-----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, UrNGG8L59MzJfA+C1ibqLESGYA+ln+twLSwcrAUj/ZlQDzEWyR8fgzVvdYTOCSUa rQPtr8aMsG8vGHXcE5aEpA== 0000944209-97-001436.txt : 19971031 0000944209-97-001436.hdr.sgml : 19971031 ACCESSION NUMBER: 0000944209-97-001436 CONFORMED SUBMISSION TYPE: S-4/A PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 19971030 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/A SEC ACT: SEC FILE NUMBER: 333-34471 FILM NUMBER: 97703962 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/A SEC ACT: SEC FILE NUMBER: 333-34471-01 FILM NUMBER: 97703963 BUSINESS ADDRESS: STREET 1: 1050 PRAIRIE AVE CITY: INGLEWOOD STATE: CA ZIP: 90301 BUSINESS PHONE: 3104191500 MAIL ADDRESS: STREET 1: 1050 PRAIRIE AVE 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/A SEC ACT: SEC FILE NUMBER: 333-34471-02 FILM NUMBER: 97703964 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/A SEC ACT: SEC FILE NUMBER: 333-34471-03 FILM NUMBER: 97703965 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/A SEC ACT: SEC FILE NUMBER: 333-34471-04 FILM NUMBER: 97703966 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/A SEC ACT: SEC FILE NUMBER: 333-34471-05 FILM NUMBER: 97703967 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/A SEC ACT: SEC FILE NUMBER: 333-34471-06 FILM NUMBER: 97703968 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/A SEC ACT: SEC FILE NUMBER: 333-34471-07 FILM NUMBER: 97703969 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/A SEC ACT: SEC FILE NUMBER: 333-34471-08 FILM NUMBER: 97703970 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/A SEC ACT: SEC FILE NUMBER: 333-34471-09 FILM NUMBER: 97703971 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 1: 1050 PRAIRIE AVE 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/A SEC ACT: SEC FILE NUMBER: 333-34471-10 FILM NUMBER: 97703972 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/A SEC ACT: SEC FILE NUMBER: 333-34471-11 FILM NUMBER: 97703973 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/A SEC ACT: SEC FILE NUMBER: 333-34471-12 FILM NUMBER: 97703974 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/A SEC ACT: SEC FILE NUMBER: 333-34471-13 FILM NUMBER: 97703975 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/A 1 FORM S-4 AMENDMENT #1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 30, 1997. REGISTRATION NO. 333-34471 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 --------------- AMENDMENT NO. 1 TO 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 NUM- BER, INCLUDING (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OF- FICES) 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(2) - ------------------------------------------------------------------------------------------------- Guaranties of Series B 9 1/2% Senior Subordinated Notes due 2007......... $125,000,000 None(3) None(3) None(3)
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- (1) Estimated solely for the purpose of computing the registration fee pursuant to Rule 457. (2) Previously paid with August 27, 1997 filing. (3) 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 OCTOBER 30, 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. There can be no assurance that in the event of a Change of Control the Company will have sufficient funds, or that it will otherwise be permitted under the terms of the Senior Debt, to satisfy its obligations with respect to any or all of the tendered Notes. See "Risk Factors--Ability to Effect Repurchase of Notes upon a Change of Control." The New Notes will be fully 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"). 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 $11.7 million of Senior Debt (including secured Indebtedness), plus accounts payable ranking pari passu to the Notes of $13.2 million. In addition, if Sunflower Racing, Inc.'s plan of reorganization is approved, the Company may guarantee up to $30.0 million of debt to be incurred by Sunflower Racing, Inc., which guarantee would rank senior to the New Notes. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." 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, or is a broker-dealer who purchased Old Notes from the Issuers, such Holder (i) could not rely on the applicable interpretations of the staff of the Commission, (ii) will not be permitted or entitled to tender such Old Notes in the Exchange Offer, and (iii) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. 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. 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 IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS. 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; however, as a result of covenants in the Indenture, HPOC currently files reports jointly with the Company pursuant to the Exchange Act. 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 and by filing separate periodic reports for Crystal Park Hotel and Casino Development Company, LLC and for Mississippi-I Gaming, L.P. (since they are not wholly-owned by 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 $336.6 million, EBITDA(/1/) of approximately $2.7 million, Adjusted EBITDA (as defined) of approximately $52.0 million and (after giving effect to the one time, non-cash $11.4 million write off of Hollywood Park's investment in Sunflower Racing, Inc. and the $36.6 million loss on the sale of Boomtown Las Vegas) a net loss of approximately $37.5 million and a deficiency of earnings to fixed charges of approximately $34.8 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. See "Unaudited Summary Pro Forma Financial Information." 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. (1) EBITDA data, which is not a measure of financial performance under GAAP, is presented because such data is used by certain investors to determine the Company's ability to service or incur indebtedness. EBITDA and Adjusted EBITDA are not calculated by the same means by all Companies and, accordingly, are not necessarily appropriate measures for comparing Companies' performance. Thus, neither EBITDA nor Adjusted EBITDA should be considered in isolation from, or as a substitute for, net earnings (loss), cash flows from operations or cash flow data prepared in accordance with GAAP. 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"), the entity that owns the facility, with unaffiliated minority investors owning the balance of the facility. In order 2 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 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 4 of Chartwell Leisure Inc. ("National Gaming") for approximately $5.25 million, and made a down payment of $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). Redemption of Depositary Shares and Common Stock Repurchases Effective August 28, 1997, the Company's 2,749,000 outstanding Depositary Shares were converted into 2,291,492 shares of the Company's common stock, thereby eliminating the annual preferred cash dividend payment of approximately $1,925,000 for future periods. 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. In no event will the Expiration Date be extended past [ ], 1998 (i.e, 90 days following commencement of the Exchange Offer). 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 6 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, 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." 7 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." 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, fully 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, without regard to the foregoing limitations, 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 at a price equal to the least of (i) the principal amount thereof, (ii) the price at which the beneficial owner acquired the New Notes (together with accrued interest and liquidated damages, if any) or (iii) such lesser amount as may be required by any relevent gaming authority. 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. There can be no assurance that in the event of a Change of Control the Company will have sufficient funds, or that it will otherwise be permitted under the terms of the Senior Debt, to satisfy its obligations with respect to any or all of the tendered Notes. 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) beyond specified limits (which may be substantial), 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 OF HOLLYWOOD PARK, INC.] - ------- (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....................................... $336,583 $174,095 Operating expenses............................. 354,666 157,022 Operating income (loss)........................ (18,083) 17,073 Interest expense............................... 15,468 7,398 Income (loss) before extraordinary item........ (37,523) 5,304 Dividends on convertible preferred stock(a).... 1,925 962 Income (loss) before extraordinary item attributable to (allocated to) common shareholders.................................. (39,448) 4,342 OTHER DATA: Depreciation and amortization.................. $ 20,818 $ 14,558 Ratio of earnings to fixed charges(b).......... -- (c) 2.07x
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(d)................................................ 82,934 89,399 Stockholders' equity....................................... 216,607 216,607 OTHER DATA: Cash flows provided by (used in): Operating activities....................................... $ 14,949 -- Investing activities....................................... 11,846 -- Financing activities....................................... (308) --
(Footnotes appear on following page) 12 - -------- The Company also considers relevant to Noteholders the following calculation of earnings before interest, taxes, depreciation, amortization and non- recurring expenses ("EBITDA"), and as adjusted ("Adjusted EBITDA"):
SIX MONTHS YEAR ENDED ENDED JUNE DECEMBER 31, 30, 1996 1997 ------------ ---------- Operating income (loss).............................. $(18,083) $17,073 Add back: Depreciation and amortization...................... 20,818 14,558 -------- ------- EBITDA........................................... 2,735 31,631 Hollywood Park/Boomtown merger costs............... 1,291 1,487 Write off of investment in a business.............. 11,412 0 Loss on sale of a business......................... 36,563 357 -------- ------- Adjusted EBITDA.................................. $ 52,001 $33,475 ======== =======
EBITDA data, which is not a measure of financial performance under GAAP, is presented because such data is used by certain investors to determine the Company's ability to service or incur indebtedness. EBITDA and Adjusted EBITDA are not calculated by the same means by all Companies and, accordingly, are not necessarily appropriate measures for comparing Companies' performance. Thus, neither EBITDA nor Adjusted EBITDA should be considered in isolation from, or as a substitute for, net earnings (loss), cash flows from operations or cash flow data prepared in accordance with GAAP. (a) Effective August 28, 1997 the Company has caused conversion of all convertible preferred stock, into an aggregate of 2,291,492 shares of common stock, thereby eliminating this annual dividend going forward. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." (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) The Company's earnings were not sufficient to cover its fixed charge requirement by $34.8 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 Las Vegas. (d) 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, and secured by all assets of the Company, HPOC and 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." 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. The Bank Credit Facility allows for interest rate swap agreements, or other interest rate protection agreements with respect to the Bank Credit Facility, up to a maximum notional amount of $125,000,000. The Company does not currently utilize such financial instruments, but may take advantage of such agreements in the future. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Unaudited Pro Forma Combined Condensed Financial Statements." 14 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 $11.7 million of Senior Debt and rank pari passu with approximately $13.2 million of accounts payable. 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. On a pro forma basis, as of June 30, 1997 the ratio of indebtedness to total capital was approximately 38%. In addition, the Company may utilize the Bank Credit Facility to fund planned expansion projects, which are currently budgeted to cost approximately $35 million in the aggregate (up to $95 million if a license is received for the Indiana Project). See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." POTENTIAL INABILITY TO REPAY DEBT 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. For the year ended December 31, 1996, pro forma fixed charges exceeded pro forma earnings by $34.6 million. 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." 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 15 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 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 16 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. 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. See "Business--Business Strategy." 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. In addition, the Company's currently planned expansion projects are budgeted to cost approximately $25 million (for Boomtown Reno), $10 million (for Boomtown New Orleans) and $60 million (for the proposed Indiana Project, if approved by regulators), respectively. Some or all of these amounts will be funded by the Bank Credit Facility, thereby increasing the amount of Senior Debt to which the Notes are subordinated. Further, additional Senior Debt may be incurred to finance other potential expansion projects. See "Business-- Business Strategy." 17 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 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 and the six months ended June 30, 1997, the Company's allocable share of the EBITDA generated by Boomtown New Orleans represented approximately 37% and 34%, respectively, 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. 18 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 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. DEPENDENCE ON CERTAIN MAJOR THOROUGHFARES 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. 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. 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. There can be no assurance that in the event of a Change of Control the Company will have sufficient funds, or that it will otherwise be permitted under the terms of the Senior Debt, to satisfy its obligations with respect to any or all of the tendered Notes. See "-- Subordination and Ranking." 19 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 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." 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. 20 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 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. Although to the Company's knowledge there have not been any local, state or federal inquiries or investigations material to the Company relating to environmental regulation of the Company's or its subsidiaries' properties, there can be no assurance that such an inquiry or investigation will not be undertaken in the future, which could result in substantial remedial or other obligations being imposed on the Company or its subsidiaries. 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. 21 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. 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 22 (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. 23 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 net proceeds received by the Company from the sale of the Old Notes were used to repay approximately $112.0 million of borrowings under the Bank Credit Facility. The remaining proceeds from the sale of Old Notes have been, and are expected to continue to be, used for working capital and other general corporate purposes, including eliminating certain financial interests of third parties in Boomtown's operations and funding Hollywood Park's expansion and growth strategy. 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 24 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. 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. In no event will the Expiration Date be extended past [ ], 1998 (i.e., 90 days following commencement of the Exchange Offer). 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. 25 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. 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. 26 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 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 27 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. 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 (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. 28 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. 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 OVERNIGHT COURIER: BY HAND: The Bank of New York 101 Barclay The Bank of New York 101 Barclay Street--(7 East) Reorganization Street--(7 East) Reorganization Section Corporate Trust Services Section Corporate Trust Services WindowNew York, New York WindowNew York, New York 10286Attention: Arwen Gibbons 10286Attention: Arwen Gibbons BY FACSIMILE: BY MAIL: (212) 815-6339 The Bank of New York 101 Barclay Street--(7 East)Reorganization SectionNew York, New York 10286Attention: Arwen Gibbons CONFIRM BY TELEPHONE: (212) 815-5920 29 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 Old Notes may be offered for resale, resold and otherwise transferred by any holder of such New Notes (other than any such holder which 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, or any broker-dealer who purchased Old Notes from the Company, 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 Old Notes, where such Old 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 30 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. If an Initial Purchaser or any Holder of Old Notes notifies the Company prior to the 20th day following consummation of Exchange Offer that (A) it is prohibited by law or Commission policy from participating in the Exchange Offer or (B) that it may not resell the New Notes acquired by it in the Exchange Offer to the public without delivering a prospectus and the prospectus contained in the Exchange Offer registration statement is not appropriate or available for such resales or (C) that it is a broker-dealer and owns Old Notes acquired directly from the Company or an affiliate of the Company, the Company is required to file with the Commission a shelf registration statement to cover resales of the Old Notes by the holders thereof who satisfy certain conditions relating to the provision of information in connection with such shelf registration statement. 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." 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. 31 CERTAIN FEDERAL INCOME TAX CONSEQUENCES The following sets forth a summary of the material 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 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 will not be taxable to the Holders thereof for federal income tax purposes. An exchanging Holder will 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. 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 32 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 GENERAL IN NATURE AND IS THEREFORE NOT INTENDED AS TAX ADVICE FOR EACH PARTICULAR NOTEHOLDER. 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. 33 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. 34 SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA The following selected historical financial data 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 elsewhere herein. The Hollywood Park and Boomtown unaudited 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 unaudited 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 selected unaudited 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 Selected Historical 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. 35 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)-- primary............... $ 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: Cash flows provided by (used in): Operating activities... $11,262 $ 13,280 $ (7,287) $ 20,291 $ 13,137 $ 15,504 $ 14,949 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) (308) Capital expenditures... 5,319 12,902 27,584 25,150 23,786 9,132 3,927 Ratio of earnings to fixed charges (a)...... 2.36x 5.89x 2.74x -- (b) -- (b) -- (b) 21.56x BALANCE SHEET DATA: (C) 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 - ------- The Company also considers relevant to Noteholders the following calculation of EBITDA and 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 ------- -------- -------- -------- -------- -------- -------- EBITDA............... 17,445 15,337 17,964 14,837 10,862 613 13,780 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 data, which is not a measure of financial performance under GAAP, is presented because such data is used by certain investors to determine the Company's ability to service or incur indebtedness. EBITDA and Adjusted EBITDA are not calculated by the same means by all Companies and, accordingly, are not necessarily appropriate measures for comparing Companies' performance. Thus, neither EBITDA nor Adjusted EBITDA should be considered in isolation from, or as a substitute for, net earnings (loss), cash flows from operations or cash flow data prepared in accordance with GAAP. (a) 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. (b) 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. (c) Balance sheet data as of June 30, 1997, includes the accounts of Boomtown. 36 BOOMTOWN, INC. SELECTED HISTORICAL FINANCIAL DATA
NINE MONTHS ENDED JUNE 30, YEARS ENDED SEPTEMBER 30, (UNAUDITED) ------------------------------------------------------ --------------------- 1992 1993 1994 1995 1996 1996 1997 ------- -------- --------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA AND RATIOS) STATEMENT OF OPERATIONS DA- TA: REVENUES: Gaming.................... $42,009 $ 42,416 $ 76,326 $189,306 $188,368 $139,350 $144,353 Food and beverage......... 3,785 3,877 7,973 15,613 16,314 12,293 13,036 Hotel, truck stop and oth- er....................... 10,059 12,780 21,700 29,929 35,553 24,882 24,070 ------- -------- --------- -------- -------- -------- -------- 55,853 59,073 105,999 234,848 240,235 176,525 181,459 ------- -------- --------- -------- -------- -------- -------- EXPENSES: Gaming.................... 20,677 21,732 38,753 98,637 102,634 76,206 83,118 Food and beverage......... 3,170 3,349 8,179 17,639 19,213 14,569 17,159 General and administrative and other................ 18,750 21,133 41,019 97,822 91,977 66,189 60,355 Depreciation and amortiza- tion..................... 3,528 3,839 5,891 10,422 10,618 8,135 11,636 Compensation stock appre- ciation rights and stock options.................. 2,229 0 0 0 0 0 0 Pre-opening expenses...... 0 0 15,787 0 0 0 0 Loss on marketable securi- ties..................... 0 0 1,691 0 0 0 0 Hollywood Park/Boomtown merger costs............. 0 0 0 0 301 712 1,610 Loss on sale of a busi- ness..................... 0 0 0 0 36,563 36,563 1,271 ------- -------- --------- -------- -------- -------- -------- 48,354 50,053 111,320 224,520 261,306 202,374 175,149 ------- -------- --------- -------- -------- -------- -------- Operating income (loss).... 7,499 9,020 (5,321) 10,328 (21,071) (25,849) 6,310 Interest expense.......... 3,369 1,033 5,632 13,434 13,838 10,362 10,439 ------- -------- --------- -------- -------- -------- -------- Income (loss) before minor- ity interests and income taxes..................... 4,130 7,987 (10,953) (3,106) (34,909) (36,211) (4,129) Minority interest......... 0 0 (351) (1,105) (645) (878) 96 ------- -------- --------- -------- -------- -------- -------- Income (loss) before income taxes and extraordinary item...................... 4,130 7,987 (10,602) (2,001) (34,264) (35,333) (4,225) Income tax expense (bene- fit)...................... 1,669 3,035 (2,779) 876 794 (50) (2,103) ------- -------- --------- -------- -------- -------- -------- Income (loss) before ex- traordinary item.......... 2,461 4,952 (7,823) (2,877) (35,058) (35,283) (2,122) Extraordinary item (a)..... 0 (370) 229 0 0 0 8,420 ------- -------- --------- -------- -------- -------- -------- Net income (loss).......... $ 2,461 $ 4,582 $ (8,052) $ (2,877) $(35,058) $(35,283) $(10,542) ======= ======== ========= ======== ======== ======== ======== Dividend requirements on preferred stock........... $ 200 $ 50 $ 0 $ 0 $ 0 $ 0 $ 0 Net income (loss) attribut- able to (allocated to) common shareholders....... $ 2,261 $ 4,532 $ (8,052) $ (2,877) $(35,058) $(35,283) $(10,542) ======= ======== ========= ======== ======== ======== ======== PER COMMON SHARE: Income (loss) before ex- traordinary item......... $ (0.61) $ 0.65 $ (0.90) $ (0.31) $ (3.79) $ (3.82) $ (0.21) Net income (loss)......... $ (0.61) $ 0.60 $ (0.93) $ (0.31) $ (3.79) $ (3.82) $ (1.07) Number of common shares.... 3,708 7,503 8,690 9,228 9,248 9,243 9,830 OTHER DATA: Ratio of earnings to fixed charges (b)............... 2.18x 7.86x -- (c) -- (c) -- (c) -- (c) -- (c) CASH FLOWS PROVIDED BY (USED IN): Operating activities...... $ 6,850 $ 6,565 $ (182) $ 9,940 $ 13,851 $ 10,195 $ 12,195 Investing activities...... (6,279) (42,505) (106,154) (6,794) (5,548) (6,779) (9,918) Financing activities...... (1,216) 48,508 100,133 6,238 (5,977) (2,605) (5,167) Capital expenditures...... 6,322 23,849 114,729 15,146 5,679 7,168 9,718 BALANCE SHEET DATA: Total assets.............. $55,916 $108,616 $ 238,467 $239,198 $205,988 $204,186 $ -- (d) Other liabilities......... 10,632 7,581 25,309 27,405 31,871 29,351 -- Long term obligations..... 31,973 0 105,140 106,547 103,729 104,732 -- Stockholders' equity...... 13,311 101,035 108,018 105,246 70,388 70,103 -- - ------- The Company also considers relevant to Noteholders the following calculation of EBITDA and Adjusted EBITDA: Operating income (loss) as presented above...... $ 7,499 $ 9,020 $ (5,321) $ 10,328 $(21,071) $(25,849) $ 6,310 Add back depreciation and amortization............ 3,528 3,839 5,891 10,422 10,618 8,135 11,636 ------- -------- --------- -------- -------- -------- -------- EBITDA.................. 11,027 12,859 570 20,750 (10,453) (17,714) 17,946 Add back compensation stock appreciation rights and stock options................. 2,229 0 0 0 0 0 0 Add back pre-opening expenses................ 0 0 15,787 0 0 0 0 Add back loss on marketable securities... 0 0 1,691 0 0 0 0 Add back Hollywood Park/Boomtown merger costs................... 0 0 0 0 301 712 1,610 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 $ 20,750 $ 26,411 $ 19,561 $ 20,827 ======= ======== ========= ======== ======== ======== ========
(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 nine months ended June 30, 1997, net of tax effect of approximately $5.9 million for the nine months ended June 30, 1997. (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) Boomtown's earnings were not sufficient to cover the fixed charge requirements by $16.5 million, $2.7 million and $34.3 million for the years ended September 30, 1994, 1995 and 1996, respectively, and $35.3 million and $4.2 million for the nine months ended June 30, 1996 and June 30, 1997, respectively. (d) As of June 30, 1997, the accounts of Boomtown were consolidated with Hollywood Park's. 37 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.......................... 33,839 16,250 -------- -------- 336,583 174,095 -------- -------- 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)............................... (18,083) 17,073 Interest expense..................................... 15,468 7,398 -------- -------- Income (loss) before minority interests and income taxes................................................ (33,551) 9,675 Minority interest (benefit).......................... (149) 63 -------- -------- Income (loss) before income taxes and extraordinary item................................................. (33,402) 9,612 Income tax expense................................... 4,121 4,308 -------- -------- Income (loss) before extraordinary item............... $(37,523) $ 5,304 ======== ======== Dividend requirements on convertible preferred stock.. $ 1,925 $ 962 Income (loss) before extraordinary item attributable to (allocated to) common shareholders................ $(39,448) $ 4,342 ======== ======== PER COMMON SHARE: Income (loss) before extraordinary item--primary..... $ (1.65) $ 0.18 Income (loss) before extraordinary item--fully di- luted............................................... $ (1.65) $ 0.18 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: Ratio of earnings to fixed charges (a)................ -- (b) 2.07x AS OF JUNE 30, 1997 ---------- BALANCE SHEET DATA: Total assets......................................... $438,139 Other liabilities.................................... 88,038 Minority interests................................... 3,030 Long term obligations................................ 130,464 Stockholders' equity................................. 216,607 - ------- The Company also considers relevant to Noteholders the following pro forma calculation of EBITDA and Adjusted EBITDA: Operating income (loss) as presented above.......... $(18,083) $ 17,073 Add back depreciation and amortization.............. 20,818 14,558 -------- -------- EBITDA............................................. 2,735 31,631 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.................................... $ 52,001 $ 33,475 ======== ========
(a) 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. (b) Hollywood Park's earnings were not sufficient to cover its pro forma fixed charge requirement by $34.8 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. 38 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 and, since Crystal Park is not on any race track premises, Crystal Park LLC entered into a five-year lease with an unaffiliated party to operate the card club casino. The lease provides for monthly payments of approximately $200,000 for the first six months, $350,000 for the months 7 through 12 39 and $759,000 for months 13 through 60. The current operator, Compton Entertainment, Inc. ("CEI"), is having difficulty making the initial payments and has asked that the $759,000 figure be renegotiated; however, the Company has actions for unlawful detainer pending against CEI. Further, CEI's license has been recently revoked, and the Company believes that CEI is attempting to have it reinstated, Thus, the Company may have to attempt to replace CEI with a new tenant. As of September 30, 1997, CEI owed Crystal Park LLC $600,000, of which $200,000 is covered by a rent security deposit Crystal Park LLC received from CEI in October 1996, and of which $350,000 was not recorded as revenues but instead was fully allowed for with a $350,000 valuation allowance. See "Business--Gaming Operations--Crystal Park." 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." 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 pursuant to a previously announced intention to repurchase and retire up to 2,000,000 shares of its common stock on the open market or in negotiated transactions. 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 40 entertainment centers, food and beverage sales, hotel room sales (at Boomtown Reno and Las Vegas) 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 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. Included in the results of operations for the six months ended June 30, 1996, 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 so that Sunflower could 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 expects to continue to operate Sunflower at least until a confirmation hearing scheduled for December 18, 1997. 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%, with $977,000 of the difference due primarily to on-track attendance declines and one fewer live race day at Hollywood Park, 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. The cost of food and beverage sales for the six months ended June 30, 1997 and 1996, did not materially change, and exceeded the revenues generated by food and beverage sales by $1,959,000 or 28.6%, and $1,445,000 or 18.9%, respectively. Included in the cost of food and beverage sales (commencing with the July 1, 1994, opening of the Hollywood Park-Casino) were the costs associated with providing complimentary meals to card players, as is the customary practice in the local card club market, thus generating costs in excess of food and beverage revenues. Administrative expenses decreased by $3,058,000, or 14.2%, due primarily to decreased expansion disbursements of approximately $551,000 in 1997, and the inclusion of Sunflower's expenses of approximately $1,030,000 in 1996 with no corresponding expenses in 1997, with the balance of the savings attributable to cost containment programs implemented at all properties. 41 Depreciation and amortization increased by $380,000, or 7.0%, primarily due to depreciation and amortization associated with Crystal Park of approximately $802,000 recorded in 1997 with no corresponding expense in 1996, offset by the inclusion of Sunflower's depreciation and amortization expenses of approximately $536,000 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. Gaming 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 lease revenues, $6,032,000 of gaming 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. Racing revenues decreased by $5,728,000, or 7.4%, primarily due to the exclusion of Sunflower's racing revenues for the nine months ended December 31, 1996. Food and Beverage sales decreased by $5,836,000, or 29.5%, with approximately $2,773,000 of the difference attributable to the inclusion of sales to PCM in 1995 with no corresponding sales in 1996, with approximately $2,414,000 of the difference due to the inclusion of a full year of food and beverage sales recorded for Sunflower in 1995 and just three months of Sunflower sales recorded in 1996, with the balance of the difference primarily due to on-track attendance declines at Hollywood Park. Total operating expenses increased by $15,939,000, or 12.5%, for the year ended December 31, 1996, compared to the year ended December 31, 1995, primarily due to the inclusion of $27,249,000 of Hollywood Park-Casino gaming floor expenses (with corresponding gaming floor expenses of $4,919,000 in 1995) which more than offset a $7,476,000 reduction in expenses arising from the exclusion in 1996 of Sunflower's expenses. Food and Beverage expense decreased by $5,589,000, or 22.2%, with $2,089,000 of the savings attributable to the exclusion of Sunflower's expenses subsequent to the first quarter of 1996, and with the balance of the savings primarily attributable to cost savings programs implemented at the Hollywood Park-Casino. Administrative expenses decreased by $5,315,000, or 11.3%, due to the inclusion of a full year of Sunflower expenses in 1995 and just three months of corresponding costs recorded 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 expects to continue to operate Sunflower at least until a confirmation hearing scheduled for December 18, 1997. 42 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 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. The 1994 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, and 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 $13,248,000, or 11.3%, during 1995, as compared to the year ended December 31, 1994. Included in 1995 Gaming 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). Racing revenues decreased by $1,683,000, or 2.1%, as a result of a $3,151,000 decline in racing revenues at Sunflower due to intense competition from nearby Missouri riverboat gaming, which more than offset simulcast racing revenue increases at both Hollywood Park and Turf Paradise. Food and beverage revenues decreased by $757,000, or 3.7%. Food and beverage sales at Sunflower declined in 1995 by $1,343,000, as compared to 1994, also as a result of competition from Missouri riverboat gaming. Such Sunflower food and beverage revenues declines were offset by increased Hollywood Park-Casino revenues, due to the casino being open for all of 1995 (as opposed to only six months in 1994). Other income increased by $777,000, or 12.3%, principally because (i) other non-casino income increased by $940,000, or 15.0%, and (ii) revenue declines of $769,000 at Hollywood Park due to the cancellation of the Forum Parking Agreement were offset by a full year of Hollywood Park-Casino gift shop and health club sales in 1995 (as opposed to only six months of such sales in 1994). A new Forum Parking Agreement was executed on October 24, 1995, covering the one year from October 1, 1995. Total operating expenses, inclusive of $31,938,000 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 $18,196,000, or 16.7%, during the year ended December 31, 1995, as compared to the year ended December 31, 1994. Gaming expenses of $4,919,000 were recorded in 1995, due to the November 17, 1995, acquisition of the Hollywood Park-Casino gaming floor business from PCM. Racing expenses decreased by $824,000, or 2.7%, primarily due to five fewer live race days at Hollywood Park in 1995 as compared to 1994. Food and beverage expenses increased by $3,310,000, or 15.1%, primarily due to a full year of Hollywood Park-Casino food and beverage services in 1995 (as compared to only 43 six months of such activity in 1994). Administrative expenses increased by $3,294,000, or 7.8%, primarily due to expansion costs incurred in connection with card club casino initiative campaigns, which were defeated in September and November, as well as costs for other expansion endeavors such as a proposed stadium and other card club casinos. All costs associated with expansion projects are expensed during the evaluation stages. 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. 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 44 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, 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 Net loss for the fiscal year ended September 30, 1996, was $35.1 million compared to a net loss of $2.9 million for the fiscal year ended September 30, 1995. Included in the results of operations for the fiscal year ended September 30, 1996, was a one time non-cash charge of $36.6 million related to the Blue Diamond Swap (as described previously). There was no corresponding expense in the results of operations for the fiscal year ended September 30, 1995. During the fiscal year ended September 30, 1996 total revenues were $236.0 million compared to $231.8 million in the prior year. Gaming revenues were $188.4 million in 1996 as compared to $189.3 million in 1995. Gains in gaming revenues at Boomtown Reno and Boomtown Biloxi during 1996 were offset by decreases in gaming revenues at Boomtown New Orleans and Boomtown Las Vegas (which was divested in the Blue Diamond Swap). Gaming revenues primarily consist of revenues from slot machines, table games and Keno. Boomtown Reno's gaming revenues grew 5.2% over the prior year primarily as a result of increased casino patronage due to higher traffic volume on Interstate 80, on which Boomtown Reno is heavily dependent for customers. Boomtown Biloxi's gaming revenues have improved due to expansion of the gaming market in the Gulf Coast region combined with increased marketing and promotional efforts. Boomtown Biloxi's gaming revenues increased by 10.0% over the prior year. Boomtown New Orleans' gaming 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 45 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. 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. 46 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 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 47 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. 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. Cash provided by operations for the six months ended June 30, 1997, contributed $14,949,000 to the increase in cash and cash equivalents. Cash provided by investing activities contributed $11,846,000 to the increase, with the majority ($12,264,000) being provided by the cash acquired in the merger with Boomtown on June 30, 1997. Other sources of cash from investing activities included proceeds from short term investments of $5,428,000, while uses of cash included normal capital expenditures of $3,927,000, and the purchase of short term investments for $1,937,000. Cash used by financing activities was $308,000, representing dividend payments to preferred stockholders of $962,000, offset by cash received from the exercise of common stock options of $654,000. During the nine months ended June 30, 1997, Boomtown's cash and cash equivalents decreased by $2,890,000. Cash flow from operations contributed $12,195,000, while cash used in investing activities was $9,918,000 ($9,718,000 of which was used for additions to property, plant and equipment) and cash used in financing activities was $5,167,000 (for the repayment of long-term debt). 48 During the six months ended June 30, 1996, Hollywood Park's cash and cash equivalents increased by $8,424,000. The increase in cash is attributed to cash provided by operations of $15,504,000, reduced by cash used in investing activities of $6,118,000 (primarily additions to property, plant and equipment) and cash used in financing activities of $962,000 (dividend payments to preferred stockholders). During the nine-months ended June 30, 1996, Boomtown's cash and cash equivalents increased by $812,000. Cash provided from operations of $10,195,000 was reduced by investing activities of $6,779,000 (primarily for additions to property, plant and equipment) and financing activities of $2,605,000 (primarily due to the prepayment of a property lease). 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 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. The Bank Credit Facility allows for interest rate swap agreements, or other interest rate protection agreements with respect to the Bank Credit Facility, up to a maximum notional amount of $125,000,000. The Company does not currently utilize such financial instruments, but may take advantage of such agreements in the future. 49 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 working capital and other general corporate purposes. 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's 2,749,900 outstanding Depositary Shares were converted into an aggregate of 2,291,492 shares of its common stock, thereby eliminating for future periods the annual preferred cash dividend payment of approximately $1,925,000. 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 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. 50 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. The Bankruptcy Court has issued an order extending the Cash Collateral Agreement until the Court holds its confirmation hearing scheduled to occur on December 18, 1997. The extension is 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, 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. Capital Commitments; Expansion Costs. The Company had no material capital commitments as of September 30, 1997. However, in addition to the financing needs discussed above, Hollywood Park has other potential capital needs with respect to Boomtown Reno and Boomtown New Orleans. The Company expects to spend approximately $25,000,000 on an expansion and renovation of Boomtown Reno, including additional hotel rooms, expanded gaming space and additional entertainment and other amenities. The Company also expects to spend approximately $10,000,000 on an expansion and upgrade of Boomtown New Orleans, including refurbishment of the existing gaming area and a building out of the second floor of the land-based facility. The Boomtown Reno expansion is expected to be completed by the end of 1998, while the Boomtown New Orleans expansion is expected to be completed by mid-1998. Longer term capital needs may include such projects as 51 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. 52 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. 53 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 0 17,456 -------- -------- -------- -------- -------- --------- 143,225 241,318 (47,960) 193,358 0 336,583 -------- -------- -------- -------- -------- --------- 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)(a) 20,818 -- -- -- -- 444 (b) -- -- -- -- -- 67 (c) -- 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) (199) (18,083) Interest expense ...... 942 13,988 (299) 13,689 (216)(d) 15,468 -- -- -- -- 329 (e) -- -- -- -- -- (11,843)(f) -- -- -- -- -- 692 (g) -- -- -- -- -- 11,875 (h) -- -------- -------- -------- -------- -------- --------- Income (loss) before minority interests and income taxes........... (775) (36,508) 4,768 (31,740) (1,036) (33,551) Minority interest ..... 15 (164) 0 (164) 0 (149) -------- -------- -------- -------- -------- --------- Income (loss) before income taxes........... (790) (36,344) 4,768 (31,576) (1,036) (33,402) Income tax expense (benefit)............. 3,459 (320) 1,370 1,050 (388)(i) 4,121 -------- -------- -------- -------- -------- --------- Income (loss) before extraordinary item..... $ (4,249) $(36,024) $ 3,398 $(32,626) $ (648) $ (37,523) ======== ======== ======== ======== ======== ========= Dividend requirement on convertible preferred stock.................. $ 1,925 Loss before extraordinary item allocated to common shareholders........... $ (39,448) ========= 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
