-23.2 7 CONSENT OF ARTHUR ANDERSEN LLP EXHIBIT 23.2 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the use of our reports (and to all references to our Firm) included in or made a part of this registration statement. /s/ Arthur Andersen LLP ARTHUR ANDERSEN LLP Los Angeles, California August 26, 1997 EX-25.1 8 STATEMENT REGARDING ELIGIBILITY OF TRUSTEE EXHIBIT 25.1 ================================================================================ FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) |__| ---------------------- THE BANK OF NEW YORK (Exact name of trustee as specified in its charter) New York 13-5160382 (State of incorporation (I.R.S. employer if not a U.S. national bank) identification no.) 48 Wall Street, New York, N.Y. 10286 (Address of principal executive offices) (Zip code) ---------------------- HOLLYWOOD PARK, INC. HOLLYWOOD PARK OPERATING COMPANY (Exact name of obligor as specified in its charter) Delaware Delaware (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) OTHER REGISTRANTS
I.R.S. State or Other Jurisdiction Employer Exact Name of Registrant as of Incorporation Identification Specified in its Charter or Organization Number - ------------------------------------------- --------------------------- --------------- HOLLYWOOD PARK FALL OPERATING COMPANY Delaware 95-4093972 HOLLYWOOD PARK FOOD SERVICES, INC. California 95-2844591 HP/COMPTON, INC. California 95-4545471 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC California 95-4595453 TURF PARADISE, INC. Arizona 86-0114029 HP YAKAMA, INC. Delaware 95-4636368 BOOMTOWN, INC. Delaware 94-3044204 BOOMTOWN HOTEL & CASINO, INC. Nevada 88-0101849 BAYVIEW YACHT CLUB, INC. Mississippi 64-0824102 MISSISSIPPI-I GAMING, L.P. Mississippi 64-0828954 LOUISIANA GAMING ENTERPRISES, INC. Louisiana 72-1229201 LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM Louisiana 72-1238179 1050 South Prairie Avenue Inglewood, California 90301 (Address of principal executive offices) (Zip code)
______________________ Series B 9 1/2% Senior Subordinated Notes due 2007 (Title of the indenture securities) ================================================================================ 1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE: (a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT. - -------------------------------------------------------------------------------- Name Address - -------------------------------------------------------------------------------- Superintendent of Banks of the State of 2 Rector Street, New York, New York N.Y. 10006, and Albany, N.Y. 12203 Federal Reserve Bank of New York 33 Liberty Plaza, New York, N.Y. 10045 Federal Deposit Insurance Corporation Washington, D.C. 20429 New York Clearing House Association New York, New York 10005 (b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS. Yes. 2. AFFILIATIONS WITH OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH AFFILIATION. None. 16. LIST OF EXHIBITS. EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE 7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R. 229.10(d). 1. A copy of the Organization Certificate of The Bank of New York (formerly Irving Trust Company) as now in effect, which contains the authority to commence business and a grant of powers to exercise corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1 filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1 to Form T-1 filed with Registration Statement No. 33-29637.) 4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1 filed with Registration Statement No. 33-31019.) -2- 6. The consent of the Trustee required by Section 321(b) of the Act. (Exhibit 6 to Form T-1 filed with Registration Statement No. 33-44051.) 7. A copy of the latest report of condition of the Trustee published pursuant to law or to the requirements of its supervising or examining authority. -3- SIGNATURE Pursuant to the requirements of the Act, the Trustee, The Bank of New York, a corporation organized and existing under the laws of the State of New York, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York, and State of New York, on the 26th day of August, 1997. THE BANK OF NEW YORK By: /s/ Thomas E. Tabor ---------------------------- Name: Thomas E. Tabor Title: Assistant Treasurer - -------------------------------------------------------------------------------- Exhibit 7 Consolidated Report of Condition of THE BANK OF NEW YORK of 48 Wall Street, New York, N.Y. 10286 And Foreign and Domestic Subsidiaries, a member of the Federal Reserve System, at the close of business March 31, 1997, published in accordance with a call made by the Federal Reserve Bank of this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts ASSETS in Thousands Cash and balances due from depos- itory institutions: Noninterest-bearing balances and currency and coin .................. $ 8,249,820 Interest-bearing balances .......... 1,031,026 Securities: Held-to-maturity securities ........ 1,118,463 Available-for-sale securities ...... 3,005,838 Federal funds sold and Securities pur- chased under agreements to resell .... 3,100,281 Loans and lease financing receivables: Loans and leases, net of unearned income ........................... 32,895,077 LESS: Allowance for loan and lease losses ..................... 633,877 LESS: Allocated transfer risk reserve .......................... 429 Loans and leases, net of unearned income, allowance, and reserve ... 32,260,771 Assets held in trading accounts ...... 1,715,214 Premises and fixed assets (including capitalized leases) ................ 684,704 Other real estate owned .............. 21,738 Investments in unconsolidated subsidiaries and associated companies .......................... 195,761 Customers' liability to this bank on acceptances outstanding ............ 