54 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 0 8,885 ------- -------- -------- -------- ------- -------- 73,139 123,966 (23,010) 100,956 0 174,095 ------- -------- -------- -------- ------- -------- 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 (b) 14,558 -- -- -- -- 34 (c) -- 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 (256) 17,073 Interest expense....... 129 6,951 (101) 6,850 (108)(d) 7,398 -- -- -- -- 165 (e) -- -- -- -- -- (5,922)(f) -- -- -- -- -- 346 (g) -- -- -- -- -- 5,938 (h) -- ------- -------- -------- -------- ------- -------- Income (loss) before minority interests and income taxes........... 7,871 (1,432) 3,911 2,479 (675) 9,675 Minority interest...... 63 0 0 0 0 63 ------- -------- -------- -------- ------- -------- Income (loss) before income taxes........... 7,808 (1,432) 3,911 2,479 (675) 9,612 Income tax expense (benefit)............. 3,100 (587) 2,051 1,464 (256)(i) 4,308 ------- -------- -------- -------- ------- -------- Income (loss) before extraordinary item..... $ 4,708 $ (845) $ 1,860 $ 1,015 $ (419) $ 5,304 ======= ======== ======== ======== ======= ======== Dividend requirement on convertible preferred stock.................. $ 962 Income before extraordinary item available to common shareholders........... $ 4,342 ======== Per common share: Loss before extraordinary item-- primary............... $ 0.18 Loss before extraordinary item-- fully diluted......... $ 0.18 Number of common shares--primary....... 23,794 Number of common shares--fully diluted. 26,085
55 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 ======== ========= ========
56 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 eliminate the amortization of the issuance costs associated with the Boomtown Notes. (b) To record the amortization of the issuance costs associated with the Notes. (c) 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. (d) To eliminate the amortization of the discount associated with the Boomtown Notes. (e) 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. (f) To eliminate the interest expense associated with the Boomtown Notes. (g) To amortize the up-front loan fees associated with the Bank Credit Facility. (h) To record the interest expense associated with the Notes at 9.5%. (i) To record the estimated 40% tax benefit associated with the pro forma expenses, after adding back the amortization of goodwill (see (c)) which is not deductible for income tax purposes. EXTRAORDINARY ITEM. The accompanying pro forma statements of operations exclude an extraordinary loss of approximately $14.2 million (approximately $8.4 million, net of tax effect) recorded by Boomtown in the period ended June 30, 1997, related to the tender and consent costs (approximately $9.0 million) and the write-off of deferred financing costs (approximately $5.2 million) associated with the early extinguishment of the Boomtown Notes. 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. 57 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. EXTRAORDINARY ITEM. The historical "Hollywood Park, Inc." column on the accompanying pro forma balance sheet reflects the write-off of the deferred financing costs (approximately $5.2 million) associated with the Boomtown Notes, which was recorded by Boomtown in the period ended June 30, 1997, and it reflects a corresponding reduction to retained earnings. 58 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 $336.6 million, EBITDA of approximately $2.7 million, Adjusted EBITDA of approximately $52.0 million and (after giving effect to the one time, non-cash $11.4 million write off of Hollywood Park's investment in Sunflower Racing, Inc. and the $36.6 million loss on the sale of Boomtown Las Vegas) a net loss of approximately $37.5 million and a deficiency of earnings to fixed charges of approximately $34.8 million. In addition, on a pro forma basis, as of June 30, 1997, Hollywood Park had total assets (book value) of approximately $438.1 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 $89.4 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 59 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. 60 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 61 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. The following sets forth certain data with respect to Boomtown Reno's hotel operations: BOOMTOWN RENO
AVERAGE OCCUPANCY AVERAGE DAILY AVERAGE REVENUE YEAR BUILT PLANNED IMPROVEMENTS RATE RATE PER ROOM ---------- -------------------- --------- ------------- --------------- 1968 A $25 million 200 Room 66% $38 $34 Hotel Expansion and Casino Remodel is underway with completion expected by the end of 1998.
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. 62 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. 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. 63 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 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, features 100 table games (but with the ability to substantially increase that number) and 282 hotel rooms. The hotel was built and opened in 1985 and was refurbished by the Company in 1995, and reopened in 1996. The casino first opened in 1996. 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 "Crystal Park 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 entered into a five year triple-net lease (the "Lease") with Compton Entertainment, Inc. ("CEI"), an unaffiliated operator. The Lease provides for 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. Thus, Hollywood Park does not participate in any gaming revenues or hotel revenues from Crystal Park. 64 On July 21, 1997, Crystal Park LLC filed an action for unlawful detainer against CEI, due to CEI's failure to pay the June 1997 rent and to make required additional rent payments. Crystal Park LLC contends that the Lease terminated prior to the July 21, 1997 filing and that CEI is currently occupying Crystal Park as a holdover tenant only, with no rights under the Lease. CEI denies these contentions. On September 12, 1997, Crystal Park LLC and CEI entered into an agreement which outlined occupancy payments to be made by CEI in exchange for a continuance of the trial in the action for unlawful detainer. CEI failed to make the final payment due under the agreement. On October 24, 1997, Crystal Park LLC filed an action for unlawful detainer against CEI, due to CEI's failure to pay the July 1997 rent. On October 11, 1997, the California Attorney General revoked CEI's conditional gaming registration, and the City of Compton revoked CEI's city gaming license. Crystal Park LLC believes that CEI is attempting to have its California conditional gaming registration and City of Compton gaming license reinstated. On October 27, 1997, Crystal Park LLC filed an action for unlawful detainer against CEI due to the license revocation. Crystal Park LLC is presently negotiating a new lease with California Casino Management, Inc., a California corporation ("CCM"), owned by Mr. Leo Chu, which would take effect in the event that CEI is unable to continue as operator/lessee of Crystal Park. Mr. Chu presently has a gaming registration application pending with the California Attorney General to operate Crystal Park. Mr. Chu currently holds a gaming registration to operate a small card club in Northern California. Mr. Chu will also require a gaming license from the City of Compton. It is expected that CCM would assume operations of Crystal Park no later than December 1, 1997. However, there can be no assurance that CCM will receive the necessary City of Compton and State of California licenses to operate Crystal Park or that Crystal Park will be able to locate a replacement operator/lessee who will be granted the required licenses. Hollywood Park has an option for five years to purchase the operator's gaming license and intends to do so if the operator remains in place until that time and 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." 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. 65 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 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 owns 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 66 $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." The Company ceased operating in a paired-share structure and terminated its REIT status in 1992 because, in light of the Company's then financial condition and operating results and the market perception of paired-share companies at the time, the paired-share structure hindered the Company's efforts to reduce its debt (totalling approximately $63 million at December 31, 1991) and grow its business. In the several years prior to 1992, the Company had experienced losses and had considerable debt. The requirement imposed by the Internal Revenue Code that a REIT distribute 95% of its taxable income as dividends effectively prevented the Company from reinvesting whatever income it generated in its business and reducing its outstanding debt. Moreover, because the Company's then existing asset base produced little taxable income, the stockholders were not realizing meaningful tax benefits from the Company's REIT status. The Company also believed that, in that time frame, the market lacked an understanding of REIT vehicles and therefore was not valuing paired-share REITs highly. In fact, the market appeared to discount the value of paired-share entities, which made it difficult for the Company to raise equity capital. Since that time circumstances have changed dramatically, both with respect to the Company's asset base and financial condition as well as with respect to the market's perception and understanding of paired-share entities. As a result, the Company now believes that the Company's financial position and market conditions will allow shareholders to realize the full value of the paired-share structure. Since 1992, the Company has raised substantial capital through equity offerings of both common and preferred stock. This capital has allowed the company to engage in significant acquisitions and to repay its outstanding debt. This process has transformed Hollywood Park into a company with relatively low debt (other than the Notes which were used principally to refinance the Boomtown debt) and strong cash flow. Further, the Company's Board has taken note of the substantial premiums the paired-share structure has attracted in the last twelve months in relation to pure operating companies. Consequently, the Company's Board, with the advice of its financial advisors, has determined that the restoration of the paired-share structure may be an appropriate way to seek to maximize shareholder value. Among other things, such a restoration is expected to: (i) allow the Company and its stockholders to realize the value inherent in the paired-share structure; (ii) afford the companies greater flexibility in structuring financing arrangements and in raising capital which can be utilized to expand its existing business and to make acquisitions in order to maximize utilization of the paired-share status; and (iii) increase the dividends paid to stockholders on the portion of its revenues generated as leasehold rents by the REIT from its paired operating company. However, there can be no assurance that any of the foregoing benefits will be achieved. For the foregoing reasons, 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, 67 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 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 68 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. 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 owns approximately 275 acres in the northwest section of Phoenix, Arizona, 100 of which are undeveloped. Sunflower owns approximately 393 acres in Kansas City, Kansas, but is currently involved in ongoing reorganization proceedings under Chapter 11 of the U.S. Bankruptcy Code. 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 69 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." 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 any person's corporate position or job title. 70 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 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 71 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 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. 72 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. 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. 73 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. 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 any person's corporate position or job title, 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. 74 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. 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 75 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 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 76 "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. 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 77 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 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 78 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 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 Riverboat Gaming Division of the Louisiana State Police (the investigative and enforcement entity under the Louisiana regulatory scheme) 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 Louisiana 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. 79 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 approximately two thirds of 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. Thus, although the Company does not anticipate another election in the near future, there can be no assurance that a new election will not be called to discontinue gaming within the parish. 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 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. 80 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 had been operating under a conditional registration from the California Department of Justice. However, the Attorney General recently revoked this license, and CEI is attempting to have it reinstated. See "Business--Gaming Operations-- Crystal Park." 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 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. 81 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. 82 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 Onsale Inc. since 1996; Director of National Wonders Inc. since 1996; 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. Schwarz 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; 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 of COHR, Inc., since 1986 and former Chairman of the Board of COHR, Inc.; 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; 83 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
84 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the name, address (address is provided for persons listed as beneficial owners of 5% or more of the Common Stock) and number of shares and percent of the outstanding Hollywood Park Common Stock beneficially owned as of August 29, 1997, by each person known to the Board of Directors of Hollywood Park to be the beneficial owner of 5% or more of the outstanding shares of Hollywood Park Common Stock, each Director, each Named Officer and all current Directors and Executive Officers as a group.
SHARES PERCENT OF BENEFICIALLY SHARES NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(a) OUTSTANDING(b) - ------------------------------------ ------------ -------------- R.D. Hubbard....................................... 2,648,174(c) 10.1% Hollywood Park, Inc. 1050 South Prairie Avenue Inglewood, California 90301 Legg Mason, Inc. .................................. 2,474,450(d) 9.5% 111 South Calvert Street Baltimore, Maryland 21202 State of Wisconsin Investment Board................ 2,323,875(e) 8.9% P.O. Box 7842 Madison, Wisconsin 53707 Harry Ornest....................................... 620,925(f) 2.4% Timothy J. Parrott................................. 502,652(g) 1.9% J.R. Johnson....................................... 372,760(h) 1.4% Warren B. Williamson............................... 151,917(i) * Lynn P. Reitnouer.................................. 54,000(j) * Robert T. Manfuso.................................. 32,333(k) * Herman Sarkowsky................................... 24,938(l) * Richard J. Goeglein................................ 6,937(m) * Peter L. Harris.................................... 4,875(n) * Delbert W. Yocam................................... 3,250(o) * G. Michael Finnigan................................ 53,748(p) * Donald M. Robbins.................................. 40,672(q) * Current Directors and Executive Officers as a group (13 persons).................. 4,517,181(r) 17.0%
- -------- * Less than one percent (1%) of the outstanding common shares. (a) Reflects the conversion of each of Hollywood Park's outstanding Depositary Shares into 0.8333 shares of Hollywood Park Common Stock effective August 28, 1997. (b) Assumes exercise of stock options beneficially owned by the named individual or entity into shares of Hollywood Park Common Stock. Based on 26,085,219 shares outstanding as of August 29, 1997. (c) Includes 28,333 shares of Hollywood Park Common Stock which Mr. Hubbard has the right to acquire upon the exercise of options which are exercisable within 60 days of August 29, 1997. (d) Includes 562,500 shares of Hollywood Park Common Stock received by Legg Mason Special Investment Trust, Inc. (an affiliate of Legg Mason, Inc.) in connection with the Boomtown 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. 85 (e) 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 Hollywood Park Common Stock of Boomtown, Inc. prior to the Boomtown Merger. (f) Includes 70,000 shares of Hollywood Park 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 536,300 shares of Hollywood Park Common Stock held in the name of the Partnership. Also includes 4,000 shares of Hollywood Park Common Stock which Mr. Ornest has the right to acquire upon the exercise of options which are exercisable within 60 days of August 29, 1997. (g) Includes 288,277 shares of Hollywood Park Common Stock which Mr. Parrott has the right to acquire pursuant to options assumed by the Company in connection with the Boomtown Merger which are exercisable within sixty days of August 29, 1997. (h) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Johnson has the right to acquire upon the exercise of options which are exercisable within 60 days of August 29, 1997. (i) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Williamson has the right to acquire upon the exercise of options which are exercisable within 60 days of August 29, 1997. (j) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Reitnouer has the right to acquire upon the exercise of options which are exercisable within 60 days of August 29, 1997. (k) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Manfuso has the right to acquire upon the exercise of options which are exercisable within 60 days of August 29, 1997. (l) Includes 4,000 shares of Hollywood Park Common Stock which Mr. Sarkowsky has the right to acquire upon the exercise of options which are exercisable within 60 days of August 29, 1997. (m) Includes 5,687 shares of Hollywood Park Common Stock which Mr. Goeglein has the right to acquire pursuant to options assumed by the Company in connection with the Boomtown Merger which are exercisable within sixty days of August 29, 1997. (n) Includes 4,875 shares of Hollywood Park Common Stock which Mr. Harris has the right to acquire pursuant to options assumed by the Company in connection with the Boomtown Merger which are exercisable within sixty days of August 29, 1997. (o) Includes 3,250 shares of Hollywood Park Common Stock which Mr. Yocam has the right to acquire pursuant to options assumed by the Company in connection with the Boomtown Merger which are exercisable within sixty days of August 29, 1997. (p) Includes 38,334 shares of Hollywood Park Common Stock which Mr. Finnigan has the right to acquire pursuant to options which are exercisable within sixty days of August 29, 1997. (q) Includes 38,334 shares of Hollywood Park Common Stock which Mr. Robbins has the right to acquire pursuant to options which are exercisable within sixty days of August 29, 1997. (r) Includes 431,090 shares of Hollywood Park Common Stock of which the Directors and Executive Officers may be deemed to have beneficial ownership following the exercise of options to purchase Hollywood Park Common Stock which are exercisable within sixty days of August 29, 1997. Excluding such shares, the Directors and Executive Officers of Hollywood Park have beneficial ownership of 4,086,091 shares of Hollywood Park Common Stock, which represents 15.7% of the shares of Hollywood Park Common Stock outstanding as of August 29, 1997. 86 DESCRIPTION OF OTHER INDEBTEDNESS The following is a summary of the material terms of the Bank Credit Facility and the Boomtown Notes. 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. 87 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. 88 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 full and unconditional guaranties by each of the existing and future Material Restricted Subsidiaries of the Issuers, initially all of the Issuers' Subsidiaries except HP Casino, Inc., Sunflower Racing, Inc., SR Food & Beverage Company (a subsidiary of Sunflower Racing, Inc.), and the following subsidiaries of Boomtown, Inc.: Boomtown Missouri, Inc., Boomtown Council Bluffs, Inc., Boomtown Iowa, L.C., Old River Enterprises, Blue Diamond Hotel and Casino, Inc. and its subsidiary Blue Diamond Disposition Corporation, Boomtown Indiana, Inc., Boomtown Hoosier, Inc., Boomtown Riverboat, Inc., Pinnacle Gaming Development Corp., and Switzerland County Development Corporation. As co-obligors, each of the Company and HPOC are, and will be, fully 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 is a 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 $136.7 million of total Indebtedness, $11.7 million of which would have constituted Senior Debt (including secured Indebtedness), plus an aggregate of approximately $13.2 million of accounts payable ranking pari passu to the Notes. 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 89 or, if no interest has been paid, from the Issue Date. 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 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. 90 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 91 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; provided that each such new Note will be in a principal amount of $1,000 or an integral multiple thereof. The 92 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. Thus, there can be no assurance that in the event of a Change of Control the Company will have sufficient funds, or that it will be permitted under the terms of the Bank Credit Facility, to satisfy its obligations with respect to any or all of the tendered 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. The presence of the Company's Note repurchase obligation in the event of a Change of Control may deter potential bidders from attempting to acquire the Company, whether by merger, tender offer or otherwise. Such deterrence may have an adverse effect on the market price for the Company's securities, particularly its common stock, which would presumably reflect the market's perception of the likelihood of any takeover attempt at a premium to the market price. 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 93 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. 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 94 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. 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 95 (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. 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; 96 (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; (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 97 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. 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. 98 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 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 99 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 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 100 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. 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 101 (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 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. 102 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. 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 103 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 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 104 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. 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 105 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 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. 106 "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. "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 107 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. "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 108 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 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 109 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). "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. 110 "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 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 111 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. "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. 112 "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 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; 113 (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; (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 114 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 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. 115 "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. "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. 116 "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 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. 117 "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. 118 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. 119 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." 120 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. 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 financial statements of Crystal Park Hotel and Casino Development Company, LLC as of December 31, 1996, and for the period from July 18, 1996 (date of inception) to 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. 121 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-39 Balance Sheets........................................................... F-40 Statements of Operations................................................. F-41 Statements of Members' Equity............................................ F-42 Statements of Cash Flows................................................. F-43 Notes to Financial Statements............................................ F-44 BOOMTOWN, INC. Report of Ernst & Young LLP, Independent Auditors........................ F-48 Consolidated Balance Sheets.............................................. F-49 Consolidated Statements of Operations.................................... F-50 Consolidated Statements of Stockholders' Equity.......................... F-51 Consolidated Statements of Cash Flows.................................... F-52 Notes to Consolidated Financial Statements............................... F-53
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 $1,841,000 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 (unaudited) 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 77,036 78,719 35,868 38,353 Food and beverage........ 13,947 19,783 20,540 6,860 7,637 Other income............. 7,253 7,097 6,320 3,564 3,487 ---------- ---------- ---------- ------- ------- 143,225 130,572 117,324 73,139 74,280 ---------- ---------- ---------- ------- ------- EXPENSES: Gaming................... 27,249 4,919 0 15,161 14,489 Racing................... 30,167 29,574 30,398 15,409 15,996 Food and beverage........ 19,573 25,162 21,851 8,819 9,082 Administrative........... 41,477 46,792 42,026 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 SIX FOR THE YEARS ENDED MONTHS ENDED DECEMBER 31, 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. (UNAUDITED) 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 purchase price of the Merger was allocated to the identifiable assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition. Based on financial analyses prepared by the Company which considered the impact of general economic, financial and market conditions on the assets acquired and liabilities assumed, the Company determined that the estimated fair values approximated their carrying amounts. 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. F-7 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 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 F-8 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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 was prepared under the assumption that the acquisition of PCM and Sunflower had occurred at the beginning of the 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 ------------ (UNAUDITED) Revenues...................................................... $149,892,000 Operating income.............................................. 15,841,000 Net loss.................................................... $ (1,866,000) ============ Dividend requirements on convertible preferred stock.......... $ 1,925,000 Net loss allocated to common shareholders..................... $ (3,791,000) Per common share: Net loss--primary........................................... $ (0.20) Net loss--fully diluted..................................... $ (0.20)
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. RACING REVENUES AND EXPENSES The Company records pari-mutuel revenues, admissions, food and beverage and other racing income associated with thoroughbred horse racing on a daily basis, except for season admissions which are recorded ratably over the racing season. Expenses associated with thoroughbred horse racing revenues are charged against income in those periods in which the thoroughbred horse racing revenues are recognized. Other expenses are recognized as they actually occur throughout the year. 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. CAPITALIZED INTEREST No capitalized interest was recorded during the years ended December 31, 1996, 1995 and 1994, nor for the six months ended June 30, 1997 and 1996, because the Company had no outstanding debt, other than Sunflower's debt which was non-recourse to the Company, and Sunflower did not make any capital improvements during the periods covered. 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. F-12 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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 2,000,000 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 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 exercised 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 $1,925,000. 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 (UNAUDITED) 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 relate 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. In computing the stock-based compensation the following assumptions were made:
RISK-FREE INTEREST EXPECTED EXPECTED EXPECTED RATE LIFE VOLATILITY DIVIDENDS --------- -------- ---------- --------- For options granted in the following periods: Second quarter 1995................. 5.0% 3 years 36.1% None First quarter 1996.................. 5.0% 3 years 36.1% None Second quarter 1996................. 5.1% 3 years 46.4% None Fourth quarter 1996 (a)............. 5.0% 10 years 47.4% None
- -------- (a) The options granted during the fourth quarter of 1996 were to the Company's directors, and it is expected that the directors will hold options for a longer period of time than the Company's employees. F-20 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following set forth the pro forma financial results under the implementation of SFAS 123:
FOR THE YEARS ENDED DECEMBER 31, FOR THE SIX MONTHS ENDED JUNE 30, ---------------------------------- ---------------------------------- 1996 1995 1997 1996 ---------------- ---------------- ---------------- ----------------- Net income (loss) before stock-based compensation expense... ($4,249,000) ($1,162,000) $4,708,000 ($8,129,000) Stock-based compensation 115,000 4,000 558,000 67,000 expense................ ---------------- ---------------- ---------------- ----------------- Pro forma net income ($4,364,000) ($1,166,000) $4,150,000 ($8,196,000) (loss)................. ================ ================ ================ ================= Dividend requirements on convertible preferred stock.................. $1,925,000 $1,925,000 $962,000 $962,000 Pro forma net income (loss) available to (allocated to) common ($6,289,000) ($3,091,000) $3,188,000 ($9,158,000) shareholders........... ================ ================ ================ ================= Per common share: Pro forma net income (loss) - primary..... ($0.34) ($0.17) $0.17 ($0.49) Pro forma net income (loss) - fully dilut- ed................... ($0.34) ($0.17) $0.17 ($0.49) Number of shares - primary................ 18,505,378 18,399,040 18,462,062 18,612,850 Number of shares - fully diluted................ 20,796,870 20,690,532 20,753,554 20,904,342
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
F-21 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 ============ ============ ============
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 ============ ============ ===========
F-22 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 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 F-23 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 ============ ============ ============
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 ========== ========= ==========
F-25 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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.
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) ============ ============
F-26 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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.
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 exercised 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 in future periods the annual preferred cash dividend of approximately $1,925,000 (unaudited). 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 (unaudited). 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. F-27 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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 employees that were eliminated by the Internal Revenue Service in 1994, when the maximum annual earnings F-29 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 lawsuit settlement expense recorded in the accompanying statement of operations for the year ended December 31, 1995, included $2,450,000 for the Class Actions, $2,750,000 for the Walkers settlement and approximately $888,000 in legal costs, for a total of approximately $6,088,000. 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. 31, SEPT. 30, JUNE 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)(a) ========= ========= ========= ========== 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. 31, SEPT. 30, JUNE 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)(b) $ (6,118)(c) $ 4,376 $ (1,075)(d) ========= ========= ========= ========== 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 ========= ========= ========= ==========
- -------- (a) The primary reason for this quarter's loss was the $11,346,000 write off of the Company's investment in Sunflower. Historically, the three months ended March 31, produce a loss, because the Company does not operate live on-track racing at Hollywood Park Race Track. (b) The primary reason for this quarter's loss was due to losses at Sunflower due to intense competition from nearby Missouri riverboat gaming. (c) The primary reasons for this quarter's loss was the $5,627,000 of expense related to the lawsuit settlement, and losses at Sunflower, due to competition from Missouri riverboat gaming. (d) The primary reasons for this quarter's loss was due to Hollywood Park Race Track being closed for live on-track racing (as historically happens during the three months ended March 31), and losses at Sunflower, due to competition from Missouri riverboat gaming. F-34 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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. CRYSTAL PARK LLC On July 21, 1997, Crystal Park LLC filed an action for unlawful detainer against Compton Entertainment, Inc. ("CEI"), the unaffiliated third party operator, due to CEI's failure to pay the June 1997 rent and to make required additional rent payments. Crystal Park LLC contends that the Lease terminated prior to the July 21, 1997 filing and that CEI is currently occupying Crystal Park as a holdover tenant only, with no rights under the Lease. CEI denies these contentions. On September 12, 1997, Crystal Park LLC and CEI entered into an agreement which outlined occupancy payments to be made by CEI in exchange for a continuance of the trial in the action for unlawful detainer. CEI failed to make the final payment due under the agreement. On October 24, 1997, Crystal Park LLC filed an action for unlawful detainer against CEI, due to CEI's failure to pay the July 1997 rent. On October 11, 1997, the California Attorney General revoked CEI's conditional gaming registration, and the City revoked CEI's city gaming license. Crystal Park LLC believes that CEI is attempting to have its California conditional gaming registration and City Gaming license reinstated. On October 27, 1997, Crystal Park LLC filed an action for unlawful detainer against CEI due to the license revocation. Crystal Park LLC is presently negotiating a new lease with California Casino Management, Inc. ("CCM"), a California corporation, owned by Mr. Leo Chu, which would take effect in the event that CEI is unable to continue as operator/lessee of Crystal Park. Mr. Chu presently has a gaming registration application pending with the California Attorney General to operate Crystal Park. Mr. Chu currently holds a gaming registration to operate a small card club in Northern California. Mr. Chu will also require a gaming license from the City of Compton. It is expected that CCM would assume operations of Crystal Park no later than December 1, 1997. There can be no assurance that CCM will receive the necessary City and State of California licenses to operate Crystal Park or that Crystal Park will be able to locate a replacement operator/lessee who will be granted the required licenses. As of September 30, 1997, CEI owed Crystal Park LLC $600,000, of which $200,000 is covered by a rent security deposit Crystal Park LLC received from CEI in October 1996, and of which $350,000 was fully reserved and, therefore, is not reflected in the operating results for the period ended September 30, 1997. F-35 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 ------- ------- ------- -------- ------- ------- ------- 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 ------- ------- ------- -------- ------- ------- ------- OPERATING INCOME (LOSS): Hollywood Park, Inc. and Race Track......... 1,330 183 7,063 (5,027) 3,549 7,233 (4,383) Hollywood Park, Inc.-- Casino Division........ 895 1,789 1,861 801 5,346 1,496 785 HP/Compton, Inc.-- Crystal Park Hotel and Casino................. 125 0 0 0 125 480 177 Turf Paradise, Inc..... 1,400 (768) 218 2,166 3,016 176 2,037 Sunflower Racing, Inc.. 0 0 0 (457) (457) 0 0 Write off of investment in Sunflower Racing, Inc.................... 0 0 (66) (11,346) (11,412) 0 0 ------- ------- ------- -------- ------- ------- ------- 3,750 1,204 9,076 (13,863) 167 9,385 (1,384) ------- ------- ------- -------- ------- ------- ------- 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-36 HOLLYWOOD PARK, INC. CALCULATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED DECEMBER 31, (UNAUDITED) ------------------------------------------------- ASSUMING FULL PRIMARY DILUTION (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 PRIMARY DILUTION (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 30, JUNE 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-37 HOLLYWOOD PARK, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS Allowance for bad debts: Balance as of December 31, 1993. $ (31,000) Charges to expense............ (137,000) Write offs.................... 9,000 ----------- Balance as of December 31, 1994. (159,000) Charges to expense............ (2,294,000)(a) Write offs.................... 612,000 ----------- Balance as of December 31, 1995. (1,841,000) Charges to expense............ (783,000) Write offs.................... 1,535,000 ----------- Balance as of December 31, 1996. $(1,089,000) ===========
- -------- (a) Hollywood Park assumed the allowance related to the Hollywood Park-Casino gaming business in the November 17, 1995, acquisition of PCM. F-38 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, except for Note 6 as to which the date is October 27, 1997 F-39 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 Organization expenses, net........................... 452 419 Other assets, net.................................... 5,210 5,099 ------- ------- Total Assets..................................... $29,344 $29,988 ======= ======= LIABILITIES AND MEMBERS' EQUITY ------------------------------- Accounts payable..................................... $ 1 $ 0 Lessee security deposit and other liabilities........ 200 220 ------- ------- 201 220 ------- ------- Members' Equity: HP/Compton, Inc.................................... 26,128 26,738 Redwood Gaming LLC................................. 2,010 2,020 First Park Investments, LLC........................ 1,005 1,010 ------- ------- 29,143 29,768 ------- ------- Total Liabilities and Members' Equity............ $29,344 $29,988 ======= =======
See accompanying notes to financial statements. F-40 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-41 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.... $26,018 $2,000 $1,000 $29,018 Net income............... 110 10 5 125 ------- ------ ------ ------- BALANCE, DECEMBER 31, 1996.................. 26,128 2,010 1,005 29,143 Capital contributions.... 384 0 0 384 Net income............... 592 43 22 657 Capital distributions.... (366) (33) (17) (416) ------- ------ ------ ------- BALANCE, JUNE 30, 1997 (UNAUDITED)........... $26,738 $2,020 $1,010 $29,768 ======= ====== ====== =======
See accompanying notes to financial statements. F-42 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 liabili- ties............................................... 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.................................... $20,776 $ 0 ======= ====== Contribution of other assets by majority member..... $ 5,242 $ 384 ======= ====== Contribution by minority members.................... $ 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-43 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. These contributions were recorded at HP/C's carrying amounts, which approximated fair value. 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. Under the terms of the lease with CEI (the "Lease"), CEI is required to 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 F-44 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 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 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. RECLASSIFICATIONS Certain reclassifications have been made to the 1996 balances to be consistent with the 1997 financial statement presentation. F-45 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC NOTES TO FINANCIAL STATEMENTS--(CONTINUED) 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. The Company has the option to either (1) purchase all of the leasehold parcels at an amount based on a formula defined in the lease agreement, or (2) purchase only the hotel and parking leasehold parcels at a fixed price amount. Management expects that in the normal course of business, and after the rent credits are fully utilized, it is probable that it will exercise the option to purchase only the hotel and parking leasehold parcels. If the option is exercised after the rent credits are fully utilized, the future minimum lease payments for the remaining lease term total approximately $3,350,000. The present value of the future minimum lease payments, after a reduction of $2,700,000 for imputed interest based on the Company's incremental borrowing rate, approximates $650,000. The rent payment credits were considered in determining the future minimum lease payments. 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. F-46 CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC NOTES TO FINANCIAL STATEMENTS--(CONTINUED) NOTE 6--UNAUDITED SUBSEQUENT EVENT On July 21, 1997, Crystal Park LLC filed an action for unlawful detainer against CEI, due to CEI's failure to pay the June 1997 rent and to make required additional rent payments. Crystal Park LLC contends that the Lease terminated prior to the July 21, 1997 filing and that CEI is currently occupying Crystal Park as a holdover tenant only, with no rights under the Lease. CEI denies these contentions. On September 12, 1997, Crystal Park LLC and CEI entered into an agreement which outlined occupancy payments to be made by CEI in exchange for a continuance of the trial in the action for unlawful detainer. CEI failed to make the final payment due under the agreement. On October 24, 1997, Crystal Park LLC filed an action for unlawful detainer against CEI, due to CEI's failure to pay the July 1997 rent. On October 11, 1997, the California Attorney General revoked CEI's conditional gaming registration, and the City revoked CEI's city gaming license. Crystal Park LLC believes that CEI is attempting to have its California conditional gaming registration and City Gaming license reinstated. On October 27, 1997, Crystal Park LLC filed an action for unlawful detainer against CEI due to the license revocation. Crystal Park LLC is presently negotiating a new lease with California Casino Management, Inc. ("CCM"), a California corporation, owned by Mr. Leo Chu, which would take effect in the event that CEI is unable to continue as operator/lessee of Crystal Park. Mr. Chu presently has a gaming registration application pending with the California Attorney General to operate Crystal Park. Mr. Chu currently holds a gaming registration to operate a small card club in Northern California. Mr. Chu will also require a gaming license from the City of Compton. It is expected that CCM would assume operations of Crystal Park no later than December 1, 1997. There can be no assurance that CCM will receive the necessary City and State of California licenses to operate Crystal Park or that Crystal Park will be able to locate a replacement operator/lessee who will be granted the required licenses. As of September 30, 1997, CEI owed Crystal Park LLC $600,000, of which $200,000 is covered by a rent security deposit Crystal Park LLC received from CEI in October 1996, and of which $350,000 was fully reserved and, therefore, is not reflected in the operating results for the period ended September 30, 1997. F-47 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-48 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 and $2.7 million as of September 30, 1996, and 1995, respectively).............. 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 and 9,233,074 issued and outstanding as of September 30, 1996 and 1995, 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-49 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 0 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 0 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 0 0 Discontinued projects/merger costs..... 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) 0 0 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) 0 -------- -------- -------- -------- -------- 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) $ 0.00 ======== ======== ======== ======== ======== 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-50 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-51 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) (UNAUDITED) 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................. 0 0 0 (200) 0 Change in construction related payables......... (84) (1,472) 680 0 (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-52 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-53 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. 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-54 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. EXTRAORDINARY LOSS (UNAUDITED)--Boomtown recorded an extraordinary loss of approximately $14.2 million (approximately $8.4 million net of tax effect) in the period ended June 30, 1997, related to the tender and consent costs (approximately $9.0 million) and the write-off of deferred financing costs (approximately $5.2 million) associated with the early extinguishment of the First Mortgage Notes. 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. F-55 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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)................................. 0 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. F-56 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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 amounted to approximately $227,000 at September 30, 1995 and 1996. 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. F-57 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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 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-58 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 and $2.4 million as of September 30, 1995 and 1996, 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.............................................................. 0 2001.............................................................. 0 Thereafter........................................................ 103,500 -------- $111,209 ========
F-59 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-60 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-61 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%. The $2.4 million is included on the accompanying balance sheet as a component of other assets and it is being amortized on the straight-line method over the remaining lease term. 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. Upon exercise of the barge and building purchase option, the remaining unamortized balance of the $2.4 million was capitalized as a component of the purchase price. 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 F-62 BOOMTOWN, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 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. 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-63 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-64 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-65 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-66 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 0 0 0 0 (111,239) 0 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 0 109 1,085 23 0 116,847 Advances from parent.......... 0 35,947 12,566 20,261 42,465 (111,239) 0 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......... $ 0 $ 35,275 $45,824 $56,349 $41,656 $ 0 $179,104 Income (loss) from operations. $ (3,290) $ (5,740) $(2,509) $12,732 $ 2,871 $ 0 $ 4,064 Equity in earnings (loss) of consolidated subsidiaries.... $ 809 $ (809) $ 0 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 0 12,195 Net cash used in investing activities...... 0 (414) (5,332) (1,719) (2,453) 0 (9,918) Net cash provided by (used in) financing activities...... 4,822 1,628 713 (11,444) (886) 0 (5,167) -------- -------- ------- ------- ------- --------- -------- Net increase (decrease) in cash and cash equivalents..... (4,974) 697 320 932 135 0 (2,890) Cash and cash equivalents: Beginning of year........... 10,457 2,563 3,662 3,512 2,907 0 23,101 -------- -------- ------- ------- ------- --------- -------- End of period... $ 5,483 $ 3,260 $ 3,982 $ 4,444 $ 3,042 $ 0 $ 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-67 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. The agreement required Boomtown to make a deposit of $500,000 by December 5, 1996 and the remaining $5,173,000 was paid on August 8, 1997. (unaudited) 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. SWAP AGREEMENT CONSUMMATION (UNAUDITED)--On July 1, 1997, Boomtown completed a swap pursuant to the Swap Agreement. See Management's Discussion and Analysis of Financial Condition and Results of Operations--"Boomtown-- Disposition of Boomtown Las Vegas." 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. Boomtown recorded an extraordinary loss of approximately $14.2 million (approximately $8.4 million net of tax effect) in the period ended June 30, 1997, related to the tender and consent costs (approximately $9.0 million) and the write-off of deferred financing costs (approximately $5.2 million) associated with the early extinguishment of the First Mortgage Notes. 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-68 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- 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.......................................................... 24 The Exchange Offer....................................................... 24 Certain Federal Income Tax Consequences.................................. 32 Capitalization........................................................... 34 Selected Historical and Pro Forma Financial Data......................... 35 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 39 Unaudited Pro Forma Combined Consolidated Condensed Financial Statements. 53 Business................................................................. 59 Management............................................................... 82 Security Ownership of Certain Beneficial Owners and Management........... 85 Description of Other Indebtedness........................................ 87 Description of Notes..................................................... 89 Plan of Distribution..................................................... 119 Book-Entry; Delivery and Form............................................ 120 Experts.................................................................. 121 Legal Matters............................................................ 121 Index to Financial Statements............................................ F-1
- ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $125,000,000 [LOGO OF HOLLYWOOD PARK] 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 Exhibit 4.1 to the Company's Current Report on Form 8-K, filed November 30, 1995. 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 Exhibit 2.1 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 Exhibit 3.1 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 Exhibit 3.2 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 Amended and Restated 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 Amended and Restated Agreement of Limited Partnership of Mississippi-I Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 3.25 Articles of Incorporation of Louisiana Gaming Enterprises, Inc. 3.26 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 Exhibit 4.5 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 Exhibit 10.24 to the Company's Registration Statement on Form S-4 dated September 18, 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 Exhibit 10.37 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997.
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EXHIBIT NO. DESCRIPTION ------- ----------- 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 Exhibit 10.6 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 Exhibit 2 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 Exhibit 10.7 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 Exhibit 10.9 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 Exhibit 10.10 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 Exhibit 10.12 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 Exhibit 10.11 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 Exhibit 10.14 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 Exhibit 10.15 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 Exhibit 10.16 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 Exhibit 10.17 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 Exhibit 10.18 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 Exhibit 10.18 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 Exhibit 10.19 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 Exhibit 10.20 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 Exhibit 10.21 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 Exhibit 10.17 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 Exhibit 10.24 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 Exhibit 10.22 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 Exhibit 10.23 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 Exhibit 10.27 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 Exhibit 10.29 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 Exhibit 10.30 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 Exhibit 10.28 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 Exhibit 10.31 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 Exhibit 10.32 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 Exhibit 10.33 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 Exhibit 10.34 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 Exhibit 10.35 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 Exhibit 10.36 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 Exhibit 10.38 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. 24.2* Powers of Attorney of officers and directors of Hollywood Park Operating Company. 24.3* Powers of Attorney of officers and directors of Hollywood Park Fall Operating Company. 24.4* Powers of Attorney of officers and directors of Hollywood Park Food Services, Inc. 24.5* Powers of Attorney of officers and directors of HP/Compton, Inc. 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. 24.7* Powers of Attorney of officers and directors of Turf Paradise, Inc. 24.8* Powers of Attorney of officers and directors of HP Yakama, Inc.
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EXHIBIT NO. DESCRIPTION ------- ----------- 24.9* Powers of Attorney of officers and directors of Boomtown, Inc. 24.10* Powers of Attorney of officers and directors of Boomtown Hotel & Casino, Inc. 24.11* Powers of Attorney of officers and directors of Bayview Yacht Club, Inc. 24.12* Powers of Attorney of directors of Bayview Yacht Club, Inc. in the capacity of General Partner of Mississippi I-Gaming, L.P. 24.13* Powers of Attorney of officers and directors of Louisiana Gaming Enterprises, Inc. 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. 25.1* Statement Regarding Eligibility of Trustee 99** Form of Letter of Transmittal
- -------- * Previously filed ** 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 30th day of October, 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 October 30, 1997 ____________________________________ Chief Executive Officer R.D. Hubbard (Principal Executive Officer) /s/ Harry Ornest* Vice Chairman of the Board October 30, 1997 ____________________________________ Harry Ornest /s/ G. Michael Finnigan* Executive Vice President and October 30, 1997 ____________________________________ Chief Financial Officer G. Michael Finnigan (Principal Financial and Accounting Officer) /s/ Richard Goeglein* Director October 30, 1997 ____________________________________ Richard Goeglein /s/ Peter L. Harris* Director October 30, 1997 ____________________________________ Peter L. Harris /s/ J.R. Johnson* Director October 30, 1997 ____________________________________ J.R. Johnson
II-8
SIGNATURE TITLE DATE --------- ----- ---- /s/ Robert T. Manfuso* Director October 30, 1997 ____________________________________ Robert T. Manfuso /s/ Timothy J. Parrott* Director October 30, 1997 ____________________________________ Timothy J. Parrott /s/ Lynn P. Reitnouer* Director October 30, 1997 ____________________________________ Lynn P. Reitnouer Director October , 1997 ____________________________________ Warren B. Williamson /s/ Herman Sarkowsky* Director October 30, 1997 ____________________________________ Herman Sarkowsky /s/ Delbert W. Yocam* Director October 30, 1997 ____________________________________ Delbert W. Yocam
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-9 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 30th day of October, 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 October 30, 1997 ____________________________________ Chief Executive Officer R.D. Hubbard (Principal Executive Officer) /s/ Harry Ornest* Vice Chairman of the Board October 30, 1997 ____________________________________ Harry Ornest /s/ G. Michael Finnigan* Executive Vice President and October 30, 1997 ____________________________________ Chief Financial Officer G. Michael Finnigan (Principal Financial and Accounting Officer) ____________________________________ Director October , 1997 Warren B. Williamson
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-10 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 30th day of October, 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 October 30, 1997 ____________________________________ (Principal Executive R.D. Hubbard Officer) /s/ Harry Ornest* Director October 30, 1997 ____________________________________ Harry Ornest ____________________________________ Director October , 1997 Warren B. Williamson /s/ G. Michael Finnigan* Executive Vice President, October 30, 1997 ____________________________________ Treasurer and Assistant G. Michael Finnigan Secretary (Principal Financial and Accounting Officer)
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-11 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 30th day of October, 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 October 30, 1997 ____________________________________ (Principal Executive R.D. Hubbard Officer) /s/ Harry Ornest* Director October 30, 1997 ____________________________________ Harry Ornest ____________________________________ Director October , 1997 Warren B. Williamson /s/ G. Michael Finnigan* Executive Vice President, October 30, 1997 ____________________________________ Treasurer and Assistant G. Michael Finnigan Secretary (Principal Financial and Accounting Officer)
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-12 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 30th day of October, 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 October 30, 1997 ____________________________________ (Principal Executive R.D. Hubbard Officer) /s/ G. Michael Finnigan* Vice President and Chief October 30, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-13 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 30th day of October, 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/COMPTON, INC. MANAGER of Crystal Park October 30, 1997 Hotel & Casino Development Company, LLC /s/ R.D. Hubbard* Director and President of October 30, 1997 ____________________________________ HP/Compton, Inc. R.D. Hubbard
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-14 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 30th day of October, 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 October 30, 1997 ____________________________________ Chief Executive Officer R.D. Hubbard (Principal Executive Officer) /s/ G. Michael Finnigan* Director, Vice President, October 30, 1997 ____________________________________ Treasurer and Assistant G. Michael Finnigan Secretary (Principal Financial and Accounting Officer) /s/ Donald M. Robbins* Director, Vice President and October 30, 1997 ____________________________________ Secretary Donald M. Robbins
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-15 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 30th day of October, 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 October 30, 1997 ____________________________________ Chief Executive Officer R.D. Hubbard (Principal Executive Officer) /s/ Bruce Rimbo* Director October 30, 1997 ____________________________________ Bruce Rimbo /s/ G. Michael Finnigan* Director, Vice President, October 30, 1997 ____________________________________ Treasurer and Assistant G. Michael Finnigan Secretary (Principal Financial and Accounting Officer)
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-16 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 30th day of October, 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 October 30, 1997 ____________________________________ Chief Executive Officer Timothy J. Parrott (Principal Executive Officer) /s/ Phil E. Bryan* Director, President and October 30, 1997 ____________________________________ Chief Operating Officer Phil E. Bryan /s/ Robert F. List* Director, Executive Vice October 30, 1997 ____________________________________ President and Secretary Robert F. List /s/ G. Michael Finnigan* Vice President, and Chief October 30, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-17 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 30th day of October, 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 October 30, 1997 ____________________________________ Chief Executive Officer Timothy J. Parrott (Principal Executive Officer) /s/ Phil E. Bryan* Director, President and October 30, 1997 ____________________________________ Chief Operating Officer Phil E. Bryan /s/ Robert F. List* Director, Senior Vice October 30, 1997 ____________________________________ President, Secretary and Robert F. List Treasurer /s/ G. Michael Finnigan* Vice President, and Chief October 30, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-18 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 30th day of October, 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 October 30, 1997 ____________________________________ Chief Executive Officer Timothy J. Parrott (Principal Executive Officer) /s/ Robert F. List* Director, Secretary and October 30, 1997 ____________________________________ Treasurer Robert F. List /s/ G. Michael Finnigan* Vice President, and Chief October 30, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-19 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 30th day of October, 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 October 30, 1997 Mississippi-I Gaming, L.P. /s/ Timothy J. Parrott* Director, Chairman and October 30, 1997 ______________________________________ Chief Executive Officer Timothy J. Parrott of Bayview Yacht Club, Inc. /s/ Robert F. List* Director, Secretary and October 30, 1997 ______________________________________ Treasurer of Bayview Robert F. List Yacht Club, Inc.