1,152,899 Intangible assets .................... 683,503 Other assets ......................... 1,526,113 ------------ Total assets ......................... $ 54,746,131 ============ LIABILITIES Deposits: In domestic offices ................ $ 25,614,961 Noninterest-bearing ................ 10,564,652 Interest-bearing ................... 15,050,309 In foreign offices, Edge and Agreement subsidiaries, and IBFs ... 15,103,615 Noninterest-bearing ................ 560,944 Interest-bearing ................... 14,542,671 Federal funds purchased and Securities sold under agreements to repurchase. 2,093,286 Demand notes issued to the U.S. ...... Treasury ........................... 239,354 Trading liabilities .................. 1,399,064 Other borrowed money: With remaining maturity of one year or less .......................... 2,075,092 With remaining maturity of more than one year ......................... 20,679 Bank's liability on acceptances exe- cuted and outstanding .............. 1,160,012 Subordinated notes and debentures .... 1,014,400 Other liabilities .................... 1,840,245 ------------ Total liabilities .................... 50,560,708 ------------ EQUITY CAPITAL Common stock ......................... 942,284 Surplus .............................. 731,319 Undivided profits and capital reserves ........................... 2,544,303 Net unrealized holding gains (losses) on available-for-sale securities ......................... (19,449) Cumulative foreign currency transla- tion adjustments ................... (13,034) ------------ Total equity capital ................. 4,185,423 ------------ Total liabilities and equity capital.. $ 54,746,131 ============
I, Robert E. Keilman, Senior Vice President and Comptroller of the above- named bank do hereby declare that this Report of Condition has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true to the best of my knowledge and belief. Robert E. Keilman We, the undersigned directors, attest to the correctness of this Report of Condition and declare that it has been examined by us and to the best of our knowledge and belief has been prepared in conformance with the instructions issued by the Board of Governors of the Federal Reserve System and is true and correct. Alan R. Griffith ) J. Carter Bacot ) Thomas A. Renyi ) Directors - -------------------------------------------------------------------------------- EX-99 9 FORM OF LETTER OF TRANSMITTAL Exhibit 99 LETTER OF TRANSMITTAL HOLLYWOOD PARK, INC. HOLLYWOOD PARK OPERATING COMPANY, AS CO-OBLIGORS OFFER FOR ALL OUTSTANDING SERIES A 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007 IN EXCHANGE FOR SERIES B 9 1/2% SENIOR SUBORDINATED NOTES DUE 2007, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED PURSUANT TO THE PROSPECTUS DATED , 1997 _________________________ - -------------------------------------------------------------------------------- THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 1997, UNLESS THE OFFER IS EXTENDED BY THE ISSUERS IN THEIR SOLE DISCRETION. - -------------------------------------------------------------------------------- _________________________ The Exchange Agent for the Exchange Offer is: THE BANK OF NEW YORK BY MAIL: BY OVERNIGHT DELIVERY OR HAND: -------- ------------------------------ The Bank Of New York The Bank of New York 101 Barclay Street, 7E 101 Barclay Street New York, NY 10286 Corporate Trust Services Window Attention: Reorganization Section, Ground Level Arwen Gibbons Attention: Reorganization Section, Arwen Gibbons To Confirm by Telephone or for Information: (212) 815-6333 Facsimile Transmissions: (212) 571-3080 DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF THIS LETTER OF TRANSMITTAL VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. Capitalized terms used but not defined herein shall have the same meaning given them in the Prospectus (as defined below). This Letter of Transmittal is to be completed by holders of Old Notes (as defined below) either if Old Notes are to be forwarded herewith or if tenders of Old Notes are to be made by book-entry transfer to an account maintained by The Bank of New York, (the "Exchange Agent") at The Depository Trust Company ("DTC") pursuant to the procedures set forth in "The Exchange Offer -- Procedures for Tendering" in the Prospectus. Holders of Old Notes whose certificates (the "Certificates") for such Old Notes are not immediately available or who cannot deliver their Certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date (as defined in the Prospectus) or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Old Notes according to the guaranteed delivery procedures set forth in "The Exchange Offer -- Terms of the Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. SEE INSTRUCTION 1. DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. 2 NOTE: SIGNATURES MUST BE PROVIDED BELOW PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY ALL TENDERING HOLDERS COMPLETE THIS BOX: - ----------------------------------------------------------------------------------------------------------------------- DESCRIPTION OF OLD NOTES TENDERED - ----------------------------------------------------------------------------------------------------------------------- IF BLANK, PLEASE PRINT NAME AND ADDRESS OLD NOTES TENDERED OF REGISTERED HOLDER. (ATTACH ADDITIONAL LIST IF NECESSARY) - ----------------------------------------------------------------------------------------------------------------------- PRINCIPAL AMOUNT OF OLD CERTIFICATE PRINCIPAL AMOUNT NOTES TENDERED (IF LESS NUMBER(S)/*/ OF OLD NOTES THAN ALL)/**/ ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- ---------------------------------------------------------------------- TOTAL AMOUNT TENDERED: - ----------------------------------------------------------------------------------------------------------------------- * Need not be completed by book-entry holders. ** Old Notes may be tendered in whole or in part in denominations of $1,000 and integral multiples thereof. All Old Notes held shall be deemed tendered unless a lesser number is specified in this column. - ------------------------------------------------------------------------------------------------------------------------