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-20 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 30th day of October, 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 October 30, 1997 ____________________________________ Chief Executive Officer Timothy J. Parrott (Principal Executive Officer) /s/ Robert F. List* Director, Executive Vice October 30, 1997 ____________________________________ President and Secretary Robert F. List /s/ G. Michael Finnigan* Vice President, and Chief October 30, 1997 ____________________________________ Financial Officer (Principal G. Michael Finnigan Financial and Accounting Officer)
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact II-21 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 30th day of October, 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 October 30, 1997 Louisiana-I Gaming, a Louisiana Partnership in Commendam /s/ Timothy J. Parrott* Director, Chairman and October 30, 1997 ______________________________________ Chief Executive Officer Timothy J. Parrott of Louisiana Gaming Enterprises, Inc. /s/ Robert F. List* Director, Executive Vice October 30, 1997 ______________________________________ President and Secretary Robert F. List of Louisiana Gaming Enterprises, Inc.
/s/ G. Michael Finnigan *By: _______________________ G. Michael Finnigan Attorney-in-Fact 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 Exhibit 4.1 to the Company's Current Report on Form 8-K, filed November 30, 1995. 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 Exhibit 2.1 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 Exhibit 3.1 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 Exhibit 3.2 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 Amended and Restated 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 Amended and Restated Agreement of Limited Partnership of Mississippi-I Gaming, L.P., is hereby incorporated by reference to Exhibit 10.31 to the Company's Quarterly Report on Form 10-Q for the period ended June 30, 1997. 3.25 Articles of Incorporation of Louisiana Gaming Enterprises, Inc.
SEQUENTIALLY EXHIBIT NUMBERED NO. DESCRIPTION PAGE ------- ----------- ------------ 3.26 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 Exhibit 4.5 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 Exhibit 10.24 to the Company's Registration Statement on Form S-4 dated September 18, 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 Exhibit 10.37 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 Exhibit 10.6 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 Exhibit 2 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 Exhibit 10.7 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 Exhibit 10.9 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 Exhibit 10.10 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 Exhibit 10.12 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 Exhibit 10.11 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 Exhibit 10.14 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 Exhibit 10.15 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 Exhibit 10.16 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 Exhibit 10.17 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 Exhibit 10.18 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 Exhibit 10.18 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 Exhibit 10.19 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 Exhibit 10.20 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 Exhibit 10.21 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 Exhibit 10.17 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 Exhibit 10.24 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 Exhibit 10.22 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 Exhibit 10.23 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 Exhibit 10.27 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 Exhibit 10.29 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 Exhibit 10.30 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 Exhibit 10.28 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 Exhibit 10.31 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 Exhibit 10.32 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 Exhibit 10.33 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 Exhibit 10.34 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 Exhibit 10.35 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 Exhibit 10.36 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 Exhibit 10.38 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. 24.2* Powers of Attorney of officers and directors of Hollywood Park Operating Company. 24.3* Powers of Attorney of officers and directors of Hollywood Park Fall Operating Company. 24.4* Powers of Attorney of officers and directors of Hollywood Park Food Services, Inc. 24.5* Powers of Attorney of officers and directors of HP/Compton, Inc. 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. 24.7* Powers of Attorney of officers and directors of Turf Paradise, Inc. 24.8* Powers of Attorney of officers and directors of HP Yakama, Inc. 24.9* Powers of Attorney of officers and directors of Boomtown, Inc. 24.10* Powers of Attorney of officers and directors of Boomtown Hotel & Casino, Inc. 24.11* Powers of Attorney of officers and directors of Bayview Yacht Club, Inc. 24.12* Powers of Attorney of directors of Bayview Yacht Club, Inc. in the capacity of General Partner of Mississippi I-Gaming, L.P. 24.13* Powers of Attorney of officers and directors of Louisiana Gaming Enterprises, Inc. 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. 25.1* Statement Regarding Eligibility of Trustee 99** Form of Letter of Transmittal
- -------- * Previously filed ** To be filed by amendment EX-3.5 2 CERTIFICATE OF INCORPORATION OF HOLLYWOOD PARK EXHIBIT 3.5 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 FALL OPERATING COMPANY", FILED IN THIS OFFICE ON THE TWENTY-THIRD DAY OF JANUARY, A.D. 1987, AT 2 O'CLOCK P.M. --------------------------------------------------- Edward J. Freel, Secretary of State AUTHENTICATION: 8585968 DATE: 07-31-97 CERTIFICATE OF INCORPORATION OF HOLLYWOOD PARK FALL OPERATING COMPANY A Close Corporation 1. The name of the corporation is Hollywood Park Fall Operating Company. 2. 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. 3. The purpose of this corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation law of Delaware. 4. The total number of shares of stock which the corporation shall have authority to issue is one hundred (100); all of such shares shall be without par value. -1- The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions thereof are as follows: Shares of stock of this corporation are to be issued and held by each and every stockholder of this corporation upon and subject to the following terms and conditions: All of the issued and outstanding stock of all classes shall be represented by certificates and shall be held of record by not more than thirty (30) persons, as defined in Section 342 of the General Corporation Law; and the corporation shall make no offering of any of its stock of any class which would constitute a "public offering" within the meaning of the United States Securities Act of 1933, as it may be amended from time to time; and the consent of the directors of the corporation shall be required to approve issuance or transfer of any shares as being in compliance with the foregoing restrictions. No holder of shares shall sell, assign or otherwise dispose of any share or shares of stock of this corporation to any person, firm, corporation or association, nor shall the executor, administrator, trustee, assignee, or other legal representative of a deceased stockholder sell, assign, transfer or otherwise dispose of any share or shares of the stock of this corporation to any person, firm, corporation or -2- association nor to any next of kin or legatees of a deceased stockholder, without first offering said share or shares of stock for sale to the corporation at a price representing the true book value thereof at the time of said offer and the corporation shall have the right to purchase the same by the payment of said purchase price at any time within thirty (30) days after receipt of written notice of said offer. In the event that the corporation does not accept the offer to sell said share or shares within thirty (30) days after receipt of the written notice of said offer, the share or shares shall next be offered for sale to the other stockholder or stockholders of said corporation at a price representing the true book value thereof at the time of said offer and such other stockholder or stockholders shall have the right to purchase the same by the payment of such purchase price at any time within thirty (30) days after receipt of written notice of said offer. Compliance with the foregoing terms and conditions in regard to the sale, assignment, transfer or other disposition of the shares of stock of this corporation shall be a condition precedent to the transfer of such shares of stock on the books of this corporation. -3- 5. The name and mailing address of each incorporator is as follows:
Name Mailing Address ---- --------------- John M. Garrick IVERSON, YOAKUM, PAPIANO & HATCH 611 West Sixth Street, Suite 1900 Los Angeles, California 90017
6. The corporation is to have perpetual existence. 7. In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: To make, alter or appeal the by-laws of the corporation. 8. Meetings of stockholders may be held within or without the state of Delaware, as the by-laws may provide. The books of the corporation may be kept outside the state of Delaware at such a place or places as may be designated from time to time by the Board of Directors or in the by-laws of the corporation. Elections of directors need not be by written ballot unless the by-laws of the corporation shall so provide. 9. The corporation reserves the right to amend, alter, change or appeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by -4- statute, and all rights conferred upon stockholders herein are granted subject to this reservation. THE UNDERSIGNED, being the incorporator hereinbefore named, for the purpose of forming a corporation pursuant to the general corporation law of the state of Delaware does make this certificate, hereby declaring and certifying that this is his act indeed and the facts herein stated are true, and accordingly has hereunto set his hand this 21st day of January, 1987. ---------------------------------------------- John M. Garrick of IVERSON, YOAKUM, PAPIANO & HATCH -5- EX-3.6 3 BY-LAWS OF HOLLYWOOD PARK EXHIBIT 3.6 HOLLYWOOD PARK FALL OPERATING COMPANY * * * * * B Y - L A W S * * * * * ARTICLE I OFFICES Section 1. The registered office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The corporation may also have offices at such other places both within and without the State of Delaware as the board of directors may from time to time determine or the business of the corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. All meetings of the stockholders for the election of directors shall be held in the City of Inglewood, State of California, at such place as may be fixed from time to time by the board of directors, or at such other place either within or without the State of Delaware as shall be designated from time to time by the board of directors and stated in the notice of the meeting. Meetings of stockholders for any other purpose may be held at such time and place, within or without the State of Delaware, as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders, commencing with the year 1987, shall be held on the twenty first day of May if not a legal holiday, and if a legal holiday, then on the next secular day following, at 10:30 A.M., or at such other date and time as shall be designated from time to time by the board of directors and stated in the notice of the meeting, at which they shall elect by a plurality vote a board of directors, and transact such other business as may properly be brought before the meeting. Section 3. Written notice of the annual meeting stating the place, date and hour of the meeting shall be given 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 4. The officer who has charge of the stock ledger of the corporation shall prepare and make, at least ten 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 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 -2- list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present. Section 5. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the certificate of incorporation, may be called by the president and shall be called by the president or secretary at the request in writing of a majority of the board of directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 6. Written notice of a special meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called, shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. Section 7. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 8. The holders of a majority of the stock 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 except as otherwise provided by statute or by the -3- certificate of incorporation. 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. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. Section 9. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, unless the question is one upon which by express provision of the statutes or of the certificate of incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Section 10. Unless otherwise provided in the certificate of incorporation each stockholder shall 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 on -4- after three years from its date, unless the proxy provides for a longer period. Section 11. Unless otherwise provided in the certificate of incorporation, any action required to be taken at any annual or special meeting of stockholders of the corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 2 of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the -5- 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 annual election and until their successors are duly elected and shall qualify, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office. Section 3. The business of the corporation shall be managed by or under the direction of its board of directors which may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the certificate of incorporation or by these by-laws directed or required to be exercised or done by the stockholders. MEETINGS OF THE BOARD OF DIRECTORS Section 4. The board of directors of the corporation may hold meetings, both regular and special, either within or without the State of Delaware. -6- Section 5. The first meeting of each newly elected board of directors shall be held at such time and place as shall be fixed by the vote of the stockholders at the annual meeting and no notice of such meeting shall be necessary to the newly elected directors in order legally to constitute the meeting, provided a quorum shall be present. In the event of the failure of the stockholders to fix the time or place of such first meeting of the newly elected board of directors, or in the event such meeting is not held at the time and place so fixed by the stockholders, the meeting may be held at such time and place as shall be specified in a notice given as hereinafter provided for special meetings of the board of directors, or as shall be specified in a written waiver signed by all of the directors. Section 6. Regular meetings of the board of directors may be held without notice at such time and at such place as shall from time to time be determined by the board. Section 7. Special meetings of the board may be called by the president on four (4) days' notice to each director, either by mail or by telegram on forty eight (48) hours if personally delivered or by telephone; special meetings shall be called by the president or secretary in like manner and on like notice on the written request of two directors unless the board consists of only one director; in which case special meetings shall be called by the president or secretary in like manner and on like notice on the written request of the sole director. -7- Section 8. At all meetings of the board a majority of the 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. If a quorum shall not be present at any meeting of the board of directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 9. 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 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. Section 10. Unless otherwise restricted by the certificate of incorporation or these by-laws, members of the board of directors, or any committee designated by the board of directors, may participate in a meeting of the board of directors, or any committee, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and -8- such participation in a meeting shall constitute presence in person at the meeting. COMMITTEE'S OF DIRECTORS Section 11. 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. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the board of directors, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the certificate of incorporation, (except that a committee may, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock -9- adopted by the board of directors as provided in Section 151(a) fix any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the corporation) adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the corporation's property and assets, recommending to the stockholders a dissolution of the corporation or a revocation of a dissolution, or amending the by-laws of the corporation; and, unless the resolution or the certificate of incorporation expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock or to adopt a certificate of ownership and merger. 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. Section 12. Each committee shall keep regular minutes of its meetings and report the same to the board of directors when required. COMPENSATION OF DIRECTORS Section 13. Unless otherwise restricted by the certificate of incorporation or these by-laws, the board of -10- 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 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. REMOVAL OF DIRECTORS Section 14. Unless otherwise restricted by the certificate of incorporation or by law, any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV NOTICES Section 1. Whenever, under the provisions of the statutes or of the certificate of incorporation or of these by-laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, addressed to such director or stockholder, at his address as it appears on the records of the corporation, with postage thereon prepaid, and such notice shall be deemed to be given -11- at the time when the same shall be deposited in the United States mail. Notice to directors may also be given by telegram. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the certificate of incorporation or of these by-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the corporation shall be chosen by the board of directors and shall be a president, a vice-president, a secretary and a treasurer. The board of directors may also choose additional vice-presidents, and one or more assistant secretaries and assistant treasurers. Any number of officers may be held by the same person, unless the certificate of incorporation or these by-laws otherwise provide. Section 2. The board of directors at its first meeting after each annual meeting of stockholders shall choose a president, one or more vice- presidents, a secretary and a treasurer. Section 3. 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 -12- powers and perform such duties as shall be determined from time to time by the board. Section 4. The salaries of all officers and agents of the corporation shall be fixed by the board of directors. Section 5. The officers of the corporation shall hold office until their successors are chosen and qualify. Any officer elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the board of directors. Any vacancy occurring in any office of the corporation shall be filled by the board of directors. THE PRESIDENT Section 6. The president shall be the chief executive officer of the corporation, shall preside at all meetings of the stockholders and the board of directors, shall have general and active management of the business of the corporation and shall see that all orders and resolutions of the board of directors are carried into effect. Section 7. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the board of directors to some other officer or agent of the corporation. -13- THE VICE-PRESIDENTS Section 8. In the absence of the president or in the event of his inability or refusal to act, the vice-president (or in the event there be more than one vice-president, the vice-presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. The vice-presidents shall perform such other duties and have such other powers as the board of directors may from time to time prescribe. THE SECRETARY AND ASSISTANT SECRETARY Section 9. The secretary 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 to be kept for that purpose and shall perform like duties for the standing committees 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 president, under whose supervision he shall be. 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 -14- affixed, it may be attested by his signature or by the signature of such assistant secretary. 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 10. The assistant secretary, or if there be more than one, the assistant secretaries in the order determined by the board of directors (or if there be no such determination, then in the order of their election) 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 and have such other powers as the board of directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. 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. Section 12. 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 president and the board of directors, at its -15- 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 13. If required by the board of directors, he shall give the corporation a bond (which shall be renewed every six years) in such sum and with such surety or sureties as shall be satisfactory to the board of directors for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. Section 14. The assistant treasurer, or if there shall be more than one, the assistant treasurers in the order determined by the board of directors (or if there be no such determination, then in the order of their election) 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 and have such other powers as the board of directors may from time to time prescribe. ARTICLE VI CERTIFICATE FOR SHARES Section 1. The shares of the corporation shall be represented by a certificate or shall be uncertificated. -16- Certificates shall be signed by, or in the name of the corporation by, the chairman or vice-chairman of the board of directors, or the president or a vice- president and the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the corporation. Within a reasonable time after the issuance or transfer of uncertificated stock, the corporation shall send to the registered owner thereof a written notice containing the information required to be set forth or stated on certificates pursuant to Sections 151, 156, 202(a) or 218(a) or a statement that the corporation will furnish without charge to each stockholder who so requests the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. Section 2. Any of or all the signatures on a certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. -17- LOST CERTIFICATES Section 3. The board of directors may direct a new certificate or certificates or uncertificated shares to be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate or certificates or uncertificated shares, the board of directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFER OF STOCK Section 4. Upon surrender to the corporation or the transfer agent of the corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignation 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. Upon receipt of proper transfer instructions from the registered owner of -18- uncertificated shares such uncertificated shares shall be cancelled and issuance of new equivalent uncertificated shares or certificated shares shall be made to the person entitled thereto and the transaction shall be recorded upon the books of the corporation. FIXING RECORD DATE Section 5. In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting: provided, however, that the board of directors may fix a new record date for the adjourned meeting. REGISTERED STOCKHOLDERS Section 6. The corporation shall be entitled to recognize the exclusive right of a person registered on its -19- books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of 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 other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the corporation, subject to the provisions of the certificate of incorporation, if any, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the certificate of incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interest of the corporation, and the -20- directors may modify or abolish any such reserve in the manner in which it was created. ANNUAL STATEMENT Section 3. The board of directors shall present at each annual meeting, and at any special meeting of the stockholders when called for by vote of the stockholders, a full and clear statement of the business and condition of the corporation. CHECKS Section 4. 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. FISCAL YEAR Section 5. The fiscal year of the corporation shall be fixed by resolution of the board of directors. SEAL Section 6. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. -21- INDEMNIFICATION Section 7. The corporation shall indemnify its officers, directors, employees and agents to the extent permitted by the General Corporation Law of Delaware. ARTICLE VIII AMENDMENTS Section 1. These by-laws may be altered, amended or repealed or new by-laws may be adopted by the stockholders or by the board of directors, when such power is conferred upon the board of directors by the certificate of incorporation at any regular meeting of the stockholders or of the board of directors or at any special meeting of the stockholders or of the board of directors if notice of such alteration, amendment, repeal or adoption of new by- laws be contained in the notice of such special meeting. If the power to adopt, amend or repeal by-laws is conferred upon the board of directors by the certificate of incorporation it shall not divest or limit the power of the stockholders to adopt, amend or repeal by-laws. -22- AMENDMENT TO BY-LAWS ADOPTED BY RESOLUTION OF THE SOLE STOCKHOLDER OF HOLLYWOOD PARK FALL OPERATING COMPANY ------------------------------------- a Delaware corporation (August 10, 1992) "NOW, THEREFORE, BE IT RESOLVED, that the first three (3) sentences of Article III, Section 1 of the By-laws of this corporation be, and they hereby are, amended to read in full as follows: `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.' RESOLVED FURTHER, that the foregoing amendment of the By-laws of this corporation be, and it hereby is, approved and adopted;" -23- EX-3.7 4 ARTICLES OF INCORPORATION OF HOLLYWOOD PARK EXHIBIT 3.7 ARTICLES OF INCORPORATION ------------------------- OF -- WILLIAMS & SONS CATERING COMPANY, INC. -------------------------------------- I. The name of this corporation is: WILLIAMS & SONS CATERING COMPANY, INC. II. The purposes for which this corporation is formed, and the specific business in which the corporation is primarily to engage being set forth in paragraph (1) below, are: (1) The specific business in which the corporation is primarily to engage is the catering and related on-premises and off-premises food service businesses, and all similar businesses; (2) To engage in any one or more other businesses or transactions which the Board of Directors of this corporation may from time to time authorize or approve, whether related or unrelated to the business described in (1) above or to any other business then or theretofore done by this corporation; (3) To act as principal, agent, joint venturer, partner, or in any other capacity which may be authorized or approved by the Board of Directors of this corporation; (4) To transact business in the State of California or in any other jurisdiction of the United States of America or elsewhere in the world; (5) To exercise all powers conferred by the laws of California upon corporations formed under the laws pursuant to and under which this corporation is formed, as such laws are now in effect or may at any time hereafter be amended. The foregoing statement of purposes shall be construed as a statement of both purposes and powers, and the purposes and powers stated in each clause shall, except where otherwise expressed, be in nowise limited or restricted by any reference to or inference from the terms or provisions of any other clause, but shall be regarded as independent purposes and powers. III. The county in the State of California where the principal office for transaction of the business of this corporation is to be located is Los Angeles County. IV. The number of directors shall be two, and the number may be changed by a by-law adopted by the vote of shareholders entitled to exercise a majority of the voting powers of this corporation, or by the written assent of such shareholders. The names and addresses of the persons who are appointed to act as the first directors of this corporation are: Name Address ---- ------- Richard C. Smith 611 West Sixth Street Los Angeles, California 90017 Karen L. Guffin 611 West Sixth Street Los Angeles, California 90017 V. This corporation is authorized to issue only one class of stock. The number of shares which this corporation is authorized to issue is Seven Hundred Fifty (750). The par value of each share of stock shall be One Hundred Dollars ($100.00), and the aggregate par value of shares shall be Seventy-Five Thousand Dollars ($75,000.00). The shareholders of this corporation are hereby granted preemptive rights to subscribe to any and all issues of shares or securities. IN WITNESS WHEREOF, for the purpose of forming this corporation under the laws of the State of California, we, the undersigned, constituting the incorporators of this corporation and the persons named herein as the first directors of this corporation, have executed these Articles of Incorporation this 13th day of July, 1973. _________________________________ Richard C. Smith _________________________________ Karen L. Guffin STATE OF CALIFORNIA ) ) COUNTY OF LOS ANGELES ) On this 13th day of July, 1973, before me, Lela Flowers, a notary public in and for said county and state, personally appeared Richard C. Smith and Karen L. Guffin, known to me to be the persons whose names are subscribed to the within instrument, and acknowledged to me that they executed the same. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal, the day and year in this certificate first above written. _________________________________ Notary Public in and for said County and State CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION NEIL PAPIANO and DONALD M. ROBBINS certify: 1. That they are the president and the secretary, respectively, of WILLIAMS & SONS CATERING COMPANY, INC., a California corporation. 2. That at a meeting of the Board of Directors of said corporation, duly held at 611 West Sixth Street, Los Angeles, California, on May 6, 1976, the following resolution was adopted: "RESOLVED: That Article I of the Articles of Incorporation of this corporation be amended to read as follows: 'The name of this corporation is EPICUREAN, INC.'" 3. That the shareholders have adopted said amendment by written consent. That the wording of the amended article, as set forth in the shareholders' written consent, is the same as that set forth in the directors' resolution in Paragraph 2 above. 4. That the number of shares represented by written consent is 100. That the total number of shares entitled to vote on or consent to the amendment is 100. I certify (or declare) under penalty of perjury that the foregoing is true and correct. Executed on May 24, 1976 at Los Angeles, California. _______________________________ NEIL PAPIANO, President _______________________________ DONALD M. ROBBINS, Secretary CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF EPICUREAN, INC. G. Michael Finnigan and Donald M. Robbins certify that: 1. They are the Executive Vice President and the Secretary of Epicurean, Inc., a California corporation. 2. Article I, of the Articles of Incorporation of this corporation is amended to read as follows: "The name of this corporation is Hollywood Park Food Services, Inc." 3. The foregoing amendment of Articles of Incorporation has been duly approved by the Board of Directors. 4. The foregoing amendment of Articles of Incorporation has been duly approved by the required vote of the sole shareholder in accordance with Section 902 of the Corporations Code. The total number of outstanding shares of the corporation is 100. The number of shares voting in favor of the amendment equaled or exceeded the vote required. The percentage vote required was more than 50%. We further declare under penalty of perjury under the laws of the State of California that the matters set forth in this certificate are true and correct of our own knowledge. Executed this 3rd day of March, 1992, at Inglewood, California. _______________________________________ G. Michael Finnigan Executive Vice President _______________________________________ Donald M. Robbins, Secretary EX-3.8 5 BY-LAWS OF HOLLYWOOD PARK FOOD SERVICES, INC. EXHIBIT 3.8 BY-LAWS OF HOLLYWOOD PARK FOOD SERVICES, INC. (FNA: WILLIAMS & SONS CATERING COMPANY, INC. AND EPICUREAN, INC.) ARTICLE I OFFICES SECTION 1. PRINCIPAL OFFICE. The principal office for the transaction of ---------------- the business of the corporation is hereby located at 1050 South Prairie in the City of Inglewood, County of Los Angeles, State of California. The board of directors is hereby granted full power and authority to change said principal office from one location to another in said County. SECTION 2. OTHER OFFICES. Branch or subordinate offices may at any time ------------- be established by the board of directors at any place or places where the corporation is qualified to do business. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 1. PLACE OF MEETINGS. All annual meetings of shareholders and all ----------------- other meetings of shareholders shall be held either at the principal office of the corporation or at any other place within or without the State of California which may be designated either by the board of directors pursuant to authority hereinafter granted to said board, or by the written consent of all shareholders entitled to vote thereat, given either before or after the meeting and filed with the secretary of the corporation. SECTION 2. ANNUAL MEETINGS. The annual meetings of shareholders shall be --------------- held on second Thursday in May in each year at 2:30 o'clock P.M. of said day; provided, however, that should said day fall upon a legal holiday, then any such annual meeting of shareholders shall be held at the same time and place of the next day thereafter ensuing which is not a legal holiday. At such meetings directors shall be elected, reports of the affairs of the corporation shall be considered, and any other business may be transacted which is within the power of the shareholders. Written notice of each annual meeting shall be given to each shareholder entitled to vote, either personally or by mail or other means of written communication, charges prepaid, addressed to such shareholder at his address appearing on the books of the corporation or given by him to the corporation for the purpose of notice. If a shareholder gives no address, notice shall be deemed to have been given if sent by mail or other means of written communication addressed to the place where the principal office of the corporation is situated, or if published at least once in some newspaper of general circulation in the County in which said office is located. All such notices shall be sent to each shareholder entitled thereto not less than ten (10) days nor more than fifty (50) days before each annual meeting, and shall specify the place, the day and the hour of such meeting, and shall state such other matters, if any, as may be expressly required by statute. SECTION 3. SPECIAL MEETINGS. Special meetings of the shareholders, for ---------------- any purpose or purposes whatsoever, may be called at any time by the president or by the board of directors, or by one or more shareholders holding not less than one-fifth of the voting power of the corporation. Except in special cases where other express provision is made by statute, notice of such special meetings shall be given in the same manner as for annual meetings of shareholders. Notices of any special meeting shall specify in addition to the place, day and hour of such meeting, the general nature of the business to be transacted. SECTION 4. ADJOURNED MEETINGS AND NOTICE THEREOF. Any shareholders' ------------------------------------- meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of a majority of the shares, the holders of which are either present in person or represented by proxy thereat, but in the absence of a quorum no other business may be transacted at such meeting, except as provided in Section 6 of Article I. When any shareholders' meeting, either annual or special, is adjourned for thirty (30) days or more, notice of the adjourned meeting shall be given as in the case of an original meeting. Save as aforesaid, it shall not be necessary to give any notice of an adjournment or of the business to be transacted at an adjourned meeting, other than by announcement at the meeting at which such adjournment is taken. SECTION 5. VOTING. Unless a record date for voting purposes be fixed as ------ provided in Section 1 of Article V of these By-laws, then, but subject to the provisions of Sections 2218 to 2223 inclusive of the California General Corporation Law, only persons in whose names shares entitled to vote stand on the stock records of the corporation on the day three (3) days prior to any meeting of shareholders shall be entitled to vote at such meeting. Such vote may be viva voce or by ---- ---- -2- ballot; provided, however, that all elections for directors must be by ballot upon demand made by a shareholder at any election and before the voting begins. Every shareholder entitled to vote at any election for directors shall have the right to cumulate his votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which his shares are entitled, or to distribute his votes on the same principle among as many candidates as he shall think fit. The candidates receiving the highest number of votes up to the number of directors to be elected shall be elected. SECTION 6. QUORUM. The presence in person or by proxy of persons entitled ------ to vote a majority of the voting shares at any meeting shall constitute a quorum for the transaction of business. The shareholders present at a duly called or held meeting at which a quorum is present may continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. SECTION 7. CONSENT OF ABSENTEES. The transactions of any meeting of -------------------- shareholders, either annual or special, however called and noticed, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each of the shareholders entitled to vote, not present in person or by proxy, signs a written waiver of notice, or a consent to the holding of such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. SECTION 8. ACTION WITHOUT MEETING. Any action which, under any provision ---------------------- of the California General Corporation Law, may be taken at a meeting of the shareholders, may be taken without a meeting if authorized by a writing signed by all of the persons who would be entitled to vote upon such action at a meeting, and filed with the secretary of the corporation. SECTION 9. PROXIES. Every person entitled to vote or execute consents ------- shall have the right to do so either in person or by one or more agents authorized by a written proxy executed by such person or his duly authorized agent and filed with the secretary of the corporation; provided that no such proxy shall be valid after the expiration of eleven (11) months from the date of its execution, unless the person executing it specified therein the length of time for which such proxy is to continue in force, which in no case shall exceed seven (7) years from the date of its execution. -3- ARTICLE III DIRECTORS SECTION 1. POWERS. Subject to limitations of the articles of ------ incorporation, of the By-laws, and of the California General Corporation Law as to action which shall be authorized or approved by the shareholders, all corporate powers shall be exercised by or under the authority of, and the business and affairs of the corporation shall be controlled by, the board of directors. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the directors shall have the following powers, to wit: First - To select and remove all the officers, agents, and employees of the corporation, prescribe such powers and duties for them as may not be inconsistent with law, with the articles of incorporation or the By-laws, fix their compensation, and require from them security for faithful service. Second - To conduct, manage and control the affairs and business of the corporation, and to make such rules and regulations therefor not inconsistent with law, or with the articles of incorporation or the By-laws, as they may deem best. Third - To change the principal office for the transaction of the business of the corporation from one location to another within the same County as provided in Article I, Section 1, hereof; to fix and locate from time to time one or more subsidiary offices of the corporation within or without the State of California for the holding of any shareholders' meeting or meetings; and to adopt, make and use a corporate seal, and to prescribe the forms of certificates of stock, and to alter the form of such seal and of such certificates from time to time, as in their judgment they may deem best, provided such seal and such certificate shall at all times comply with the provisions of law. Fourth - To authorize the issue of shares of stock of the corporation from time to time, upon such terms and for such considerations as may be lawful. Fifth - To borrow money and incur indebtedness for the purposes of the corporation, and to cause to be executed and delivered therefor, in the corporate name, promissory notes, bonds, debentures, deeds of trust, mortgages, pledges, hypothecations or other evidences of debt and securities therefor. -4- Sixth - To appoint an executive committee and other committees, and to delegate to the executive committee any of the powers and authority of the board in the management of the business and affairs of the corporation, except the power to declare dividends and to adopt, amend or repeal By-laws. The executive committee shall be composed of two or more directors. SECTION 2. NUMBER OF DIRECTORS. Amended by resolution of the sole ------------------- shareholder 08/10/92. SECTION 3. ELECTION AND TERM OF OFFICE. The directors shall be elected at --------------------------- each annual meeting of shareholders, but if any such annual meeting is not held, or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose. All directors shall hold office until their respective successors are elected. SECTION 4. VACANCIES. Vacancies in the board of directors may be filled --------- by a majority of the remaining directors, though less than a quorum, or by a sole remaining director, and each director so elected shall hold office until his death, resignation or removal, or until his successor is elected at an annual or a special meeting of the shareholders. A vacancy or vacancies in the board of directors shall be deemed to exist in case of the death, resignation or removal of any director, or if the authorized number of directors be increased, or if the shareholders fail at any annual or special meeting of shareholders at which any director or directors are elected to elect the full authorized number of directors to be voted for at that meeting. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors. If the board of directors accepts the resignation of a director tendered to take effect at a future time, the board or the shareholders shall have power to elect a successor to take office when the resignation is to become effective. No reduction of the authorized number of directors shall have the effect of removing any director prior to the expiration of his term of office. SECTION 5. PLACE OF MEETING. Regular meetings of the board of directors ---------------- shall be held at any place within or without the State of California which has been designated from time to time by resolution of the board or by written consent of all members of the board. In the absence of such designation regular meetings shall be held at the principal office of the corporation. Special meetings of the board may -5- be held either at a place so designated or at the principal office of the corporation. SECTION 6. ORGANIZATION MEETING. Immediately following each annual -------------------- meeting of shareholders, the board of directors shall hold a regular meeting for the purpose of organization, election of officers, and the transaction of other business. Notice of such meeting is hereby dispensed with. SECTION 7. OTHER REGULAR MEETINGS. Other regular meetings of the board of ---------------------- directors shall be held without call at such time as the board of directors may from time to time designate; provided, however, should said day fall upon a legal holiday, then said meeting shall be held at the same time on the next day thereafter ensuing which is not a legal holiday. Notice of all such regular meetings of the board of directors is hereby dispensed with. SECTION 8. SPECIAL MEETINGS. Special meetings of the board of directors ---------------- for any purpose or purposes shall be called at any time by the president or, if he is absent or unable or refuses to act, by any vice-president or by any two directors. Written notice of the time and place of special meetings shall be delivered personally to each director, or sent to each director by mail or by other form of written communication, charges prepaid, addressed to him at his address as it is shown upon the records of the corporation, or, if it is not so shown on such records or is not readily ascertainable, at the place in which the meeting of the directors are regularly held. In case such notice is mailed or telegraphed, it shall be deposited in the United States mail or delivered to the telegraph company in the County in which the principal office of the corporation is located at least forty-eight (48) hours prior to the time of the holding of the meeting. In case such notice is delivered personally as above provided, it shall be so delivered at least twenty-four (24) hours prior to the time of the holding of the meeting. Such mailing, telegraphing or delivery as above provided shall be due, legal and personal notice to such director. SECTION 9. WAIVER OF NOTICE. The transactions of any meeting of the board ---------------- of directors, however called and noticed or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present, and if, either before or after the meeting, each of the directors not present signs a written waiver of notice, or a consent to holding such meeting, or an approval of the minutes thereof. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting. -6- SECTION 10. QUORUM. A majority of the authorized number of directors ------ shall be necessary to constitute a quorum for the transaction of business, except to adjourn as hereinafter provided. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present shall be regarded as the act of the board of directors, unless a greater number be required by law or by the articles of incorporation. SECTION 11. ADJOURNMENT. A quorum of the directors may adjourn any ----------- directors meeting to meet again at a stated day and hour; provided, however, that in the absence of a quorum, a majority of the directors present at any directors' meeting, either regular or special, may adjourn from time to time until the time fixed for the next regular meeting of the board. SECTION 12. NOTICE OF ADJOURNMENT. Notice of the time and place of --------------------- holding an adjourned meeting need not be given to absent directors if the time and place be fixed at the meeting adjourned. SECTION 13. ACTION WITHOUT MEETING. Any action required or permitted to ---------------------- be taken by the board of directors under any provision of the California General Corporation Law may be taken without a meeting if all members of the board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors. SECTION 14. FEES AND COMPENSATION. Directors shall not receive any stated --------------------- salary for their services as directors, but, by resolution of the board, a fixed fee, with or without expenses of attendance, may be allowed one or more of the directors for attendance at each meeting. Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise, and receiving compensation therefor. SECTION 15. INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES. ---------------------------------------------------- (a) When a person is sued, either alone or with others, because he is or was a director, officer, or employee of the corporation, in any proceeding (whether brought by the corporation, its receiver, its trustee, one or more of its shareholders or creditors, any governmental body, any public official, or any private person or corporation, domestic or foreign) arising out of his alleged misfeasance or nonfeasance in the performance of his duties or out of any alleged wrongful act against the corporation or by the corporation, he may be indemnified for his reasonable expenses, including -7- attorneys' fees incurred in the defense of the proceeding, if both of the following conditions exist: (1) The person sued is successful in whole or in part, or the proceeding against him is settled with the approval of the court. (2) The court finds that his conduct fairly and equitably merits such indemnity. The amount of such indemnity may be assessed against the corporation, its receiver, or its trustee, by the court in the same or in a separate proceeding and shall be so much of the expenses, including attorneys' fees incurred in the defense of the proceeding, as the court determines and finds to be reasonable. Application for such indemnity may be made either by a person sued or by the attorney or other person rendering services to him in connection with the defense, and the court may order fees and expenses to be paid directly to the attorney or other person, although he is not a party to the proceeding. Notice of the application for such indemnity shall be served upon the corporation, its receiver, or its trustee, and upon the plaintiff and other parties to the proceeding. The court may order notice to be given also to the shareholders in the manner provided elsewhere in these By-laws for giving notice of shareholders' meetings, in such form as the court directs. (b) Notwithstanding the provisions of Subsection (a) of this Section 15, the board of directors may authorize the corporation to pay expenses incurred by, or to satisfy a judgment or fine rendered or levied against, a present or former director, officer or employee of the corporation in an action brought by a third party against such person (whether or not the corporation is joined as a party defendant) to impose a liability or penalty on such person for an act alleged to have been committed by such person while a director, officer or employee, or by the corporation, or by both; provided, the board of directors determines in good faith that such director, officer or employee was acting in good faith within what he reasonably believed to be the scope of his employment or authority and for a purpose which he reasonably believed to be in the best interests of the corporation or its shareholders. Payments authorized hereunder include amounts paid and expenses incurred in settling any such action or threatened action. This Subsection (b) does not apply to any action instituted or maintained in the right of the corporation by a shareholder or holder of a voting trust certificate representing shares of the corporation. (c) The provisions of this Section 15 shall apply to the estate, executor, administrator, heirs, legatees or devisees of a director, officer or employee, and the term -8- "person" where used in the foregoing Subsections of this Section 15 shall include the estate, executor, administrator, heirs, legatees or devisees of such person. ARTICLE IV OFFICERS SECTION 1. OFFICERS. The officers of the corporation shall be a -------- president, a vice-president, a secretary and a treasurer. The corporation may also have, at the discretion of the board of directors, a chairman of the board, one or more additional vice-presidents, one or more assistant secretaries and one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 3 of this Article IV. One person may hold two or more offices, except those of president and secretary. SECTION 2. ELECTION. The officers of the corporation, except such -------- officers as may be appointed in accordance with the provisions of Section 3 or Section 5 of this Article IV, shall be chosen annually by the board of directors, and each shall hold his office until he shall resign or shall be removed or otherwise disqualified to serve, or his successor shall be elected and qualified. SECTION 3. SUBORDINATE OFFICERS, ETC. The board of directors may appoint -------------------------- such other officers as the business of the corporation may require, each of whom shall have such authority and perform such duties as are provided in these By- laws or as the board of directors may from time to time specify, and shall hold office until he shall resign or shall be removed or otherwise disqualified to serve. SECTION 4. REMOVAL AND RESIGNATION. Any officer may be removed, either ----------------------- with or without cause, by a majority of the directors at the time in office, at any regular or special meeting of the board, or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors. Any officer may resign at any time by giving written notice to the board of directors or to the president, or to the secretary of the corporation. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignations shall not be necessary to make it effective. SECTION 5. VACANCIES. A vacancy in any office because of death, --------- resignation, removal, disqualification or any other -9- cause shall be filled in the manner prescribed in the By-laws for regular appointments to such office. SECTION 6. CHAIRMAN OF THE BOARD. The chairman of the board, if there --------------------- shall be such an officer, shall, if present, preside at all meetings of the board of directors, and exercise and perform such other powers and duties as may be from time to time assigned to him by the board of directors or prescribed by these By-laws. SECTION 7. PRESIDENT. Subject to such supervisory powers, if any, as may --------- be given by the board of directors to the chairman of the board, if there be such an officer, the president shall be the chief executive officer of the corporation and shall, subject to the control of the board of directors, have general supervision, direction and control of the business and officers of the corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the board, at all meetings of the board of directors. He shall be ex officio a member of all the standing committees, including the -- ------- executive committee, if any, and shall have the general powers and duties of management usually vested in the office of the president of a corporation, and shall have such other powers and duties as may be prescribed by the board of directors or these By-laws. SECTION 8. VICE PRESIDENT. In the absence or disability of the president, -------------- the vice-presidents in order of their rank as fixed by the board of directors, or if not ranked, the vice president designated by the board of directors, shall perform all the duties of the president, and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors or these By-laws. SECTION 9. SECRETARY. The secretary shall keep, or cause to be kept, a --------- book of minutes at the principal office or such other place as the board of directors may order, of all meetings of directors and shareholders, with the time and place of holding, whether regular or special, and if special, how authorized, the notice thereof given, the names of those present at directors' meetings, the number of shares present or represented at shareholders' meetings and the proceedings thereof. The secretary shall keep, or cause to be kept, at the principal office or at the office of the corporation's transfer agent, a share register, or a duplicate share register, showing the names of the shareholders and their addresses; the number and classes of shares held by each; the number and date of certificates issued for the same; and the -10- number and date of cancellation of every certificate surrendered for cancellation. The secretary shall give, or cause to be given, notice of all the meetings of the shareholders and of the board of directors required by these By-laws or by law to be given, and he shall keep the seal of the corporation in safe custody, and shall have such other powers and perform such other duties as may be prescribed by the board of directors or these By-laws. If for any reason the secretary shall fail to give notice of any special meeting of the board of directors called by one or more of the persons identified in the first paragraph of Section 8, Article III, or if he shall fail to give notice of any special meeting of the shareholders called by one or more of the persons identified in Section 3, Article II, then any such person or persons may give notice of any such special meeting. SECTION 10. TREASURER. The treasurer shall keep and maintain, or cause to --------- be kept and maintained, adequate and correct accounts of the properties and business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital, surplus and shares. Any surplus, including earned surplus, paid-in surplus and surplus arising from a reduction of stated capital, shall be classified according to source and shown in a separate account. The books of account shall at all reasonable times be open to inspection by any director. The treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries 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, shall render to the president and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have such other powers &nd perform such other duties as may be prescribed by the board of directors or these By-laws. ARTICLE V MISCELLANEOUS SECTION 1. RECORD DATE AND CLOSING STOCK BOOKS. ----------------------------------- The board of directors may fix a time in the future as a record date for the determination of the shareholders entitled to notice of and to vote at any meeting of shareholders or entitled to receive any dividend or distribution, or any allotment of rights, or to exercise rights in respect to any change, conversion or exchange of shares. The record date so fixed shall be not more than fifty (50) days prior to the date of the meeting or event for the purposes of which it is fixed. -11- When a record date is so fixed, only shareholders who are such 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 any transfer of any shares on the books of the corporation after the record date. The board of directors may close the books of the corporation against transfers of shares during the whole or any part of a period not more than fifty (50) days prior to the date of shareholders' meeting, the date when the right to any dividend, distribution, or allotment of rights vests, or the effective date of any change, conversion or exchange of shares. SECTION 2. INSPECTION OF CORPORATE RECORDS. The share register or ------------------------------- duplicate share register, the books of account, and minutes of proceedings of the shareholders and the board of directors and of executive committees of directors shall be open to inspection upon the written demand of any shareholder or the holder of a voting trust certificate, at any reasonable time, and for a purpose reasonably related to his interests as a shareholder, or as the holder of such voting trust certificate, and shall be exhibited at any time when required by the demand at any shareholders' meeting of ten per cent (10%0 of the shares represented at the meeting. Such inspection may be made in person or by an agent or attorney, and shall include the right to make extracts. Demand of inspection other than at a shareholders' meeting shall be made in writing upon the president, secretary, assistant secretary or general manager of the corporation. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for -------------------- payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the board of directors. SECTION 4. ANNUAL REPORT. The board of directors shall cause an annual ------------- report to be sent to the shareholders not later than one hundred twenty (120) days after the close of the fiscal year of the corporation. SECTION 5. CONTRACT, ETC., HOW EXECUTED. The board of directors, except ---------------------------- as in these By-laws otherwise provided, may authorize any officer or officers, agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances; and unless so authorized by the board of directors, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its -12- credit or to render it liable for any purpose or in any amount. SECTION 6. CERTIFICATES OF STOCK. A certificate or certificates for --------------------- shares of the capital stock of the corporation shall be issued to each shareholder when any such shares are fully paid up. All such certificates shall be signed by the president or a vice-president and the secretary or an assistant secretary, or be authenticated by facsimiles of the signatures of the president and secretary, or by a facsimile of the signature of the president and the written signature of the secretary or an assistant secretary. Every certificate authenticated by a facsimile of a signature must be countersigned by a transfer agent or transfer clerk, and be registered by an incorporated bank or trust company, either domestic or foreign, as registrar of transfers, before issuance. Certificates for shares may be issued prior to full payment under such restrictions and for such purposes as the board of directors or these By-laws may provide; provided, however, that any such certificate so issued prior to full payment shall state on its face the amount remaining unpaid and the terms of payment thereof. No new certificate for shares shall be issued in lieu of an old certificate unless the latter is surrendered and cancelled at the same time; provided, however, that a new certificate will be issued without the surrender and cancellation of the old certificate if (1) the old certificate is lost, apparently destroyed or wrongfully taken; (2) the request for the issuance of the new certificate is made within a reasonable time after the owner of the old certificate has notice of its loss, destruction, or theft; (3) the request for the issuance of a new certificate is made prior to the receipt of notice by the corporation that the old certificate has been acquired by a bona fide purchaser; (4) the owner of the old certificate files a sufficient indemnity bond with the corporation; and (5) the owner satisfies any other reasonable requirements imposed by the corporation. In the event of the issuance of a new certificate, the rights and liabilities of the corporation, and of the holders of the old and new certificates, shall be governed by the provisions of Sections 8104 and 8405 of the California Commercial Code. SECTION 7. REPRESENTATION OF SHARES OF OTHER CORPORATIONS. The president ---------------------------------------------- or any vice-president and the secretary or assistant secretary of this corporation are authorized to vote, represent and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted to said officers to vote or represent on behalf of this corporation any and all shares held by this corporation in any other corporation or -13- corporations may be exercised either by said officers in person or by any person authorized so to do by proxy or power of attorney duly executed by said officers. SECTION 8. INSPECTION OF BY-LAWS. The corporation shall keep in it --------------------- principal office or the transaction of business the original or a copy of these By-laws as amended or otherwise altered to date, certified by the secretary, which shall be open to inspection by the shareholders at all reasonable times during office hours. SECTION 9. PERIODIC REPORTS. Regular reports containing detailed ---------------- financial and other information concerning the business and affairs of the corporation shall be furnished periodically to the responsible officers and directors of the corporation, and such reports shall be designed to keep each such officer and director currently and reasonably informed of the affairs of the corporation. ARTICLE VI AMENDMENTS SECTION 1. POWER OF SHAREHOLDERS. New By-laws may be adopted or these By- --------------------- laws may be amended or repealed by the vote of shareholders entitled to exercise a majority of the voting power of the corporation or by the written assent of such shareholders, except as otherwise provided by law or by the articles of incorporation; provided that if the authorized number of directors of the corporation is five (5) or more, the vote or written assent of shareholders holding more than eighty per cent (80%) of the voting power of the corporation shall be required to reduce the authorized number of directors below five (5). SECTION 2. POWER OF DIRECTORS. Subject to the right of shareholders ------------------ as provided in Section 1 of this Article VI to adopt, amend or repeal By-laws, By-laws other than a By-law or amendment thereof changing the authorized number of directors may be adopted, amended or repealed by the board of directors at any regular or special meeting thereof. -14- CERTIFICATE OF SECRETARY I, the undersigned, do hereby certify: (1) That I am the duly elected and acting secretary of WILLIAMS & SONS CATERING COMPANY, INC., a California corporation; and (2) That the foregoing By-laws, comprising 15 pages, constitute the original By-laws of said corporation as duly adopted at a meeting of the board of directors thereof duly held August 1, 1973. IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed the seal of said corporation this 1st day of August, 1973. ___________________________________ Fran E. Williams Secretary (CORPORATE SEAL) -15- AMENDMENT TO BY-LAWS ADOPTED BY RESOLUTION OF THE SOLE SHAREHOLDER OF HOLLYWOOD PARK FOOD SERVICES, INC. ---------------------------------- a California corporation (August 10, 1992) "NOW, THEREFORE, BE IT RESOLVED, that Article III, Section 2 of the By-laws of this corporation be, and it hereby is, amended to read in full as follows: "Section 2. Number of Directors. The affairs of this ------------------- corporation shall be managed by a Board of Directors consisting of not less than three (3) nor more than five (5) directors. The exact number of directors within the limits specified shall be fixed, and may be changed from time to time, by a resolution duly adopted by the Board of Directors or the shareholders. The limits may be changed, or a single number fixed without provision for variation, by an amendment to these bylaws duly adopted by the vote or written consent of a majority of the outstanding shares entitled to vote; provided, however, that if at any time the minimum number of directors is five (5) or more, a bylaw reducing the minimum number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting or the shares not consenting in the case of action by written consent are equal to more than 16-2/3 percent of the outstanding shares entitled to vote. No amendment may change the stated maximum number of authorized directors to a number greater than two times the stated minimum number of directors minus one." RESOLVED FURTHER, that the foregoing amendment of the By-laws of this corporation be, and it hereby is, approved and adopted;" -16- EX-3.9 6 ARTICLES OF INCORPORATION OF HP/COMPTON, INC. EXHIBIT 3.9 ARTICLES OF INCORPORATION OF HP/COMPTON, INC. ---------------- ONE: The name of this corporation is HP/Compton, Inc. --- TWO: The purpose of this corporation is to engage in any lawful