(BOXES BELOW TO BE CHECKED BY ELIGIBLE INSTITUTIONS ONLY) [_] CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution _____________________________________________ DTC Account Number ________________________________________________________ Transaction Code Number ___________________________________________________ [_] CHECK HERE AND ENCLOSE A PHOTOCOPY OF THE NOTICE OF GUARANTEED DELIVERY IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name of Registered Holders(s) _____________________________________________ Window Ticket Number (if any) _____________________________________________ Date of Execution of Notice of Guaranteed Delivery ________________________ Name of Institution which Guaranteed Delivery _____________________________ If Guaranteed Delivery is to be made By Book-Entry Transfer: ______________ Name of Tendering Institution ___________________________________________ DTC Account Number ______________________________________________________ Transaction Code Number _________________________________________________ [_] CHECK HERE IF TENDERED BY BOOK-ENTRY TRANSFER AND NON-EXCHANGED OLD NOTES ARE TO BE RETURNED BY CREDITING THE DTC ACCOUNT NUMBER SET FORTH ABOVE. [_] CHECK HERE IF YOU ARE A BROKER-DEALER WHO ACQUIRED THE OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER") AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: _____________________________________________________________________ Address: __________________________________________________________________ __________________________________________________________________ 3 Ladies and Gentlemen: The undersigned hereby tenders to Hollywood Park, Inc., a Delaware corporation (the "Company") and Hollywood Park Operating Company ("HPOC")(collectively, the "Issuers"), the above described aggregate principal amount of Series A 9 1/2% Senior Subordinated Notes due 2007 (including the guarantees thereof, the "Old Notes") in exchange for a like aggregate principal amount of Series B 9 1/2% Senior Subordinated Notes due 2007 (including the Guarantees, the "New Notes") which have been registered under the Securities Act of 1933 (the "Securities Act"), upon the terms and subject to the conditions set forth in the Prospectus dated _________, 1997 (as the same may be amended or supplemented from time to time, the "Prospectus"), receipt of which is acknowledged, and in this Letter of Transmittal (which, together with the Prospectus, constitute the "Exchange Offer"). Subject to and effective upon the acceptance for exchange of all or any portion of the Old Notes tendered herewith in accordance with the terms and conditions of the Exchange Offer (including, if the Exchange Offer is extended or amended, the terms and conditions of any such extension or amendment), the undersigned hereby sells, assigns and transfers to or upon the order of the Issuers all right, title and interest in and to such Old Notes as are being tendered herewith. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent as its agent and attorney-in-fact (with full knowledge that the Exchange Agent is also acting as agent of the Issuers in connection with the Exchange Offer) with respect to the tendered Old Notes, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), subject only to the right of withdrawal described in the Prospectus, to (i) deliver Certificates for Old Notes to the Issuers together with all accompanying evidences of transfer and authenticity to, or upon the order of, the Issuers, upon receipt by the Exchange Agent, as the undersigned's agent, of the New Notes to be issued in exchange for such Old Notes, (ii) present Certificates for such Old Notes for transfer, and to transfer the Old Notes on the books of the Issuers, and (iii) receive for the account of the Issuers all benefits and otherwise exercise all rights of beneficial ownership of such Old Notes, all in accordance with the terms and conditions of the Exchange Offer. THE UNDERSIGNED HEREBY REPRESENTS AND WARRANTS THAT THE UNDERSIGNED HAS FULL POWER AND AUTHORITY TO TENDER, EXCHANGE, SELL, ASSIGN AND TRANSFER THE OLD NOTES TENDERED HEREBY AND THAT, WHEN THE SAME ARE ACCEPTED FOR EXCHANGE, THE ISSUERS WILL ACQUIRE GOOD, MARKETABLE AND UNENCUMBERED TITLE THERETO, FREE AND CLEAR OF ALL LIENS, RESTRICTIONS, CHARGES AND ENCUMBRANCES, AND THAT THE OLD NOTES TENDERED HEREBY ARE NOT SUBJECT TO ANY ADVERSE CLAIMS OR PROXIES. THE UNDERSIGNED WILL, UPON REQUEST, EXECUTE AND DELIVER ANY ADDITIONAL DOCUMENTS DEEMED BY THE ISSUERS OR THE EXCHANGE AGENT TO BE NECESSARY OR DESIRABLE TO COMPLETE THE EXCHANGE, ASSIGNMENT AND TRANSFER OF THE OLD NOTES TENDERED HEREBY, AND THE UNDERSIGNED WILL COMPLY WITH ITS OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT. THE UNDERSIGNED HAS READ AND AGREES TO ALL OF THE TERMS OF THE EXCHANGE OFFER. The name(s) and address(es) of the registered Holder(s) of the Old Notes tendered hereby should be printed above, if they are not already set forth above, as they appear on the Certificates representing such Old Notes. The Certificate number(s) and the Old Notes that the undersigned wishes to tender should be indicated in the appropriate boxes above. If any tendered Old Notes are not exchanged pursuant to the Exchange Offer for any reason, or if Certificates are submitted for more Old Notes than are tendered or accepted for exchange, Certificates for such nonexchanged or nontendered Old Notes will be returned (or, in the case of Old Notes tendered by book-entry transfer, such Old Notes will be credited to an account maintained at DTC), without expense to the tendering Holder, promptly following the expiration or termination of the Exchange Offer. 4 The undersigned understands that tenders of Old Notes pursuant to any one of the procedures described in "The Exchange Offer -- Procedures for Tendering" in the Prospectus and in the instructions hereto will, upon the Issuers' acceptance for exchange of such tendered Old Notes, constitute a binding agreement between the undersigned and the Issuers upon the terms and subject to the conditions of the Exchange Offer. The undersigned recognizes that, under certain circumstances set forth in the Prospectus, the Issuers may not be required to accept for exchange any of the Old Notes tendered hereby. Unless otherwise indicated herein in the box entitled "Special Issuance Instructions" below, the undersigned hereby directs that the New Notes be issued in the name(s) of the undersigned or, in the case of a book-entry transfer of Old Notes, that such New Notes be credited to the account indicated above maintained at DTC, if applicable, substitute Certificates representing Old Notes not exchanged or not accepted for exchange will be issued to the undersigned or, in the case of a book-entry transfer of Old Notes, will be credited to the account indicated above maintained at DTC. Similarly, unless otherwise indicated under "Special Delivery Instructions," please deliver New Notes to the undersigned at the address shown below the undersigned's signature. BY TENDERING OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, THE UNDERSIGNED HEREBY REPRESENTS AND AGREES THAT (I) THE UNDERSIGNED IS NOT AN "AFFILIATE" OF EITHER ISSUER, (II) ANY NEW NOTES TO BE RECEIVED BY THE UNDERSIGNED ARE BEING ACQUIRED IN THE ORDINARY COURSE OF ITS BUSINESS, (III) THE UNDERSIGNED HAS NO ARRANGEMENT OR UNDERSTANDING WITH ANY PERSON TO PARTICIPATE IN A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF NEW NOTES TO BE RECEIVED IN THE EXCHANGE OFFER, AND (IV) IF THE UNDERSIGNED IS NOT A BROKER- DEALER, THE UNDERSIGNED IS NOT ENGAGED IN, AND DOES NOT INTEND TO ENGAGE IN, A DISTRIBUTION (WITHIN THE MEANING OF THE SECURITIES ACT) OF SUCH NEW NOTES. BY TENDERING OLD NOTES PURSUANT TO THE EXCHANGE OFFER AND EXECUTING THIS LETTER OF TRANSMITTAL, A HOLDER OF OLD NOTES WHICH IS A BROKER-DEALER REPRESENTS AND AGREES, CONSISTENT WITH CERTAIN INTERPRETIVE LETTERS ISSUED BY THE STAFF OF THE DIVISION OF CORPORATION FINANCE OF THE SECURITIES AND EXCHANGE COMMISSION TO THIRD PARTIES, THAT (A) SUCH OLD NOTES HELD BY THE BROKER-DEALER ARE HELD ONLY AS A NOMINEE, OR (B) SUCH OLD NOTES WERE ACQUIRED BY SUCH BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND IT WILL DELIVER THE PROSPECTUS (AS AMENDED OR SUPPLEMENTED FROM TIME TO TIME) MEETING THE REQUIREMENTS OF THE SECURITIES ACT IN CONNECTION WITH ANY RESALE OF SUCH NEW NOTES (PROVIDED THAT, BY SO ACKNOWLEDGING AND BY DELIVERING A PROSPECTUS, SUCH BROKER-DEALER WILL NOT BE DEEMED TO ADMIT THAT IT IS AN "UNDERWRITER" WITHIN THE MEANING OF THE SECURITIES ACT). THE ISSUERS HAVE AGREED THAT, SUBJECT TO THE PROVISIONS OF THE REGISTRATION RIGHTS AGREEMENT, THE PROSPECTUS, AS IT MAY BE AMENDED OR SUPPLEMENTED FROM TIME TO TIME, MAY BE USED BY A PARTICIPATING BROKER-DEALER (AS DEFINED BELOW) IN CONNECTION WITH RESALES OF NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES, WHERE SUCH OLD NOTES WERE ACQUIRED BY SUCH PARTICIPATING BROKER-DEALER FOR ITS OWN ACCOUNT AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES, FOR THE LESSER OF (I) A PERIOD ENDING 180 DAYS FROM THE DATE ON WHICH THE REGISTRATION STATEMENT OF WHICH THE PROSPECTUS IS A PART IS DECLARED EFFECTIVE OR (II) SUCH PERIOD OF TIME AS SUCH BROKER-DEALER MUST COMPLY WITH THE PROSPECTUS DELIVERY REQUIREMENTS OF THE SECURITIES ACT IN ORDER TO RESELL THE NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES WHICH WERE ACQUIRED BY IT AS A RESULT OF MARKET-MAKING OR OTHER TRADING ACTIVITIES. IN THAT REGARD, EACH BROKER-DEALER WHO ACQUIRED OLD NOTES FOR ITS OWN ACCOUNT AS A RESULT OF MARKET- MAKING OR OTHER TRADING ACTIVITIES (A "PARTICIPATING BROKER-DEALER"), BY TENDERING SUCH OLD NOTES AND EXECUTING THIS LETTER OF TRANSMITTAL, AGREES THAT, UPON RECEIPT OF NOTICE FROM EITHER ISSUER OF THE OCCURRENCE OF ANY EVENT OR THE DISCOVERY OF ANY FACT WHICH MAKES ANY STATEMENT CONTAINED OR INCORPORATED BY REFERENCE IN THE PROSPECTUS UNTRUE IN ANY MATERIAL RESPECT OR WHICH CAUSES THE PROSPECTUS TO OMIT TO STATE A MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS CONTAINED OR INCORPORATED BY REFERENCE THEREIN, IN LIGHT OF THE CIRCUMSTANCES UNDER 5 WHICH THEY WERE MADE, NOT MISLEADING OR OF THE OCCURRENCE OF CERTAIN OTHER EVENTS SPECIFIED IN THE REGISTRATION RIGHTS AGREEMENT, SUCH PARTICIPATING BROKER-DEALER WILL SUSPEND THE SALE OF NEW NOTES PURSUANT TO THE PROSPECTUS UNTIL THE ISSUERS HAVE AMENDED OR SUPPLEMENTED THE PROSPECTUS TO CORRECT SUCH MISSTATEMENT OR OMISSION AND HAS FURNISHED COPIES OF THE AMENDED OR SUPPLEMENTED PROSPECTUS TO THE PARTICIPATING BROKER-DEALER OR THE ISSUERS HAVE GIVEN NOTICE THAT THE SALE OF THE NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE. IF THE ISSUERS GIVE SUCH NOTICE TO SUSPEND THE SALE OF THE NEW NOTES, IT SHALL EXTEND THE 180-DAY PERIOD REFERRED TO ABOVE DURING WHICH PARTICIPATING BROKER-DEALERS ARE ENTITLED TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF NEW NOTES BY THE NUMBER OF DAYS DURING THE PERIOD FROM AND INCLUDING THE DATE OF THE GIVING OF SUCH NOTICE TO AND INCLUDING THE DATE WHEN PARTICIPATING BROKER-DEALERS SHALL HAVE RECEIVED COPIES OF THE