act or --- activity for which a corporation may be organized under the General Corporation Law of California other than the banking business, the trust company business or the practice of a profession permitted to be incorporated by the California Corporations Code. THREE: The name and address of this corporation's initial agent for ----- service of process is: G. Michael Finnigan 1050 South Prairie Avenue Inglewood, California 90301 FOUR: This corporation is authorized to issue one class of shares of ---- stock; the total number of said shares is l00,000. FIVE: The liability of the directors of this corporation for monetary ---- damages shall be eliminated to the fullest extent permissible under California law. SIX: This corporation is authorized to indemnify the directors and --- officers of this corporation to the fullest extent permissible under California law. Dated: July 20, 1995 /s/ S.A. MORGAN ________________________________ S. A. Morgan, Incorporator EX-3.10 7 BY-LAWS OF HP/COMPTON, INC. EXHIBIT 3.10 BYLAWS ------ for the regulation, except as otherwise provided by statute or the Articles of Incorporation, of HP/COMPTON, INC. ---------------- ARTICLE I. GENERAL PROVISIONS ------------------------------ Section 1.01 Principal Executive Office. The principal executive office of the - ---------------------------------------- corporation shall be located at 1050 South Prairie Avenue, Inglewood, California 90301. The Board of Directors shall have the power to change the principal office to another location and may fix and locate one or more subsidiary offices within or without the State of California. Section 1.02 Number of Directors. The number of directors of the corporation - --------------------------------- shall be one (1) until changed by a bylaw amending this Section 1.02 duly adopted by the vote or written consent of a majority of the outstanding shares entitled to vote; provided, however, that, if at any time the number of directors is more than one, a bylaw reducing the number of directors to a number less than five (5) cannot be adopted if the votes cast against its adoption at a meeting or the shares not consenting in the case of action by written consent are equal to more than 16-2/3 percent of the outstanding shares entitled to vote. ARTICLE II. SHARES AND SHAREHOLDERS ------------------------------------ Section 2.01 Meetings of Shareholders. - -------------------------------------- (a) Place of Meetings. Meetings of shareholders shall be held at any place ----------------- within or without the State of California designated by the Board of Directors. In the absence of any such designation, shareholders' meetings shall be held at the principal executive office of the corporation. (b) Annual Meetings. An annual meeting of the shareholders of the --------------- corporation shall be held on such date and at such time as shall be designated by the Board of Directors. Should said day fall upon a legal holiday, the annual meeting of shareholders shall be held at the same time on the next day thereafter ensuing which is a full business day. At each annual meeting directors shall be elected, and any other proper business may be transacted. (c) Special Meetings. Special meetings of the shareholders may be called ---------------- by the Board of Directors, the chairman of the board, the president, or by the holders of shares entitled to cast not less than 10% of the votes at the meeting. Upon request in writing to the chairman of the board, the president, any vice president or the secretary by any person (other than the board) entitled to call a special meeting of shareholders, the officer forthwith shall cause notice to be given to the shareholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than 35 nor more than 60 days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice. (d) Notice of Meetings. Notice of any shareholders' meeting shall be given ------------------ not less than 10 nor more than 60 days before the date of the meeting to each shareholder entitled to vote thereat. Such notice shall state the place, date and hour of the meeting and (i) in the case of a special meeting, the general nature of the business to be transacted, and no other business may be transacted, or (ii) in the case of the annual meeting, those matters which the Board, at the time of the giving of the notice, intends to present for action by the shareholders. The notice of any meeting at which directors are to be elected shall include the names of nominees intended at the time of the notice to be presented by the board for election. If action is proposed to be taken at any meeting, which action is within Sections 310, 902, 1201, 1900 or 2007 of the General Corporation Law of the State of California, the notice shall also state the general nature of that proposal. Notice of a shareholders' meeting shall be given either personally or by first-class mail, or other means of written communication, charges prepaid, addressed to the shareholder at the address of such shareholder appearing on the books of the corporation or given by the shareholder to the corporation for the purpose of notice; or if no such address appears or is given, at the place where the principal executive office of the corporation is located or by publication at least once in a newspaper of general circulation in the county in which the principal executive office is located. The notice shall be deemed to have been given at the time when delivered personally or deposited in the mail or sent by other means of written communication. An affidavit of mailing of any notice executed by the secretary, assistant secretary or any transfer agent, shall be prima facie evidence of the giving of the notice. (e) Adjourned Meeting and Notice Thereof. Any meeting of shareholders may ------------------------------------ be adjourned from time to time by the vote of a majority of the shares represented either in person or by proxy whether or not a quorum is present. When a shareholders' meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the -2- corporation may transact any business which might have been transacted at the original meeting. However, if the adjournment is for more than 45 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting. (f) Waiver of Notice. The transactions of any meeting of shareholders, ---------------- however called and noticed, and wherever held, are as valid as though had at a meeting duly held after regular call and notice, if a quorum is present either in person or by proxy, and if, either before or after the meeting, each of the persons entitled to vote, not present in person or by proxy, signs a written waiver of notice or a consent to the holding of the meeting or an approval of the minutes thereof. The waiver of notice or consent need not specify either the business to be transacted or the purpose of any annual or special meeting of shareholders, except that if action is taken or proposed to be taken for approval of any of those matters specified in the second paragraph of subparagraph (d) of Section 2.01 of this Article II, the waiver of notice or consent shall state the general nature of the proposal. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. (g) Quorum. The presence in person or by proxy of the persons entitled to ------ vote a majority of the shares entitled to vote at any meeting shall constitute a quorum for the transaction of business. If a quorum is present, the affirmative vote of the majority of the shares represented and voting at the meeting (which shares voting affirmatively also constitute at least a majority of the required quorum) shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by law or the Articles of Incorporation of the corporation. The shareholders present at a duly called or held meeting at which a quorum is present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum, provided that any action taken (other than adjournment) must be approved by at least a majority of the shares required to constitute a quorum. Section 2.02 Action Without a Meeting. Any action which may be taken at any - -------------------------------------- annual or special meeting of shareholders may be taken without a meeting and without prior notice, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Notwithstanding the foregoing, directors may not be elected by -3- written consent except by unanimous written consent of all shares entitled to vote for the election of directors, except as provided by Section 3.04 hereof. Where the approval of shareholders is given without a meeting by less than unanimous written consent, unless the consents of all shareholders entitled to vote have been solicited in writing, the secretary shall give prompt notice of the corporate action approved by the shareholders without a meeting. In the case of approval of transactions pursuant to Section 310, 317, 1201 or 2007 of the General Corporation Law of the State of California, the notice shall be given at least ten (10) days before the consummation of any action authorized by that approval. Such notice shall be given in the same manner as notice of shareholders' meeting. Section 2.03 Voting of Shares. - ------------------------------ (a) In General. Except as otherwise provided in the Articles of ---------- Incorporation and subject to subparagraph (b) hereof, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of shareholders. (b) Cumulative Voting. At any election of directors, every shareholder ----------------- complying with this paragraph (b) and entitled to vote may cumulate his or her votes and give one candidate a number of votes equal to the number of directors to be elected multiplied by the number of votes to which the shareholder's shares are entitled, or distribute the shareholder's votes on the same principle among as many candidates as the shareholder thinks fit. No shareholder shall be entitled to cumulate votes (i.e., cast for any one or more candidates a number of votes greater than the number of votes which such shareholder normally is entitled to cast) unless such candidate or candidates' names have been placed in nomination prior to the voting and the shareholder has given notice at the meeting prior to the voting of the shareholder's intention to cumulate the shareholder's votes. If any one shareholder has given such notice, all shareholders may cumulate their votes for candidates in nomination. In any election of directors, the candidates receiving the highest number of affirmative votes up to the number of directors to be elected by such shares are elected; votes against a director and votes withheld shall have no legal effect. (c) Election by Ballot. Elections for directors need not be by ballot ------------------ unless a shareholder demands election by ballot at the meeting and before the voting begins. Section 2.04 Proxies. Every person entitled to vote shares may authorize - --------------------- another person or persons to act by proxy with respect to such shares. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise -4- provided in the proxy. Every proxy continues in full force and effect until revoked by the person executing it prior to the vote pursuant thereto, except as otherwise herein provided. Such revocation may be effected by a writing delivered to the corporation stating that the proxy is revoked or by a subsequent proxy executed by the person executing the prior proxy and presented to the meeting, or as to any meeting by attendance at such meeting and voting in person by the person executing the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed. A proxy is not revoked by the death or incapacity of the maker unless, before the vote is counted, written notice of such death or incapacity is received by the corporation. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 705(e) and 705(f) of the California General Corporation Law. Section 2.05 Inspectors of Election. - ------------------------------------ (a) Appointment. In advance of any meeting of shareholders the Board may ----------- appoint inspectors of election to act at the meeting and any adjournment thereof. If inspectors of election are not so appointed, or if any persons so appointed fail to appear or refuse to act, the chairman of any meeting of shareholders may, and on the request of any shareholder or a shareholder's proxy shall, appoint inspectors of election (or persons to replace those who so fail or refuse) at the meeting. The number of inspectors shall be either one or three. If appointed at a meeting on the request of one or more shareholders or proxies, the majority of shares represented in person or by proxy shall determine whether one or three inspectors are to be appointed. (b) Duties. The inspectors of election shall determine the number of ------ shares outstanding and the voting power of each, the shares represented at the meeting, the existence of a quorum and the authenticity, validity and effect of proxies, receive votes, ballots or consents, hear and determine all challenges and questions in any way arising in connection with the right to vote, count and tabulate all votes or consents, determine when the polls shall close, determine the result and do such acts as may be proper to conduct the election or vote with fairness to all shareholders. The inspectors of election shall perform their duties impartially, in good faith, to the best of their ability and as expeditiously as is practical. If there are three inspectors of election, the decision, act or certificate of a majority is effective in all respects as the decision, act or certificate of all. Any report or certificate made by the inspectors of election is prima facie evidence of the facts stated therein. -5- Section 2.06 Record Date. In order that the corporation may determine the - ------------------------- shareholders entitled to notice of any meeting or to vote or entitled to receive payment of any dividend or other distribution or allotment of any rights or entitled to exercise any rights in respect of any other lawful action, the Board may fix, in advance, a record date, which shall not be more than 60 nor less than 10 days prior to the date of such meeting nor more than 60 days prior to any other action. If no record date is fixed: (1) The record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the business day next preceding the day on which notice is given or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. (2) The record date for determining shareholders entitled to give consent to corporate action in writing without a meeting, when no prior action by the Board has been taken, shall be the day on which the first written consent is given. (3) The record date for determining shareholders for any other purpose shall be at the close of business on the day on which the board adopts the resolution relating thereto, or the 60th day prior to the date of such other action, whichever is later. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting unless the board fixes a new record date for the adjourned meeting, but the board shall fix a new record date if the meeting is adjourned for more than 45 days from the date set for the original meeting. Shareholders at the close of business on the record date are entitled to notice and to vote or to receive the dividend, distribution or allotment of rights or to exercise the rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date, except as otherwise provided in the Articles of Incorporation or by agreement or in the California General Corporation Law. Section 2.07 Share Certificates. - -------------------------------- (a) In General. The corporation shall issue a certificate or certificates ---------- representing shares of its capital stock. Each certificate so issued shall be signed in the name of the corporation by the chairman or vice chairman of the board or the president or a vice president and by the chief financial officer or an assistant treasurer or the secretary or any assistant secretary, shall state the name of the record owner thereof and shall certify the number of shares and the -6- class or series of shares represented thereby. Any or all of the signatures on the certificate may be facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if such person were an officer, transfer agent or registrar at the date of issue. (b) Two or More Classes or Series. If the shares of the corporation are ----------------------------- classified or if any class of shares has two or more series, there shall appear on the certificate one of the following: (1) A statement of the rights, preferences, privileges, and restrictions granted to or imposed upon the respective classes or series of shares authorized to be issued and upon the holders thereof; or (2) A summary of such rights, preferences, privileges and restrictions with reference to the provisions of the Articles of Incorporation and any certificates of determination establishing the same; or (3) A statement setting forth the office or agency of the corporation from which shareholders may obtain upon request and without charge, a copy of the statement referred to in subparagraph (1). (c) Special Restrictions. There shall also appear on the certificate -------------------- (unless stated or summarized under subpara graph (1) or (2) of subparagraph (b) above) the statements required by all of the following clauses to the extent applicable: (1) The fact that the shares are subject to restrictions upon transfer. (2) If the shares are assessable, a statement that they are assessable. (3) If the shares are not fully paid, a statement of the total consideration to be paid therefor and the amount paid thereon. (4) The fact that the shares are subject to a voting agreement or an irrevocable proxy or restrictions upon voting rights contractually imposed by the corporation. (5) The fact that the shares are redeemable. (6) The fact that the shares are convertible and the period for conversion. -7- Section 2.08 Transfer of Certificates. Where a certificate for shares is - -------------------------------------- presented to the corporation or its transfer clerk or transfer agent with a request to register a transfer of shares, the corporation shall register the transfer, cancel the certificate presented, and issue a new certificate if: (a) the security is endorsed by the appropriate person or persons; (b) reasonable assurance is given that those endorsements are genuine and effective; (c) the corporation has no notice of adverse claims or has discharged any duty to inquire into such adverse claims; (d) any applicable law relating to the collection of taxes has been complied with; (e) the transfer is not in violation of any federal or state securities law; and (f) the transfer is in compliance with any applicable agreement governing the transfer of the shares. Section 2.09 Lost Certificates. Where a certificate has been lost, destroyed - ------------------------------- or wrongfully taken, the corporation shall issue a new certificate in place of the original if the owner: (a) so requests before the corporation has notice that the certificate has been acquired by a bona fide purchaser; (b) files with the corporation a sufficient indemnity bond, if so requested by the Board of Directors; and (c) satisfies any other reasonable requirements as may be imposed by the Board. Except as above provided, no new certificate for shares shall be issued in lieu of an old certificate unless the corporation is ordered to do so by a court in the judgment in an action brought under Section 419(b) of the California General Corporation Law. ARTICLE III. DIRECTORS ----------------------- Section 3.01 Powers. Subject to the provisions of the California General - -------------------- Corporation Law and the Articles of Incorporation, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the Board of Directors. The Board may delegate the management of the day-to-day operations of the business of the corporation to a management company or other person provided that the business and affairs of the corporation shall be managed and all corporate powers shall be exercised under the ultimate direction of the Board. Section 3.02 Committees of the Board. The Board may, by resolution adopted by - ------------------------------------- a majority of the authorized number of directors, designate one or more committees, each consisting of two or more directors, to serve at the pleasure of the Board. The Board may designate one or more directors as alternate members of any committee, who may replace any absent member at any meeting of the committee. The appointment of members or alternate members of a committee requires the vote of a majority of the authorized number of directors. Any such committee, to the extent provided in the resolution of the -8- Board, shall have all the authority of the Board, except with respect to: (1) The approval of any action which also requires, under the California General Corporation Law, shareholders' approval or approval of the outstanding shares; (2) The filling of vacancies on the Board or in any committee. (3) The fixing of compensation of the directors for serving on the Board or on any committee. (4) The amendment or repeal of bylaws or the adoption of new bylaws. (5) The amendment or repeal of any resolution of the Board which by its express terms is not so amendable or repealable. (6) A distribution (within the meaning of the California General Corporation Law) to the shareholders of the corporation, except at a rate or in a periodic amount or within a price range determined by the Board. (7) The appointment of other committees of the Board or the members thereof. Section 3.03 Election and Term of Office. The directors shall be elected at - ----------------------------------------- each annual meeting of shareholders but, if any such annual meeting is not held or the directors are not elected thereat, the directors may be elected at any special meeting of shareholders held for that purpose. Each director, including a director elected to fill a vacancy, shall hold office until the expiration of the term for which elected and until a successor has been elected and qualified. Section 3.04 Vacancies. Except for a vacancy created by the removal of a - ----------------------- director, vacancies on the Board may be filled by approval of the Board or, if the number of directors then in office is less than a quorum, by (a) the unanimous written consent of the directors then in office, (b) the affirmative vote of a majority of the directors then in office at a meeting held pursuant to notice or waivers of notice under the California General Corporation Law, or (c) a sole remaining director. The shareholders may elect a director or directors at any time to fill any vacancy or vacancies not filled by the directors, but any such election by written consent requires the consent of a majority of the outstanding shares entitled to vote. The Board of Directors shall have the power to declare vacant the office of a director who has been declared of unsound mind by an order of court, or convicted of a felony. -9- Section 3.05 Removal. Any or all of the directors may be removed without --------------------- cause if such removal is approved by the vote of a majority of the outstanding shares entitled to vote, except that no director may be removed (unless the entire board is removed) when the votes cast against removal, or not consenting in writing to such removal, would be sufficient to elect such director if voted cumulatively at an election at which the same total number of votes were cast (or, if such action is taken by written consent, all shares entitled to vote were voted) and the entire number of directors authorized at the time of the director's most recent election were then being elected. Section 3.06 Resignation. Any director may resign effective upon giving - ------------------------- written notice to the chairman of the board, the president, the secretary or the Board of Directors of the corporation, unless the notice specifies a later time for the effectiveness of such resignation. If the resignation is effective at a future time, a successor may be elected to take office when the resignation becomes effective. Section 3.07 Meetings of the Board of Directors and Committees. - --------------------------------------------------------------- (a) Regular Meetings. Regular meetings of the Board of Directors may be ---------------- held without notice at such time and place within or without the State as may be designated from time to time by resolution of the Board or by written consent of all members of the Board or in these bylaws. (b) Organization Meeting. Immediately following each annual meeting of -------------------- shareholders the Board of Directors shall hold a regular meeting for the purpose of organization, election of officers, and the transaction of other business. Notice of such meetings is hereby dispensed with. (c) Special Meetings. Special meetings of the Board of Directors for any ---------------- purpose or purposes may be called at any time by the chairman of the board or the president or, by any vice president or the secretary or any two directors. (d) Notices; Waivers. Special meetings shall be held upon four days' ---------------- notice by mail or forty-eight hours' notice delivered personally or by telephone or telegraph. Notice of a meeting need not be given to any director who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such director. All such waivers, consents and approvals shall be filed with the corporate records or made a part of the minutes of the meeting. -10- (e) Adjournment. A majority of the directors present, whether or not a ----------- quorum is present, may adjourn any meeting to another time and place. If the meeting is adjourned for more than 24 hours, notice of such adjournment to another time and place shall be given prior to the time of the adjourned meeting to the directors who were not present at the time of adjournment. (f) Place of Meeting. Meetings of the Board may be held at any place ---------------- within or without the state which has been designated in the notice of the meeting or, if not stated in the notice or there is no notice, then such meeting shall be held at the principal executive office of the corporation, or such other place designated by resolution of the Board. (g) Presence by Conference Telephone Call. Members of the Board may ------------------------------------- participate in a meeting through use of conference telephone or similar communications equipment, so long as all members participating in such meeting can hear one another. Such participation constitutes presence in person at such meeting. (h) Quorum. A majority of the authorized number of directors constitutes a ------ quorum of the Board for the transaction of business. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a quorum is present is the act of the Board of Directors, unless a greater number be required by law or by the Articles of Incorporation. A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for such meeting. Section 3.08 Action Without Meeting. Any action required or permitted to be - ------------------------------------ taken by the Board of Directors, may be taken without a meeting if all members of the Board shall individually or collectively consent in writing to such action. Such written consent or consents shall be filed with the minutes of the proceedings of the Board. Such action by written consent shall have the same force and effect as a unanimous vote of such directors. Section 3.09 Committee Meetings. The provisions of Sections 3.07 and 3.08 of - -------------------------------- these bylaws apply also to committees of the Board and action by such committees, mutatis mutandis. ARTICLE IV. OFFICERS --------------------- Section 4.01 Officers. The officers of the corporation shall consist of a - ---------------------- chairman of the board or a president, or both, a secretary, a chief financial officer, and such additional officers as may be elected or appointed in accordance with Section 4.03 of these bylaws and as may be necessary to enable -11- the corporation to sign instruments and share certificates. Any number of offices may be held by the same person. Section 4.02 Elections. All officers of the corporation, except such officers - ----------------------- as may be otherwise appointed in accordance with Section 4.03, shall be chosen by the Board of Directors, and shall serve at the pleasure of the Board of Directors, subject to the rights, if any, of an officer under any contract of employment. Section 4.03 Other Officers. The Board of Directors, the chairman of the - ---------------------------- board, or the president at their or his discretion, may appoint one or more vice presidents, one or more assistant secretaries, a treasurer, one or more assistant treasurers, or such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority and perform such duties as the Board of Directors, the chairman of the board, or the president, as the case may be, may from time to time determine. Section 4.04 Removal. Subject to the rights, if any, of an officer under any - --------------------- contract of employment, any officer may be removed, either with or without cause, by the Board of Directors, or, except in case of an officer chosen by the Board of Directors, by any officer upon whom such power of removal may be conferred by the Board of Directors, without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Section 4.05 Resignation. Any officer may resign at any time by giving written - ------------------------- notice to the Board of Directors or to the president, or to the secretary of the corporation without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party. Any such resignation shall take effect at the date of the receipt of such notice or at any later time specified therein; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. Section 4.06 Vacancies. A vacancy in any office because of death, resignation, - ----------------------- removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to such office. Section 4.07 Chairman of the Board. The chairman of the board, if there shall - ----------------------------------- be such an officer, shall, if present, preside at all meetings of the Board of Directors and exercise and perform such other powers and duties as may be from time to time assigned to him by the Board of Directors. If there is no president, the chairman of the board shall in addition be the chief executive officer of the corporation and shall have the powers and duties prescribed in Section 4.08 below. -12- Section 4.08 President. Subject to such supervisory powers, if any, as may be - ----------------------- given by the Board of Directors to the chairman of the board, if there be such an officer, the president shall be general manager and chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and affairs of the corporation. He shall preside at all meetings of the shareholders and, in the absence of the chairman of the board, or if there be none, at all meetings of the Board of Directors. He shall be ex-officio a member of all the standing committees, including the executive committee, if any, and shall have the general powers and duties of management usually vested in the office of president of a corporation, and shall have such other powers and duties as may be prescribed by the Board of Directors or these bylaws. Section 4.09 Vice President. In the absence of the president or in the event - ---------------------------- of the president's inability or refusal to act, the vice president, or in the event there be more than one vice president, the vice president designated by the Board of Directors, or if no such designation is made, in order of their election, shall perform the duties of president and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. Any vice president shall perform such other duties as from time to time may be assigned to such vice president by the president or the Board of Directors. Section 4.10 Secretary. The secretary shall keep or cause to be kept the - ----------------------- minutes of proceedings and record of shareholders, as provided for and in accordance with Section 5.01(a) of these bylaws. The secretary shall give, or cause to be given, notice of all meetings of the shareholders and of the Board of Directors required by these bylaws or by law to be given, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors. Section 4.11 Chief Financial Officer. The chief financial officer shall have - ------------------------------------- general supervision, direction and control of the financial affairs of the corporation and shall have such other powers and duties as may be prescribed by the Board of Directors or these bylaws. In the absence of a named treasurer, the chief financial officer shall also have the powers and duties of the treasurer as hereinafter set forth and shall be authorized and empowered to sign as treasurer in any case where such officer's signature is required. Section 4.12 Treasurer. The treasurer shall keep or cause to be kept the books - ----------------------- and records of account as provided for and in accordance with Section 5.01(a) of these bylaws. The books -13- of account shall at all reasonable times be open to inspection by any director. The treasurer shall deposit all moneys and other valuables in the name and to the credit of the corporation with such depositaries 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, shall render to the president and directors, whenever they request it, an account of all of his transactions as treasurer and of the financial condition of the corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board of Directors or these bylaws. In the absence of a named chief financial officer, the treasurer shall be deemed to be the chief financial officer and shall have the powers and duties of such office as hereinabove set forth. ARTICLE V. MISCELLANEOUS ------------------------- Section 5.01 Records and Reports. - --------------------------------- (a) Books of Account and Proceedings. The corporation shall keep adequate -------------------------------- and correct books and records of account and shall keep minutes of the proceedings of its shareholders, Board and committees of the board and shall keep at its principal executive office, or at the office of its transfer agent or registrar, a record of its shareholders, giving the names and addresses of all shareholders and the number and class of shares held by each. Such minutes shall