SUPPLEMENTED OR AMENDED PROSPECTUS NECESSARY TO PERMIT RESALES OF THE NEW NOTES OR TO AND INCLUDING THE DATE ON WHICH THE ISSUERS HAVE GIVEN NOTICE THAT THE SALE OF NEW NOTES MAY BE RESUMED, AS THE CASE MAY BE. A PARTICIPATING BROKER-DEALER WHO INTENDS TO USE THE PROSPECTUS IN CONNECTION WITH THE RESALE OF THE NEW NOTES RECEIVED IN EXCHANGE FOR OLD NOTES PURSUANT TO THE EXCHANGE OFFER MUST NOTIFY THE ISSUERS, OR CAUSE THE ISSUERS TO BE NOTIFIED, ON OR PRIOR TO THE EXPIRATION DATE, THAT IT IS A PARTICIPATING BROKER-DEALER. Such notice may be given in the space provided for that purpose on page 2 of this Letter of Transmittal or may be delivered to the Exchange Agent at the address set forth on page 1 of this Letter of Transmittal. Each New Note will bear interest from its issuance date. Holders of Old Notes that are accepted for exchange will receive, in cash, accrued interest thereon to, but excluding, the issuance date of the New Notes. Such interest will be paid with the first interest payment on the New Notes. Interest on the Old Notes accepted for exchange will cease to accrue upon issuance of the New Notes. All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the heirs, executors, administrators, personal representatives, trustees in bankruptcy, legal representatives, successors and assigns of the undersigned. Except as stated in the Prospectus, this tender is irrevocable. 6 HOLDER(S) SIGN HERE (SEE INSTRUCTIONS 2, 5 AND 6) (PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW) (NOTE: SIGNATURE(S) MUST BE GUARANTEED IF REQUIRED BY INSTRUCTION 2) Must be signed by registered Holder(s) exactly as name(s) appear(s) on Certificate(s) for the Old Notes hereby tendered or on a security position listing, or by any person(s) authorized to become the registered Holder(s) by endorsements and documents transmitted herewith (including such opinions of counsel, certifications and other information as may be required by the Issuers or the Trustee for the Old Notes to comply with the restrictions on transfer applicable to the Old Notes). If signature is by an attorney-in-fact, executor, administrator, trustee, guardian, officer of a corporation or another acting in a fiduciary capacity or representative capacity, please set forth the signer's full title. See Instruction 5. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (SIGNATURE(S) OF HOLDER(S)) Date _______________________, 1997 Name(s) _______________________________________________________________________ (PLEASE PRINT) Address _______________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number ________________________________________________ _______________________________________________________________________________ (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER(S)) GUARANTEE OF SIGNATURE(S) (SEE INSTRUCTIONS 2 AND 5) Authorized Signature __________________________________________________________ Name __________________________________________________________________________ (PLEASE PRINT) Date________________________, 1997 Capacity or Title _____________________________________________________________ Name of Firm __________________________________________________________________ Address _______________________________________________________________________ (INCLUDE ZIP CODE) Area Code and Telephone Number ________________________________________________ 7 SPECIAL ISSUANCE INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5 AND 6) (SEE INSTRUCTIONS 1, 5 AND 6) To be completed ONLY if the New To be completed ONLY if New Notes are to be issued in the name of Notes are to be sent to someone other than someone other than the registered Holder of the registered Holder of the Old Notes the Old Notes whose name(s) appear(s) whose name(s) appear(s) above, or to such above. registered Holder(s) at an address other than that shown above. Issue New Notes: Mail New Notes to: Name ____________________________________ (PLEASE PRINT) Name _____________________________________ Address _________________________________ (PLEASE PRINT) _________________________________________ Address __________________________________ - ----------------------------------------- __________________________________________ (INCLUDE ZIP CODE) ------------------------------------------ (INCLUDE ZIP CODE) - ----------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.) ------------------------------------------- (TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NO.)
INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER 1. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY PROCEDURES. This Letter of Transmittal is to be completed either if (a) Certificates are to be forwarded herewith or (b) tenders are to be made pursuant to the procedures for tender by book-entry transfer set forth in "The Exchange Offer -- Procedures for Tendering" in the Prospectus. Certificates, or timely confirmation of a book-entry transfer of such Old Notes into the Exchange Agent's account at DTC, as well as this Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at one of its addresses set forth herein on or prior to the Expiration Date. Old Notes may be tendered in whole or in part in the principal amount of $1,000 and integral multiples of $1,000. Holders who wish to tender their Old Notes and (i) whose Old Notes are not immediately available or (ii) who cannot deliver their Old Notes, this Letter of Transmittal and all other required documents to the Exchange Agent on or prior to the Expiration Date or (iii) who cannot complete the procedures for delivery by book-entry transfer on a timely basis, may tender their Old Notes by properly completing and duly executing a Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. Pursuant to such procedures: (i) such tender must be made by or through an Eligible Institution (as defined below); (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form made available by the Issuers, must be received by the Exchange Agent on or prior to the Notes Expiration Date, and (iii) the Certificates (or a book-entry confirmation (as defined in the Prospectus)) representing all tendered Old Notes, in proper form for transfer, together with a Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees and any other documents required by this Letter of Transmittal, must be received by the 8 Exchange Agent within three business days after the date of execution of such Notice of Guaranteed Delivery, all as provided in "The Exchange Offer -- Guaranteed Delivery Procedures" in the Prospectus. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by facsimile or mail to the Exchange Agent, and must include a guarantee by an Eligible Institution in the form set forth in such Notice. For Old Notes to be properly tendered pursuant to the guaranteed delivery procedure, the Exchange Agent must receive a Notice of Guaranteed Delivery on or prior to the Expiration Date. As used herein and in the Prospectus, "Eligible Institution" means a firm or other entity identified in Rule 17Ad-15 under the Exchange Act as "an eligible guarantor institution," including (as such terms are defined therein) (i) a bank; (ii) a broker, dealer, municipal securities broker or dealer or government securities broker or dealer, (iii) a credit union; (iv) a national securities exchange, registered securities association or clearing agency; or (v) a savings association that is a participant in a Securities Transfer Association. THE METHOD OF DELIVERY OF CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, OR OVERNIGHT DELIVERY SERVICE IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. The Issuers will not accept any alternative, conditional or contingent tenders. Each tendering Holder, by execution of a Letter of Transmittal (or facsimile thereof), waives any right to receive any notice of the acceptance of such tender. 2. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required if: (i) this Letter of Transmittal is signed by the registered Holder (which term, for purposes of this document, shall include any participant in DTC whose name appears on a security position listing as the owner of the Old Notes) of Old Notes tendered herewith, unless such Holder(s) has completed either the box entitled "Special Issuance Instructions" or the box entitled "Special Delivery Instructions" above, or (ii) such Old Notes are tendered for the account of a firm that is an Eligible Institution. In all other cases, an Eligible Institution must guarantee the signature(s) on this letter of Transmittal. See Instruction 5. 3. INADEQUATE SPACE. If the space provided in the box captioned "Description of Old Notes" is inadequate, the Certificate number(s) and/or the principal amount of Old Notes and any other required information should be listed on a separate signed schedule which is attached to this Letter of Transmittal. 4. PARTIAL TENDERS AND WITHDRAWAL RIGHTS. Tenders of Old Notes will be accepted only in the principal amount of $1,000 and integral multiples thereof. If less than all the Old Notes evidenced by any Certificate submitted are to be tendered, fill in the principal amount of Old Notes which are to 9 be tendered in the box entitled "Principal Amount of Old Notes Tendered (if less than all)." In such case, new Certificate(s) for the remainder of the Old Notes that were evidenced by your old Certificate(s) will only be sent to the Holder of the Old Notes, promptly after the Expiration Date. All Old Notes represented by Certificates delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. Except as otherwise provided herein, tenders of Old Notes may be withdrawn at any time on or prior to the Expiration Date. In order for a withdrawal to be effective on or prior to that time, a written, telegraphic, telex or facsimile transmission of such notice of withdrawal must be timely received by the Exchange Agent at one of its addresses set forth above or in the Prospectus on or prior to the Expiration Date. Any such notice of withdrawal must specify the name of the person who tendered the Old Notes to be withdrawn, the aggregate principal amount of Old Notes to be withdrawn, and (if Certificates for Old Notes have been tendered) the name of the registered Holder of the Old Notes as set forth on the Certificate for the Old Notes, if different from that of the person who tendered such Old Notes. If Certificates for the Old Notes have been delivered or otherwise identified to the Exchange Agent, then prior to the physical release of such Certificates for the Old Notes, the tendering Holder must submit the serial numbers shown on the particular Certificates for the Old Notes to be withdrawn and the signature on the notice of withdrawal must be guaranteed by an Eligible Institution, except in the case of Old Notes tendered for the account of an Eligible Institution. If Old Notes have been tendered pursuant to the procedures for book-entry transfer set forth in "The Exchange Offer -- Procedures for Tendering" the notice of withdrawal must specify the name and number of the account at DTC to be credited with the withdrawal of Old Notes, in which case a notice of withdrawal will be effective if delivered to the Exchange Agent by written, telegraphic, telex or facsimile transmission. Withdrawals of tenders of Old Notes may not be rescinded. Old Notes properly withdrawn will not be deemed validly tendered for purposes of the Exchange Offer, but may be retendered at any subsequent time on or prior to the Expiration Date by following any of the procedures described in the Prospectus under "The Exchange Offers -- Procedures for Tendering." All questions as to the validity, form and eligibility (including time of receipt) of such withdrawal notices will be determined by the Issuers, in their sole discretion, whose determination shall be final and binding on all parties. Neither the Issuers, any affiliates or assigns of the Issuers, the Exchange Agent nor any other person shall be under any duty to give any notification of any irregularities in any notice of withdrawal or incur any liability for failure to give any such notification. Any Old Notes which have been tendered but which are withdrawn will be returned to the Holder thereof without cost to such Holder promptly after withdrawal. 