be kept in written form. Such other books and records shall be kept either in written form or in any other form capable of being converted into written form. (b) Annual Report. An annual report to shareholders referred to in Section ------------- 1501 of the California General Corporation Law is expressly dispensed with, but nothing herein shall be interpreted as prohibiting the Board of Directors from issuing annual or other periodic reports to the shareholders of the corporation as they consider appropriate. (c) Shareholders' Requests for Financial Reports. If no annual report for -------------------------------------------- the last fiscal year has been sent to shareholders, the corporation shall, upon the written request of any shareholder made more than 120 days after the close of that fiscal year, deliver or mail to the person making the request within 30 days thereafter the financial statements for that year required by Section 1501(a) of the California General Corporation Law. Any shareholder or shareholders holding at least 5 percent of the outstanding shares of any class of this corporation may make a written request to the corporation for an income statement of the corporation for the three-month, six-month or nine-month period of the current fiscal year ended more than 30 days prior to the date of the request and a balance sheet of the corporation as of the end -14- of such period, and the corporation shall deliver or mail the statements to the person making the request within 30 days thereafter. A copy of the statements shall be kept on file in the principal office of the corporation for 12 months and they shall be exhibited at all reasonable times to any shareholder demanding an examination of them or a copy shall be mailed to such shareholder upon demand. Section 5.02 Rights of Inspection. - ---------------------------------- (a) By Shareholders. --------------- (1) Record of Shareholders. Any shareholder or shareholders holding ---------------------- at least 5 percent in the aggregate of the outstanding voting shares of the corporation or who hold at least 1% of such voting shares and have filed a Schedule 14B with the United States Securities and Exchange Commission relating to the election of directors of the corporation shall have an absolute right to do either or both of the following: (i) inspect and copy the record of shareholders' names and addresses and shareholdings during usual business hours upon five business days' prior written demand upon the corporation, or (ii) obtain from the transfer agent for the corporation, upon written demand and upon the tender of its usual charges for such a list (the amount of which charges shall be stated to the shareholder by the transfer agent upon request), a list of the shareholders' names and addresses, who are entitled to vote for the election of directors, and their shareholdings, as of the most recent record date for which it has been compiled or as of a date specified by the shareholder subsequent to the date of demand. The list shall be made available on or before the later of five business days after demand is received or the date specified therein as the date as of which the list is to be compiled. The record of shareholders shall also be open to inspection and copying by any shareholder or holder of a voting trust certificate at any time during usual business hours upon written demand on the corporation, for a purpose reasonably related to such holder's interests as a shareholder or holder of a voting trust certificate. (2) Corporate Records. The accounting books and records and minutes ----------------- of proceedings of the shareholders and the Board and committees of the board shall be open to inspection upon the written demand on the corporation of any shareholder or holder of a voting trust certificate at any reasonable time during usual business hours, for a purpose reasonably related to such holder's interests as a shareholder or as the holder of such voting trust certificate. This right of inspection shall also extend to the records of any subsidiary of the corporation. -15- (3) Bylaws. The corporation shall keep at its principal executive ------ office in this state, the original or a copy of its bylaws as amended to date, which shall be open to inspection by the shareholders at all reasonable times during office hours. (b) By Directors. Every director shall have the absolute right at any ------------ reasonable time to inspect and copy all books, records and documents of every kind and to inspect the physical properties of the corporation of which such person is a director and also of its subsidiary corporations, domestic or foreign. Such inspection by a director may be made in person or by agent or attorney and the right of inspection includes the right to copy and make extracts. Section 5.03 Checks, Drafts, Etc. All checks, drafts or other orders for - --------------------------------- payment of money, notes or other evidences of indebtedness, issued in the name of or payable to the corporation, shall be signed or endorsed by such person or persons and in such manner as, from time to time, shall be determined by resolution of the Board of Directors. Section 5.04 Representation of Shares of Other Corporations. The chairman of - ------------------------------------------------------------ the board, if any, president or any vice president of this corporation, or any other person authorized to do so by the chairman of the board, president or any vice president, is authorized to vote, represent and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted to said officers to vote or represent on behalf of this corporation any and all shares held by this corporation in any other corporation or corporations may be exercised either by such officers in person or by any other person authorized so to do by proxy or power of attorney duly executed by said officers. Section 5.05 Indemnification and Insurance. - ------------------------------------------- (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 or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "Proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the corporation or is or was serving (during such person's tenure as director or officer) at the request of the corporation, any other corporation, partnership, joint venture, trust or other enterprise in any capacity, whether the basis of a Proceeding is an alleged action 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 California -16- General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the corporation to provide broader indemnification rights than said law permitted the corporation to provide prior to such amendment), against all expenses, liability and loss (including attorneys' fees, judgments, fines, or penalties and amounts to be paid in settlement) reasonably incurred or suffered by such person in connection therewith. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the corporation the expenses incurred in defending a Proceeding in advance of its final disposition; provided, however, that, if California General Corporation Law requires, the payment of such expenses in advance of the final disposition of a 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 shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. No amendment to or repeal of this Section 5.05 shall apply to or have any effect on any right to indemnification provided hereunder with respect to any acts or omissions occurring prior to such amendment or repeal. (b) Right of Claimant to Bring Suit. If a claim for indemnity under ------------------------------- paragraph (a) of this Section 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 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 a 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 California General Corporation 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 (including its Board of Directors, independent legal counsel, or its shareholders) 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 California General Corporation Law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel, or its shareholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. -17- (c) Non-Exclusivity of Rights. The rights conferred in this Section shall ------------------------- not be exclusive of any other rights which any director, officer, employee or agent may have or hereafter acquire under any statute, provision of the Articles of Incorporation, bylaw, agreement, vote of shareholders or disinterested directors or otherwise, to the extent the additional rights to indemnification are authorized in the Articles of Incorporation of the corporation. (d) Insurance. 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 expense, liability or loss, whether or not the corporation would have the power to indemnify the person against that expense, liability or loss under the California General Corporation Law. (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 full extent authorized or permitted by law and including as part thereof provisions with respect to any or all of the foregoing to ensure the payment of such amounts 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 a 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 5.06 Employee Stock Purchase Plans. The corporation may adopt and - ------------------------------------------- carry out a stock purchase plan or agreement or stock option plan or agreement providing for the issue and sale for such consideration as may be fixed of its unissued shares, or of issued shares acquired or to be acquired, to one or more of the employees or directors of the corporation or of a subsidiary or to a trustee on their behalf and for the payment for such shares in installments or at one time, and may provide for aiding any such persons in paying for such -18- shares by compensation for services rendered, promissory notes or otherwise. A stock purchase plan or agreement or stock option plan or agreement may include, among other features, the fixing of eligibility for participation therein, the class and price of shares to be issued or sold under the plan or agreement, the number of shares which may be subscribed for, the method of payment therefor, the reservation of title until full payment therefor, the effect of the termination of employment, an option or obligation on the part of the corporation to repurchase the shares upon termination of employment, subject to the provisions of the California General Corporation Law, restrictions upon transfer of the shares and the time limits of and termination of the plan. Section 5.07 Construction and Definitions. Unless the context otherwise - ------------------------------------------ requires, the general provisions, rules of construction and definitions contained in the California General Corporation Law shall govern the construction of these bylaws. Without limiting the generality of the foregoing, the masculine gender includes the feminine and neuter, the singular number includes the plural and the plural number includes the singular, and the term "person" includes a corporation as well as a natural person. ARTICLE VI. AMENDMENTS ----------------------- Section 6.01 Power of Shareholders. New bylaws may be adopted or these bylaws - ----------------------------------- may be amended or repealed by the vote of shareholders entitled to exercise a majority of the voting power of the corporation or by the written assent of such shareholders, except as otherwise provided by law or by the Articles of Incorporation. Section 6.02 Power of Directors. Subject to the right of shareholders as - -------------------------------- provided in Section 6.01 to adopt, amend or repeal bylaws, any bylaw may be adopted, amended or repealed by the Board of Directors other than a bylaw or amendment thereof changing the authorized number of directors, if such number is fixed, or the maximum-minimum limits thereof, if an indefinite number. -19- The undersigned, as the incorporator of HP/Compton, Inc. hereby adopts the foregoing bylaws as the bylaws of said corporation. Dated as of July 21, 1995. ______________________________ S. A. Morgan, Incorporator The undersigned, being the Sole Director of HP/Compton, Inc. hereby adopts the foregoing bylaws as the bylaws of said corporation. Dated as of July 21, 1995. _____________________________ R. D. Hubbard, Director THIS IS TO CERTIFY: That I am the duly elected, qualified and acting Secretary of HP/Compton, Inc. and that the foregoing bylaws were adopted as the bylaws of said corporation as of the 21st day of July 1995, by the Sole Director of said corporation. Dated as of July 21, 1995. _____________________________ Donald Robbins, Secretary -20- TABLE OF CONTENTS - ----------------- Page ----
ARTICLE I. GENERAL PROVISIONS 1 Section 1.01 Principal Executive Office 1 Section 1.02 Number of Directors 1 ARTICLE II. SHARES AND SHAREHOLDERS 1 Section 2.01 Meetings of Shareholders 1 (a) Place of Meetings 1 (b) Annual Meetings 1 (c) Special Meetings 1 (d) Notice of Meetings (e) Adjourned Meeting and Notice Thereof 2 (f) Waiver of Notice 3 (g) Quorum 3 Section 2.02 Action Without a Meeting 3 Section 2.03 Voting of Shares 4 (a) In General 4 (b) Cumulative Voting 4 (c) Election by Ballot 4 Section 2.04 Proxies 4 Section 2.05 Inspectors of Election 5 (a) Appointment 5 (b) Duties 5 Section 2.06 Record Date.. 6 Section 2.07 Share Certificates 6 (a) In General 6
-21- (b) Two or More Classes or Series 7 (c) Special Restrictions 7 Section 2.08 Transfer of Certificates 8 Section 2.09 Lost Certificates 8 Section 3.01 Powers 8 Section 3.02 Committees of the Board 8 Section 3.03 Election and Term of Office 9 Section 3.04 Vacancies.... 9 Section 3.05 Removal 10 Section 3.06 Resignation.. 10 Section 3.07 Meetings of the Board of Directors and Committees..... (a) Regular Meetings 10 (b) Organization Meeting 10 (c) Special Meetings 10 (d) Notices; Waivers 10 (e) Adjournment 11 (f) Place of Meeting 11 (g) Presence by Conference Telephone Call 11 (h) Quorum 11 Section 3.08 Action Without Meeting 11 Section 3.09 Committee Meetings 11 ARTICLE IV. OFFICERS....... 11 Section 4.01 Officers 11 Section 4.02 Elections.... 12 Section 4.03 Other Officers 12
-22- Section 4.04 Removal........... 12 Section 4.05 Resignation.. 12 Section 4.06 Vacancies.... 12 Section 4.07 Chairman of the Board 12 Section 4.08 President.... 13 Section 4.09 Vice President 13 Section 4.10 Secretary.... 13 Section 4.11 Chief Financial Officer 13 Section 4.12 Treasurer.... 13 ARTICLE V. MISCELLANEOUS... 14 Section 5.01 Records and Reports 14 (a) Books of Account and Proceedings 14 (b) Annual Report 14 (c) Shareholders' Requests for Financial Reports............ 14 Section 5.02 Rights of Inspection 15 (a) By Shareholders 15 (1) Record of Shareholders 15 (2) Corporate Records 15 (3) Bylaws 16 (b) By Directors 16 Section 5.03 Checks, Drafts, Etc 16 Section 5.04 Representation of Shares of Other Corporations........... 16 Section 5.05 Indemnification and Insurance.................... 16 (a) Right to Indemnification 16 (b) Right of Claimant to Bring Suit 17
-23- (c) Non-Exclusivity of Rights 18 (d) Insurance 18 (e) Indemnification of Employees and Agents of the Corporation 18 Section 5.06 Employee Stock Purchase Plans........................ 18 Section 5.07 Construction and Definitions.................. 19 ARTICLE VI. AMENDMENTS..... 19 Section 6.01 Power of Shareholders 19 Section 6.02 Power of Directors 19
-24- EX-3.11 8 ARTICLES OF ORGANIZATION OF CRYSTAL PARK HOTEL EXHIBIT 3.11 RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: SPACE ABOVE THIS LINE FOR RECORDER'S USE ================================================================================ STATE OF CALIFORNIA BILL JONES SECRETARY OF STATE SACRAMENTO I, BILL JONES, Secretary of State of California, hereby certify: That the annexed transcript of 1 page(s) was prepared by and in this _____ office from the record on file, of which it purports to be a copy, and that it is full, true and correct. IN WITNESS WHEREOF, I execute this certificate and affix the Great Seal of the State of California JUL 30, 1997 -------------------------- Secretary of State =============================================================================== STATE OF CALIFORNIA BILL JONES SECRETARY OF STATE LLC-1 LIMITED LIABILITY COMPANY ARTICLES OF ORGANIZATION IMPORTANT - Read the instructions before completing the form. --------- This document is presented for filing pursuant to Section 17050 of the California Corporations Code. - ------------------------------------------------------------------------------- 1. Limited liability company name: (End the name with "LLC" or "Limited Liability Company". No periods between the letters in "LLC". "Limited" and "Company" may be abbreviated to "Ltd." and "Co.") Crystal Park Hotel and Casino Development Company, LLC - ------------------------------------------------------------------------------- 2. Latest date (month/day/year) on which the limited liability company is to dissolve: December 31, 2026 - ------------------------------------------------------------------------------- 3. The purpose of the limited company is to engage in any lawful act or activity for which a limited liability company may be organized under the Beverly-Killea Limited Liability Company Act. - ------------------------------------------------------------------------------- 4. Enter the name of initial agent for service of process and check the appropriate provision below: G. Michael Finnigan , which is ------------------------------------------------------------------ [ X ] an individual residing in California, Proceed to Item 5. [ ] a corporation which has filed a certificate pursuant to Section 1505 of the California Code. Skip Item 5 and proceed to Item 6. - -------------------------------------------------------------------------------- 5. If the initial agent for service of process is an individual, enter a business or residential street address in California: Street address: 1050 South Prairie Avenue City: Inglewood State: CALIFORNIA Zip Code: 90301 - -------------------------------------------------------------------------------- 6. The limited liability company will be managed by: (check one) [ X ] one manager [ ] more than one manager [ ] limited liability company members - -------------------------------------------------------------------------------- 7. If other matters are to be included in the Articles of Organization attach one or more separate pages. Number of pages attached, if any: -0- - -------------------------------------------------------------------------------- 8. It is hereby declared that I am the person who executed this instrument, which execution is my act and deed. -------------------------------------------------- Signature of organizer Joan L. Lesser -------------------------------------------------- Type or print name of organizer Date: May 28 , 19 96 ------------------------------------ ----- - -------------------------------------------------------------------------------- 101996150023 FILED; REGISTRN/ARTICLES OF ORG. AT SACRAMENTO, CA ON MAY 29, 1996 SECRETARY OF STATE OF CALIFORNIA - -------------------------------------------------------------------------------- LLC-1 Approved by the Secretary of State Filing Fee $70 1/96 - -------------------------------------------------------------------------------- EX-3.12 9 OPERATING AGREEMENT OF CRYSTAL PARK HOTEL EXHIBIT 3.12 OPERATING AGREEMENT FOR CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC A CALIFORNIA LIMITED LIABILITY COMPANY THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, DELIVERED AFTER SALE, TRANSFERRED, PLEDGED, OR HYPOTHECATED UNLESS QUALIFIED AND REGISTERED UNDER APPLICABLE STATE AND FEDERAL SECURITIES LAWS OR UNLESS, IN THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, SUCH QUALIFICATION AND REGISTRATION IS NOT REQUIRED. ANY TRANSFER OF THE SECURITIES REPRESENTED BY THIS AGREEMENT IS FURTHER SUBJECT TO OTHER RESTRICTIONS, TERMS AND CONDITIONS WHICH ARE SET FORTH HEREIN. OPERATING AGREEMENT FOR CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC A CALIFORNIA LIMITED LIABILITY COMPANY This Operating Agreement is made as of July 18, 1996, by and among HP/COMPTON, INC., a California corporation ("HPC"), REDWOOD GAMING LLC, a California limited liability company ("DeBartolo") and FIRST PARK INVESTMENTS, LLC, a California limited liability company ("Chu"), with reference to the following facts: A. Compton Entertainment, Inc., a California corporation ("CEI") and each of its officers, directors and shareholders has been licensed (the "City License") by the City of Compton (the "City") to own and operate a card club (the "Card Club") located in the area known as Alameda Auto Plaza in the City (the "Card Club Site"). B. Pursuant to an Amended and Restated Agreement Respecting Pyramid Casino by and between Hollywood Park, Inc., a Delaware corporation and the parent corporation of HPC ("HPI"), on the one hand, and CEI and the principal shareholder of CEI, Rouben Kandilian, on the other hand (the "Purchase Agreement"), HPC (by assignment of HPI's rights thereunder) acquired CEI's rights to the Card Club Site, including its rights under that certain Amended and Restated Disposition and Development Agreement, Agreement of Purchase and Sale, and Lease with Option to Purchase (the "DDA") with The Community Redevelopment Agency of the City (the "Real Property Rights"), the plans and specifications for the construction of the Card Club (the "Plans"), an option (the "License Rights Option") to acquire the City License and all other assets held by CEI pertaining to the Card Club. C. Pursuant to the DDA, HPC has leased certain improvements on the Card Club Site adjacent to the Card Club which HPC is obligated to remodel, furnish and operate as a hotel (the "Hotel"). D. HPC and CEI have entered into a Lease of the Card Club, dated as of August 3, 1995, with HPC as Landlord and CEI as Tenant (the "Lease"). Pursuant to the Lease, HPC is to construct, develop and furnish the Card Club on the Card Club Site pursuant to the Plans. Costs of construction, development and furnishing of the Card Club and the Hotel and related start-up matters (collectively, "Project Costs") are expected to be approximately $25,000,000, including an aggregate $5,000,000 paid or to be paid by HPC to CEI for the Real Property Rights, the Plans, the License Rights Option and the exercise price -1- under the License Rights Option. HPC has expended approximately $9,200,000 to date on Project Costs and related matters. E. Section 5.4.1 of the Purchase Agreement provides that at such time as HPI is licensed as an operator of the Card Club under applicable California law and City ordinances, the Lease shall terminate and CEI and HPI shall enter into a partnership agreement (or limited liability company operating agreement) for the ownership and operation of the Card Club. F. HPC, DeBartolo and Chu wish to form a limited liability company to acquire all of HPC's rights to construct and own the Card Club, to acquire HPC's rights under the Lease, the DDA and the Purchase Agreement and to enter into this Agreement for the management and operation of the Company (as hereinafter defined). G. The Members have executed, and have filed or will cause to be filed with the California Secretary of State, Articles of Organization ("Articles") of Crystal Park Hotel and Casino Development Company, LLC, a California limited liability company (the "Company"), pursuant to the provisions of California Corporations Code, Title 2.5, also known as the Beverly-Killea Limited Liability Company Act (the "Act"). NOW, THEREFORE, for good and valuable consideration, the receipt of which is hereby acknowledged, the Members (capitalized terms are generally defined in Schedule I) by this Agreement set forth the operating agreement for the Company - ---------- under the laws of the State of California. ARTICLE 1 ORGANIZATIONAL MATTERS 1.1 FORMATION. Pursuant to the Act, the Members have formed a --------- California limited liability company under the laws of the State of California by filing the Articles with the California Secretary of State and entering into this Agreement. The rights and liabilities of the Members shall be determined pursuant to the Act and this Agreement. To the extent that the rights or obligations of any Member are different by reason of any provision of this Agreement than they would be in the absence of such provision, this Agreement shall, to the extent permitted by the Act, control. 1.2 NAME. The name of the Company shall be "CRYSTAL PARK HOTEL AND ---- CASINO DEVELOPMENT COMPANY, LLC." The business of the Company may be conducted under that name or, upon compliance with applicable laws, any other name that the Manager deems appropriate or advisable. The Manager shall file any fictitious name certificates and similar filings, and any -2- amendments thereto, that the Manager considers appropriate or advisable. 1.3 TERM. The term of this Agreement shall be co-terminus with the ---- period of duration of the Company provided in the Articles, unless extended or sooner terminated as hereinafter provided. 1.4 COMPANY PROPERTY. Pursuant to Section 21 hereof, the property of ---------------- the Company (the "Company Property") shall consist of all of HPC's interest in the Card Club Site, including the Real Property Rights, the Card Club, the License Rights Option, HPC's rights under the Purchase Agreement, the Lease, and the DDA, and all other assets and properties, tangible and intangible, that are hereafter acquired or received by the Company. No Member, individually, shall have any ownership of the Company Property. 1.5 OFFICE AND AGENT. The Company shall continuously maintain an office ---------------- and registered agent in the State of California as required by the Act. The principal office of the Company shall be as determined by the Manager. The Company also may have such offices, anywhere within and without the State of California, as the Manager from time to time may determine. The registered agent shall be as stated in the Articles or as otherwise determined by the Manager. 1.6 ADDRESSES OF THE MEMBERS. The respective names and addresses of the ------------------------ Members are set forth on Exhibit A. The Manager shall revise Exhibit A from --------- --------- time to time as changes in the information on that Exhibit occur. 1.7 PURPOSE OF COMPANY. The purpose of the Company is to engage in any ------------------ lawful activity for which a limited liability company may be organized under the Act. Notwithstanding the foregoing, without the written consent of all of the Members, the Company shall not engage in any business other than the following: (a) The business of developing and owning the Card Club and, after such time as applicable law is amended to permit public companies to operate card clubs or HPI or HPC is otherwise legally permitted to operate the Card Club, to obtain all necessary licenses and approvals for, and to transfer the Company Assets to, Newco in accordance with the Purchase Agreement, with Newco thereafter to own and operate the Card Club and to own, lease or operate or to provide for the operation by others of the other Company Assets; (b) The business of remodeling, furnishing and operating or contracting for the operation of the Hotel; (c) The business of acquiring the Card Club Site or other property pursuant to the DDA and developing, constructing, -3- operating, contracting for the operation of and/or leasing other improvements at the Card Club Site or such other property as may be acquired and/or leased pursuant to the DDA; and (d) Such other activities directly related to the foregoing businesses as may be necessary, advisable or appropriate to further the foregoing business. In furtherance of this purpose, after such time as applicable law is amended to permit public companies to operate card clubs or HPI or HPC is otherwise legally permitted to operate the Card Club, each Member shall, and shall cause each person or entity that has a direct or indirect interest in such Member and who is required to apply for a license in order for the Company or Newco to acquire a license to operate the Card Club to, apply to the appropriate governmental authorities to obtain such licenses and approvals as are necessary for the Company or Newco to obtain a license to operate the Card Club. ARTICLE 2 CAPITAL CONTRIBUTIONS 2.1 INITIAL CAPITAL CONTRIBUTIONS. The Members shall make the following ----------------------------- contributions to the Company ("Initial Capital Contributions"): Chu $ 1,000,000 HPC $22,000,000 DeBartolo $ 2,000,000 Chu and DeBartolo shall contribute their Initial Capital Contributions in cash on the effective date of this Agreement. HPC shall satisfy a portion of its Initial Capital Contribution by assigning to the Company all of its right, title and interest in and to the Card Club Site, including without limitation the Real Property Rights and HPC's rights under the Purchase Agreement, the Lease and the License Rights Option (together, the "Initial Card Club Assets"), upon approval of such assignment by the City and CEI. The Company shall assume all of HPC's obligations under or with respect to the Initial Card Club Assets, including without limitation obligations under the agreements set forth in Schedule 2.1, ------------ and shall indemnify HPC and HPI and hold each of them harmless from and against all losses, liabilities, costs and expenses with respect thereto (the "Card Club Liabilities"). The parties agree that the net fair market value of the non-cash assets contributed by HPC (i.e., the value of the Initial Card Club Assets minus ---- the value of the Card Club Liabilities) is equal to the amount of HPC's Initial Expenses which, as of July 8, 1996, were approximately Nine Million Two Hundred Thousand Dollars ($9,200,000), as shown on Schedule 6.5. HPC shall contribute, ------------ as and when required by -4- the Company, cash of up to the difference between the Initial Expenses on the date that the Initial Card Club Assets are assigned to the Company and Twenty- Two Million Dollars ($22,000,000). 2.2 ADDITIONAL CAPITAL CONTRIBUTIONS. Except as may be explicitly -------------------------------- agreed in writing by the Member and the Company, no Member shall be required to make any additional Capital Contributions. If the Manager notifies the Members, from time to time upon at least twenty (20) days' prior written notice, that additional Capital Contributions are necessary for (i) the acquisition, development and construction of the Card Club and the remodeling and furnishing of the Hotel and related activities in accordance with the Budget in effect from time to time or (ii) the acquisition and/or leasing of the Card Club Site or other property pursuant to the DDA or (iii) such improvements to the Card Club Site or other property acquired and/or leased pursuant to the DDA as are agreed upon by a Super Majority Interest or (iv) the payment of Card Club Liabilities or (v) such additional expenses as may be incurred after such time as applicable law is amended to permit public companies to operate card clubs or HPI or HPC is otherwise legally permitted to operate the Card Club, in connection with the formation of Newco and in connection with the operation by Newco of the Card Club or (vi) any other business purpose of the Company (collectively, "Additional Capital Contributions") each of the Members shall have the right, but not the obligation, to contribute as Additional Capital an amount equal to its respective Profit Percentage Interest of such Additional Capital Contribution. If any Member elects not to make such Additional Capital Contribution (the "Non-participating Member Contribution"), and HPC contributes its Profit Percentage Interest of such Additional Capital Contribution, then HPC shall be entitled to contribute as an Additional Capital Contribution an amount equal to the Non-participating Member Contribution. To the extent that the Members do not contribute their respective Profit Percentage Interests of Additional Capital Contributions, their Profit Percentage Interests shall be adjusted in accordance with Section 2.7. 2.3 CAPITAL ACCOUNTS. The Company shall establish an individual Capital ---------------- Account for each Member. The Company shall determine and maintain each Capital Account in accordance with Regulations Section 1.704-1(b)(2)(iv). Upon the contributions by the Members under Section 2.1 and 2.2, each such Member will receive a credit to its Capital Account in the amount of cash or the fair market value of property so contributed. If a Member Transfers all or a part of such Member's Membership Interest in accordance with this Agreement, such Member's Capital Account attributable to the Transferred Membership Interest shall carry over to the new owner of such Membership Interest pursuant to Regulations Section 1.704-1(b)(2)(iv)(1). Each Capital Account shall consist of a Member's paid-in Capital Contribution(s) (whether in cash, property, services or otherwise, including a -5- Member's payment of claims against or liabilities of the Company to the extent that the payor has no right of indemnification or contribution) (a) increased by such Member's allocated share of Net Profits in accordance with Article 3 hereof, (b) decreased by such Member's allocated share of Net Losses and distributions in accordance with Article 3 hereof, and (c) adjusted as otherwise required in accordance with the Code, Regulations and generally accepted accounting principles (to the extent consistent with the Code and Regulations). If the book value of property is adjusted pursuant to Regulations 1.704- 1(b)(2)(ix)(f), Capital Accounts shall be adjusted as provided in Regulations Section 1.704-1(b)(2)(iv)(g). 2.4 NO INTEREST ON OR WITHDRAWAL OF CAPITAL. No Member shall be --------------------------------------- entitled to receive any interest on such Member's Capital Contributions. Except as otherwise provided by law, no Member shall be entitled to withdraw or reduce its Capital Contribution or to demand or receive property other than cash in return for its Capital Contribution. No Member shall have any obligation, upon winding up of the Company, to restore any deficit balance in its Capital Account for the benefit of the other Members. 