5. SIGNATURES ON LETTER OF TRANSMITTAL, ASSIGNMENTS AND ENDORSEMENTS. If this Letter of Transmittal is signed by the registered Holder(s) of the Old Notes tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the Certificate(s) without alteration, enlargement or any change whatsoever. If any of the Old Notes tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Old Notes are registered in different name(s) on several Certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal (or facsimiles thereof) as there are different registrations of Certificates. 10 If this Letter of Transmittal or any Certificates or bond powers are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and must submit proper evidence satisfactory to the Issuers, in their sole discretion, of such persons' authority to so act. When this Letter of Transmittal is signed by the registered owner(s) of the Old Notes listed and transmitted hereby, no endorsement(s) of Certificate(s) or separate bond power(s) are required unless New Notes are to be issued in the name of a person other than the registered Holder(s). Signature(s) on such Certificate(s) or bond power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered owner(s) of the Old Notes listed, the Certificates must be endorsed or accompanied by appropriate bond powers, signed exactly as the name or names of the registered owner(s) appear(s) on the Certificates, and also must be accompanied by such opinions of counsel, certifications and other information as the Issuers or the Trustee for the Old Notes may require in accordance with the restrictions on transfer applicable to the Old Notes. Signatures on such Certificates or bond powers must be guaranteed by an Eligible Institution. 6. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If New Notes are to be issued in the name of a person other than the signer of this Letter of Transmittal, or if New Notes are to be sent to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Certificates for Old Notes not exchanged will be returned by mail or, if tendered by book-entry transfer, by crediting the account indicated above maintained at DTC. See Instruction 4. 7. IRREGULARITIES. The Issuers will determine, in their sole discretion, all questions as to the form of documents, validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Old Notes, which determination shall be final and binding on all parties. The Issuers reserve the absolute right to reject any and all tenders determined by them not to be in proper form or the acceptance of which, or exchange for, may, in the view of counsel to the Issuers, be unlawful. The Issuers also reserve the absolute right, subject to applicable law, to waive any of the conditions of the Exchange Offer set forth in the Prospectus under "The Exchange Offer -- Conditions" or any conditions or irregularity in any tender of Old Notes of any particular Holder whether or not similar conditions or irregularities are waived in the case of other Holders. The Issuers interpretation of the terms and conditions of the Exchange Offer (including this Letter of Transmittal and the instructions hereto) will be final and binding. No tender of Old Notes will be deemed to have been validly made until all irregularities with respect to such tender have been cured or waived. Neither the Issuer, any affiliates or assigns of the Issuers, the Exchange Agent, nor any other person shall be under any duty to give notification of any irregularities in tenders or incur any liability for failure to give such notification. 8. QUESTIONS, REQUESTS FOR ASSISTANCE AND ADDITIONAL COPIES. Questions and requests for assistance may be directed to the Exchange Agent at its address and telephone number set forth on the front of this Letter of Transmittal. Additional copies of the Prospectus, the Notice of Guaranteed Delivery and the Letter of Transmittal may be obtained from the Exchange Agent or from your broker, dealer, commercial bank, trust company or other nominee. 9. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under U.S. Federal income tax law, a Holder whose tendered Old Notes are accepted for exchange is required to provide the Exchange Agent 11 with such Holder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below. If the Exchange Agent is not provided with the correct TIN, the Internal Revenue Service (the "IRS") may subject the Holder or other payee to a $50 penalty. In addition, payments to such Holders or other payees with respect to Old Notes exchanged pursuant to the Exchange Offer may be subject to 31% backup withholding. The box in Part 2 of the Substitute Form W-9 may be checked if the tendering Holder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 2 is checked, the Holder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 2 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Exchange Agent will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Exchange Agent. The Exchange Agent will retain such amounts withheld during the 60 day period following the date of the Substitute Form W-9. If the Holder furnishes the Exchange Agent with its TIN within 60 days after the date of the Substitute Form W-9, the amounts retained during the 60 day period will be remitted to the Holder and no further amounts shall be retained or withheld from payments made to the Holder thereafter. If, however, the Holder has not provided the Exchange Agent with its TIN within such 60 day period, amounts withheld will be remitted to the IRS as backup withholding. In addition, 31% of all payments made thereafter will be withheld and remitted to the IRS until a correct TIN is provided. The Holder is required to give the Exchange Agent the TIN (e.g., social security number or employer identification number) of the registered owner of the Old Notes or of the last transferee appearing on the transfers attached to, or endorsed on, the Old Notes. If the Old Notes are registered in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. Certain Holders (including, among others, corporations, financial institutions and certain foreign persons) may not be subject to these backup withholding and reporting requirements. Such Holders should nevertheless complete the attached Substitute Form W-9 below, and write "exempt" on the face thereof, to avoid possible erroneous backup withholding. A foreign person may qualify as an exempt recipient by submitting a properly completed IRS Form W-8, signed under penalties of perjury, attesting to that Holder's exempt status. Please consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which Holders are exempt from backup withholding. Backup withholding is not an additional U.S. Federal income tax. Rather, the U.S. Federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained. 10. LOST, DESTROYED OR STOLEN CERTIFICATES. If any Certificate(s) representing Old Notes have been lost, destroyed or stolen, the Holder should promptly notify the Exchange Agent. The Holder will then be instructed as to the steps that must be taken in order to replace the Certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost, destroyed or stolen Certificate(s) have been followed. 11. SECURITY TRANSFER TAXES. Holders who tender their Old Notes for exchange will not be obligated to pay any transfer taxes in connection therewith. If, however, New Notes are to be delivered 12 to, or are to be issued in the name of, any person other than the registered Holder of the Old Notes tendered, or if a transfer tax is imposed for any reason other than the exchange of Old Notes in connection with the Exchange Offer, then the amount of any such transfer tax (whether imposed on the registered Holder or any other persons) will be payable by the tendering Holder. If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted with the Letter of Transmittal, the amount of such transfer taxes will be billed directly to such tendering Holder. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE THEREOF) AND ALL OTHER REQUIRED DOCUMENTS MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE. 13 TO BE COMPLETED BY ALL TENDERING SECURITYHOLDERS (SEE INSTRUCTION 9) PAYER'S NAME: THE BANK OF NEW YORK - ---------------------------------------------------------------------------------------------------------------- SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN _________________________ Form W-9 TIN IN THE BOX AT RIGHT AND Social Security Number or CERTIFY BY SIGNING AND Employer Identification Number DATING BELOW -------------------------------------------------------------------------------- Department of the Treasury Part 2 Internal Revenue Service Awaiting TIN [_] ----------------------------------- CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT (1) the number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), (2) 1 am not subject to backup withholding either because (i) I am exempt from backup withholding, (ii) I have not been notified by the Internal Revenue Service ("IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding, and (3) any other information provided on this form is true and correct. Payer's Request for Taxpayer SIGNATURE ________________________________________________________________ Identification Number (TIN) and Certification DATE _____________________________________________________________________ You must cross out item (iii) in Part (2) above if you have been notified by the IRS that you are subject to backup withholding because of underreporting interest or dividends on your tax return and you have not been notified by the IRS that you are no longer subject to backup withholding. ________________________________________________________________________________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY IN CERTAIN CIRCUMSTANCES RESULT IN BACKUP WITHHOLDING OF 31% OF ANY AMOUNTS PAID TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. - -------------------------------------------------------------------------------- CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and that either (1) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (2) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number by the time of payment, 31% of all payments made to me on account of the New Notes shall be retained until I provide a taxpayer identification number to the Exchange Agent and that, if I do not provide my taxpayer identification number within 60 days, such retained amounts shall be remitted to the Internal Revenue Service as backup withholding and 31% of all reportable payments made to me thereafter will be withheld and remitted to the Internal Revenue Service until I provide a taxpayer identification number. Signature ___________________________________ Date _____________________ - -------------------------------------------------------------------------------- 14 -----END PRIVACY-ENHANCED MESSAGE-----