2.5 THIRD PARTY LOANS. The Company may seek debt financing from banks, ----------------- savings and loan associations or other financial institutions from time to time if the Manager determines that the Initial Capital Contributions are insufficient for the conduct of its business or if the Manager otherwise determines in good faith that such financing is necessary or desirable ("Third Party Loans"), provided that no Member shall be required to guarantee any Third -------- Party Loan unless such Member agrees to do so. Third Party Loans may be secured by liens on the Company Property and shall have such other terms and conditions as may be determined by a Super Majority Interest. 2.6 SHORT-TERM ADVANCES. Any Member may, but shall be under no ------------------- obligation to, advance funds in excess of its obligation to make Initial Capital Contributions and Additional Capital Contributions ("Advances") in order to pay operational expenditures on a short-term basis in contemplation of income from operations or a disbursement of funds from Third Party Loans, if, in the judgment of the Manager, payment of expenditures cannot or should not be delayed until such funds are obtained by the Company. Amounts funded by a Member pursuant to this Section 2.6 shall bear interest at the Rate plus 200 basis points (but in no event greater than the maximum rate permitted under applicable law), and shall be repaid immediately upon receipt of funds contemplated to be received as provided above or from other Company assets as agreed by all of the Members. 2.7 DILUTION. In the event that HPC contributes its Profit Percentage -------- Interest of an Additional Capital Contribution -6- and Chu and/or DeBartolo, as applicable, does not contribute its Profit Percentage Interest of such Additional Capital Contribution, the Profit Percentage Interests shall be recalculated such that (a) Chu's or DeBartolo's (as applicable) Profit Percentage Interest shall equal one-hundred (100) multiplied by a fraction, the numerator of which shall equal Chu's or DeBartolo's (as applicable) Capital Contributions and the denominator of which shall equal the total of all Capital Contributions by all Members; and (b) the Profit Percentage Interest of HPC shall be increased by the reduction in the Profit Percentage Interest of Chu or DeBartolo (as applicable) determined pursuant to clause (a) of this Section 2.7 from the Profit Percentage Interest of Chu or DeBartolo (as applicable) immediately prior to such determination. ARTICLE 3 ALLOCATIONS OF NET PROFITS AND NET LOSSES 3.1 ALLOCATIONS OF INCOME AND NET PROFITS. After giving effect to the ------------------------------------- special allocations set forth in Sections 3.3 and 3.4 hereof, Net Profits shall be allocated in accordance with the Members' Profit Percentage Interests, which shall initially be as follows: HPC 88% DeBartolo 8% Chu 4% The foregoing Profit Percentage Interests shall be subject to adjustment from time to time upon the admission of new Members or in accordance with Section 27. 3.2 ALLOCATIONS OF NET LOSSES. After giving effect to the special ------------------------- allocations set forth in Sections 3.3 and 3.4 hereof, Net Losses shall be allocated to the Members as follows: 3.2.1 POSITIVE CAPITAL ACCOUNTS. Net Losses shall first be ------------------------- allocated to the Members in proportion to and to the extent of their positive Capital Account balances. 3.2.2 PROFIT PERCENTAGE INTERESTS. Except as provided in --------------------------- Section 3.2.1, Net Losses shall be allocated to the Members in proportion to their Profit Percentage Interests. 3.3 SPECIAL ALLOCATIONS. ------------------- 3.3.1 MEMBER NONRECOURSE DEDUCTIONS. Any Member Nonrecourse ------------------------------ Deductions for any Fiscal Year and any other deductions or losses for any Fiscal Year referable to a liability owed by the Company to (or guaranteed or indemnified by) a Member for which no other Member bears the economic risk -7- of loss shall be specially allocated to the Member who bears the economic risk of loss with respect to the Member Nonrecourse Debt or other liability to which such Member Nonrecourse Deductions or other deductions are attributable in accordance with Regulations Section 1.704-2(i) and Regulations Section 1.704- 1(b). 3.3.2 NONRECOURSE DEDUCTIONS REFERABLE TO LIABILITIES OWED TO ------------------------------------------------------- NON-MEMBERS. Any Nonrecourse Deductions for any Fiscal Year and any other - ----------- deductions or losses for any Fiscal Year referable to a liability owed by the Company to a Person other than a Member for which no Member bears the economic risk of loss shall be specially allocated to the Members in proportion to their Profit Percentage Interests. 3.3.3 MEMBER MINIMUM GAIN CHARGEBACK. Except as otherwise ------------------------------ provided in Regulation Section 1.704-2(i)(4), notwithstanding any other provision of this Article 3, if there is a net decrease in Member Nonrecourse Debt Minimum Gain (as defined in Regulations Section 1.704-2(i)(2)) attributable to a Member Nonrecourse Debt during any Fiscal Year, each Member who has a share of the Member Nonrecourse Minimum Gain attributable to such Member Nonrecourse Debt (which share shall be determined in accordance with Regulations Section 1.704-2(i)(5)) shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years) in an amount equal to that portion of such Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain attributable to such Member Nonrecourse Debt, determined in accordance with Regulations Section 1.704-2(i)(4). Allocations pursuant to the previous sentence shall be made in proportion to the amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(i)(4) and 1.704- 2(j)(2). This Section 3.3.3 is intended to comply with the minimum gain chargeback requirement contained in Regulations Section 1.704-2(i)(4) and shall be interpreted consistently therewith. 3.3.4 MINIMUM GAIN CHARGEBACK. Except as otherwise provided in ----------------------- Regulations Section 1.704-2(f), notwithstanding any other provision of this Article 3, if there is a net decrease in Company Minimum Gain during any Fiscal Year, each Member shall be specially allocated items of Company income and gain for such Fiscal Year (and, if necessary, in subsequent Fiscal Years) in an amount equal to the portion of such Member's share of the net decrease in Company Minimum Gain which share of such net decrease shall be determined in accordance with Regulations Section 1.704-2(g)(2). Allocations pursuant to the previous sentence shall be made in proportion to the respective amounts required to be allocated to each Member pursuant thereto. The items to be so allocated shall be determined in accordance with Regulations Section 1.704-2(f)(6) and 1.704-2(j)(2). This Section 3.3.4 is intended to comply with the minimum gain chargeback requirement contained in -8- Regulations Section 1.704-2(f) and shall be interpreted consistently therewith. 3.3.5 QUALIFIED INCOME OFFSET. In the event a Member ----------------------- unexpectedly receives any adjustments, allocations, or distributions described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) or any other event creates an Adjusted Capital Account Deficit, items of Company income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such excess deficit balance as quickly as possible. 3.4 CURATIVE ALLOCATIONS. The allocations set forth in Section 3.3 -------------------- hereof (the "Regulatory Allocations") are intended to comply with certain requirements of the Regulations. It is the intent of the Members that, to the extent possible, all Regulatory Allocations shall be offset either with other Regulatory Allocations or with special allocations of other items of Company income, gain, loss, or deduction pursuant to this Section 3.4. Therefore, notwithstanding any other provision of this Article 3 (other than the Regulatory Allocations), the Members shall make such offsetting special allocations of Company income, gain, loss, or deduction in whatever manner they determine appropriate so that, after such offsetting allocations are made, a Member's Capital Account balance is, to the extent possible, equal to the Capital Account balance such Member would have had if the Regulatory Allocations were not part of this Agreement and all Company items were allocated pursuant to Sections 3.1 and 3.2. 3.5 APPLICATION OF SECTION 704(c) PRINCIPLES. Notwithstanding the ---------------------------------------- preceding sections of this Article 3: (a) Section 704(c) of the Code shall apply to the allocation of items of income, gain, deduction and loss related to contributed property having a tax basis at the time of contribution that differs from its fair market value; and (b) Regulations Section 1.704-1(b)(2)(iv)(f) shall apply to the items of income, gain, deduction and loss related to property the book value of which is adjusted pursuant to that Regulations Section. 3.6 ALLOCATION OF EXCESS NON-RECOURSE LIABILITIES. For purposes of --------------------------------------------- Section 752 of the Code and Section 1.752-2(a)(3) of the Regulations, "excess non-recourse liabilities" shall be allocated among the Members in accordance with their Profit Percentage Interests. 3.7 INTENTION TO BE TAXED AS A PARTNERSHIP. The Company shall be -------------------------------------- treated as a partnership for tax purposes. 3.8 ALLOCATION OF NET PROFITS AND LOSSES IN RESPECT OF A TRANSFERRED ---------------------------------------------------------------- INTEREST. If any Membership Interest is - -------- -9- Transferred, or is increased or decreased by reason of the admission of a new Member, Additional Capital Contributions or otherwise, during any Fiscal Year of the Company, each item of income, gain, loss, deduction or credit of the Company for such Fiscal Year shall be allocated among the Members by the Manager in accordance with any method permitted by Section 706(d) of the Code and the applicable Regulations in order to take into account the Members' varying Percentage Interests during the Year. 3.9 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS. The Members are aware -------------------------------------------- of the income tax consequences of the allocations made by this Article 3 and hereby agree to be bound by the provisions of this Article 3 in reporting their shares of Company income and loss for income tax purposes. ARTICLE 4 DISTRIBUTIONS 4.1 DISTRIBUTION OF ASSETS BY THE COMPANY. Subject to applicable law ------------------------------------- and any limitations contained elsewhere in this Agreement, no distribution shall be made if, after giving effect to the distribution, (a) the Company would not be able to pay its debts as they become due in the usual course of business, or (b) the Company's total assets would be less than the sum of its total liabilities. 4.2 NET CASH FLOW. Subject to Section 41, Net Cash Flow, if any, shall ------------- be distributed within thirty (30) days after the end of each calendar quarter to the Members in accordance with the Members' respective Profit Percentage Interests on the date of the distribution. 4.3 PERSONS TO RECEIVE DISTRIBUTION. All distributions shall be made to ------------------------------- the Persons who, according to the books and records of the Company, are the holders of record of the Economic Interests in respect of which such distributions are made on the actual date of distribution. Neither the Company nor any Company Person shall incur any liability for making distributions in accordance with this Section 4.3. 4.4 FORM OF DISTRIBUTION. A Member, regardless of the nature of the -------------------- Member's Capital Contribution, has no right to demand and receive any distribution from the Company in any form other than money. No Member may be compelled to accept from the Company a distribution of any asset in kind in lieu of a proportionate distribution of money being made to other Members. 4.5 WITHHOLDING ON DISTRIBUTIONS. Each Member consents and agrees that ---------------------------- the Company may deduct and withhold amounts for tax or other obligations of such Member on any amount -10- distributed or allocated by the Company to such Member, and to any assignee of a Member's Membership Interest (or the related Economic Interest), if the Company believes in good faith that it is required by law to do so. All amounts so withheld with respect to such Member, substitute Member, or Economic Interest Owner shall be treated as amounts distributed to such Person pursuant to Section 9.5 or 9.6 for all purposes under this Agreement. In addition, the affected Member, substitute Member or Economic Interest Owner shall reimburse the Company for any such amounts so withheld to the extent not deducted from a distribution. 4.6 RETURN OF DISTRIBUTIONS. Except for distributions made in violation ----------------------- of the Act or this Agreement, no Member or Economic Interest Owner shall be obligated to return any distribution to the Company or pay the amount of any distribution for the account of the Company or to any creditor of the Company. The amount of any distribution returned to the Company by a Member or Economic Interest Owner or paid by a Member or Economic Interest Owner for the account of the Company or to a creditor of the Company shall be added to the account or accounts from which it was subtracted when it was distributed to the Member or Economic Interest Owner. ARTICLE 5 MEMBERS 5.1 LIMITED LIABILITY. Except as required under the Act or as expressly ----------------- set forth in this Agreement, no Member shall be personally liable for any debt, obligation or liability of the Company, whether that liability or obligation arises in contract, tort or otherwise. 5.2 ADMISSION OF ADDITIONAL MEMBERS. No additional Members shall be ------------------------------- admitted unless approved by a Super Majority Interest. No additional Member shall become a Member until such additional Member has made any required Capital Contribution and has become a party to this Agreement by executing a signature page agreeing to the terms and provisions hereof, and substitute Members may only be admitted in accordance with Article 7. 5.3 TRANSACTIONS WITH THE COMPANY. A Company Person or any Affiliate ----------------------------- may lend money to and transact other business with the Company only in accordance with this Agreement or with the prior approval of holders of a majority of the Profit Percentage Interests held by the disinterested Members after full disclosure of the Member's involvement. Subject to other applicable law, such Member has the same rights and obligations with respect thereto as a person who is not a Member. -11- 5.4 MEMBERS ARE NOT AGENTS. Pursuant to Article 6, the management of ---------------------- the Company is vested in the Manager. Unless expressly and duly authorized in writing to do so by the Manager, no Member, acting solely in the capacity of a Member, is an agent of the Company nor can any Member in such capacity bind or execute any instrument on behalf of the Company or render the Company liable for any purpose. 5.5 VOTING RIGHTS. ------------- 5.5.1 GENERAL RULE. Except as expressly provided in this ------------ Agreement, the Articles or the Act, Members shall have no voting, approval or consent rights. Except as otherwise expressly provided in this Agreement, in all instances in which a vote, approval, consent or agreement of the Members is required, a vote, approval or consent of a Super Majority Interest (or, in instances in which there are defaulting Members or an assignment of a Membership Interest, non-defaulting Members or Members who are not assignors of a Membership Interest, respectively, who hold eighty (80%) of the Profit Percentage Interests held by all such non-defaulting or non-assigning Members) shall be required. 5.5.2 MEETINGS OF MEMBERS. No annual or regular meetings of ------------------- Members are required. A meeting of the Members may be called by any Manager or by Members with collective Profit Percentage Interests of at least ten percent (10%). Meetings of Members may be held at such date, time and place within or without the State of California as the Manager may fix from time to time. Notice of any meeting shall be given in accordance with Section 17104 of the Corporations Code. At any Members' meeting, the Manager shall preside at the meeting and shall designate an officer or representative of a Member to act as secretary of the meeting. The secretary of the meeting shall prepare minutes of the meeting, which shall be placed in the minute books of the Company. Any action that may be taken at a meeting of Members may be taken without a meeting, if a consent in writing setting forth the action so taken, is signed and delivered to the Company by Members having not less than the minimum number of votes that would be necessary to authorize or take that action at a meeting at which all Members entitled to vote on that action at a meeting were present and voted. All such consents shall be filed with the Company and shall be maintained in the Company records. Members may participate in any Members' meeting through the use of any means of conference telephones or similar communications equipment as long as all Members participating can hear one another. A Member so participating is deemed to be present in person at the meeting. 5.5.3 PROXIES. Every Member entitled to vote at a meeting may ------- authorize another person or persons to act by proxy with respect to his, her or its Membership Interest. No proxy shall be valid after the expiration of 11 months from the date thereof unless otherwise provided in the proxy. Every -12- proxy continues in full force and effect until revoked by the Member executing it prior to the vote pursuant thereto, except as otherwise herein provided. Such revocation may be effected by a writing delivered to the Company stating that the proxy is revoked or by a subsequent proxy executed by the Member executing the prior proxy and presented to the meeting, or as to any meeting by attendance at such meeting and voting in person by the person executing the proxy. The dates contained on the forms of proxy presumptively determine the order of execution, regardless of the postmark dates on the envelopes in which they are mailed. A proxy is not revoked by the death or incapacity of the Member unless, before the vote is counted, written notice of such death or incapacity is received by the Company. The revocability of a proxy that states on its face that it is irrevocable shall be governed by the provisions of Sections 703(e) and 705(f) of the California General Corporation Law. 5.6 WITHDRAWAL, RESIGNATION AND RETIREMENT. Except as required by law, -------------------------------------- no Member may withdraw, resign or retire from the Company without the express consent of a Super Majority Interest. ARTICLE 6 MANAGEMENT AND CONTROL OF THE COMPANY 6.1 MANAGEMENT OF THE COMPANY BY THE MANAGER. ---------------------------------------- 6.1.1 EXCLUSIVE MANAGEMENT BY THE MANAGER. Subject to the ----------------------------------- provisions of the Articles and this Agreement, the business, property and affairs of the Company shall be managed, and all powers of the Company shall be exercised, by or under the direction of the Manager. The Manager shall have, without limitation the authority to exercise all rights and fulfill all obligations with respect to the Initial Card Club Assets, including without limitation rights and obligations under the agreements set forth in Schedule -------- 2.1. - --- 6.1.2 AGENCY AUTHORITY OF THE MANAGER. Subject to the rights of ------------------------------- the Members as set forth in Section 6.3, the Manager shall have signing authority with respect to all matters on behalf of the Company, including without limitation the authority to endorse checks, drafts and other evidences of indebtedness made payable to the order of the Company or to sign checks, drafts and other instruments obligating the Company to pay money, or sign agreements or other documents. Subject to the provisions of the Articles and this Agreement, the Manager may delegate any of its powers hereunder. -13- 6.2 MANAGER. ------- 6.2.1 INITIAL MANAGER. HPC shall be the initial Manager. --------------- 6.2.2 TERM OF OFFICE; SUCCESSOR MANAGER. The Manager shall hold --------------------------------- office for a term commencing on the date of appointment (or in the case of the initial Manager, commencing on the date hereof) and expiring upon the earlier of (i) the date on which such Manager resigns, (ii) the date on which the Manager becomes an Excluded Member pursuant to Section 92 hereof or (iii) the date on which the Manager ceases to be a Member owning at least a 20% interest in the capital and profits of the Company. Upon the expiration of the term of office of a Manager, a successor Manager shall be elected by a Super Majority Interest, including HPC in its capacity as a Member (unless HPC's term as the Manager expired by reason of clause (ii) above), provided that such successor Manager -------- must be a Member owning at least a 20% interest in the capital and profits of the Company unless agreed upon in writing by all of the Members. 6.2.3 RESIGNATION. The Manager may resign at any time by giving ----------- written notice to the Members without prejudice to the rights, if any, of the Company under any contract to which the Manager is a party. The resignation of any Manager shall take effect upon receipt of that notice or at such later time as shall be specified in the notice; and, unless otherwise specified in the notice, acceptance of the resignation shall not be necessary to make it effective. A Manager who has an incapacity shall be deemed to have resigned. For purposes of this Section 6.2.3, "incapacity" shall mean, as to any Manager, as applicable, (i) the death or adjudication or incompetence or insanity in the case of a natural person, (ii) the inability of a Manager to fulfill his obligations under this Agreement because of injury or physical or mental illness and such incapacity shall exist for ninety (90) working days in the aggregate during any consecutive twelve (12) month period, (iii) the termination of a trust in the case of a trustee of a trust, the dissolution and commencement of winding up of a partnership in the case of a partnership, the filing of a certificate of dissolution or its equivalent in the case of a corporation or a limited liability company and the distribution by a fiduciary of an estate's entire interest in the Company, or (iv) the Bankruptcy of such Manager. The resignation of a Manager shall not affect the Manager's rights as a Member and shall not by itself constitute a withdrawal of a Member. 6.3 LIMITATIONS ON MANAGER'S AUTHORITY. Notwithstanding the foregoing, ---------------------------------- the Manager shall not, without the written consent of all of the Members, which consent shall not be unreasonably delayed or withheld: -14- (a) do any act in contravention of this Agreement in its present form or as amended; (b) confess a judgment against the Company; (c) cause the Company to enter into any arrangement with itself or any of its affiliates or other related entities as principal on terms less favorable to the Company as would be obtained from an unaffiliated third party; (d) dissolve the Company except in accordance with Article 9 hereof; (e) change the nature of the business of the Company (provided, -------- however, that to the extent agreed to by a Super Majority Interest the Company - ------- may determine to undertake additional businesses at the Card Club Site or other property leased or acquired by the Company pursuant to the DDA in addition to the Card Club and the Hotel). 6.4 CARD CLUB OPERATOR; HOTEL OPERATOR; OTHER OFFICERS. -------------------------------------------------- 6.4.1 CARD CLUB OPERATOR; HOTEL OPERATOR. Pursuant to the ---------------------------------- Lease, CEI will act as the operator of the Card Club (the "Card Club Operator") until such time as the Company may be licensed to act as the Card Club Operator, at which time the Company and CEI shall form Newco to operate the Card Club, the Hotel and related businesses, in accordance with the Purchase Agreement. When the Company and CEI form Newco, subject to the terms of the Purchase Agreement, the Manager shall select the chief operating officer and manager of the Card Club (and may enter into employment agreements with such persons as it deems appropriate). Such chief operating officer and manager, under the supervision of the Manager, shall be responsible for the day-to-day management of the operations of the Card Club and shall make all the decisions required to be made regarding the day-to-day administration, supervision, management and control of the operations of the Card Club. The chief operating officer (and all other employees of the Company) shall report directly to and shall be supervised by the Manager. The Hotel operator shall be selected by the Manager. 6.4.2 OTHER OFFICERS. The Manager may appoint such other -------------- officers as may be deemed necessary or advisable from time to time by the Manager. All officers, including the chief operating officer, shall serve at the pleasure of the Manager, subject to all rights, if any, of an officer under any contract of employment. Any individual may hold any number of offices with such duties and powers as designated by the Manager. 6.5 REMUNERATION AND REIMBURSEMENT OF MEMBERS. Except as otherwise ----------------------------------------- authorized in, or pursuant to, this Agreement, no Member is entitled to remuneration for acting on behalf of the Company or in connection with the Company's business. HPC shall -15- receive a credit against its Initial Capital Contribution for all Initial Expenses paid for by HPC or HPI. A schedule setting forth the Initial Expenses paid for by HPC or HPI as of July 8, 1996, is attached hereto as Schedule 6.5. ------------ The Manager shall be entitled to full reimbursement of its actual costs incurred in connection with the Company's ownership and/or operation of the Card Club, including salaries and other compensation of all employees hired for or assigned to Card Club operations but excluding any allocation for general and administrative overhead costs. The Members shall be entitled to reimbursement of reasonable out-of-pocket expenses incurred or services provided for the purposes of the Company at the request of the Manager. 6.6 BUDGETS. The Manager shall prepare an initial capital budget and ------- annual capital and operating budgets and operating plans for the Company for each fiscal year, which annual budgets and plans shall be delivered to the Members for informational purposes. 6.7 BANK ACCOUNTS. All funds of every kind and nature received by the ------------- Company, including capital contributions, loan proceeds, and operating receipts shall be deposited in such bank accounts in the name of the Company as shall be determined from time to time by the Manager. Company funds shall not be commingled with funds of any Member or others. 6.8 INSURANCE. The Company shall procure and maintain in full force and --------- effect insurance on the Card Club and other Company Property, including liability, fire, extended property and business interruption insurance, naming the Company and the Manager as insureds thereunder (the terms and coverage amounts of which shall be that customary in the industry). The Company shall procure and maintain any additional insurance coverage required by applicable City ordinances or written order. ARTICLE 7 TRANSFER AND ASSIGNMENT OF INTERESTS 7.1 RESTRICTIONS ON TRANSFER; TRANSFERS OF ECONOMIC INTERESTS. No --------------------------------------------------------- Member may Transfer its Membership Interest or Economic Interest in the Company, in whole or in part, without the prior written consent of the Manager (or, in the case of HPC if HPC is then the Manager, holders of a majority of the Profit Percentage Interests excluding those held by HPC), which consent may be given or withheld, conditioned or delayed by the Manager or such holders, as applicable, in its or their sole discretion; provided that any Member may Transfer its Economic Interest to another Member or to an Affiliate without consent. The Transfer of an Economic Interest to an Affiliate or another Member shall not effect a Transfer of the Membership Interest of the transferring Member and the transferee shall in no event be -16- deemed substituted as a Member of the Company, except to the extent of the Economic Interest so Transferred unless otherwise agreed by all of the Members. No Transfer of an Economic Interest permitted by this Agreement shall effect a novation or release any of the transferor Member's obligations hereunder, and the Transferring Member shall continue to be obligated under each and every provision of this Agreement. No Economic Interest Owner of the Company shall have any right to participate in the management of the business and affairs of the Company or to become a Member thereof. 7.2 RIGHTS OF FIRST REFUSAL. If a Member has received the prior written ----------------------- consent of the Manager (or, in the case of HPC if HPC is then the Manager, holders of a majority of the Profit Percentage Interests excluding those held by HPC), to a proposed Transfer in accordance with Section 7.1, prior to seeking to sell all or any portion of its Membership Interest (the "Transferable Interest"), (i) each Member other than HPC shall first offer HPC and, as long as HPC is the Manager, the other Members and (ii), HPC subject to the requirements of the Purchase Agreement regarding the rights of CEI in connection with Transfers by HPC, shall offer to the other Members (in each case, collectively with HPC, the "Offerees") the right to purchase the Transferable Interest (or in the case of HPC, if CEI had the right pursuant to the Purchase Agreement to exercise a right of first refusal and did so, the remainder, if any, of the Transferable Interest following such exercise) on the same terms and conditions as the selling Member intends to sell such interest, or on the same terms and conditions as the offer received from a prospective purchaser, as the case may be (herein, the "First Opportunity Offer"). The First Opportunity Offer, once made, shall constitute an irrevocable binding offer by the selling Member to sell the Transferable Interest to the Offerees, who shall have thirty (30) days after receipt of the First Opportunity Offer within which to accept same in writing. If any of the Offerees timely accepts the First Opportunity Offer, the selling Member shall sell the Transferable Interest to such accepting Offerees on a pro rata basis in accordance with their Profit Percentage Interests (or if only one Offeree accepts in a timely manner, such Offeree may purchase the entire Transferable Interest), on the same terms and conditions as the First Opportunity Offer; provided, however, that such sale shall be consummated within -------- ninety (90) days of the Offerees' acceptance of the First Opportunity Offer. If the Offerees fail to timely accept the First Opportunity Offer or do not agree to purchase all of the Transferable Interest, the selling Member (other then HPC, if it has previously made such offer to CEI) shall offer the still available portion of the Transferable Interest to CEI in accordance with the terms and conditions of the Purchase Agreement. If CEI agrees to purchase (x) all of the still available portion of the Transferable Interest of DeBartelo or Chu, as applicable, or (y) all or any portion of the Transferable Interest of HPC, the sale of the Transferable Interest to CEI and the accepting Offerees, if any, shall be -17- consummated in accordance with the Purchase Agreement. If the accepting Offerees, if any, and CEI together do not agree to purchase the entire Transferable Interest, then the selling Member shall be free to sell the Transferable Interest to any third party, subject to the terms of this Agreement and of the Purchase Agreement. Each of the Members acknowledges receipt of a copy of the Purchase Agreement and hereby agrees to be bound by all the provisions thereof, including without limitation (i) the grant to CEI by each of them of a right of first refusal with respect to Transfers of their respective Membership Interests herein, and (ii) the provisions regarding the price below which Membership Interests may not be sold, all as set forth in Section 10.2 of the Purchase Agreement. 7.3 TRANSFERS SUBJECT TO LICENSES AND APPROVALS. Notwithstanding any ------------------------------------------- other provision of this Agreement, at such time as a public company is permitted under applicable law to own and operate a card club, or HPI or HPC is otherwise legally permitted to operate the Card Club, no Transfer of a Membership Interest or an Economic Interest in the Company may be made unless and until the transferee has obtained all licenses and approvals necessary for the ownership and operation of the Card Club from the City and any other necessary or applicable licensing authorities and has executed an agreement to be bound by all provisions of this Agreement. 7.4 EFFECT OF NON-COMPLIANCE. Any purported Transfer not permitted by ------------------------ this Agreement shall be void ab initio and of no effect against the Company, any --------- other Member or any creditor of or claimant against the Company. 7.5 EFFECT OF TRANSFER. A transferee of a Membership Interest shall ------------------ have the right to become a substitute Member only if (a) the requirements of Sections 7.1 and 7.2, and as applicable, Sections 7.3 and 7.8, are met, (b) such person executes an instrument satisfactory to all of the Members accepting and adopting the terms and provisions of this Agreement, and (c) such person pays any reasonable expenses in connection with its admission as a new Member. The admission of a substitute Member shall not result in the release of the Member who assigned the Membership Interest from any liability that such Member may have to the Company or to any Member. 7.6 RIGHTS OF LEGAL REPRESENTATIVES. Subject to the provisions of ------------------------------- Section 9.2, if a Member who is an individual dies or is adjudged by a court of competent jurisdiction to be incompetent to manage the Member's person or property, the Member's executor, administrator, guardian, conservator, or other legal representative shall have all the rights of a holder of an Economic Interest, but shall have no right to become a substitute Member without the consent otherwise required pursuant to this Agreement. If a Member is a corporation, trust, or other entity and is dissolved or terminated, the -18- powers described in the preceding sentence may be exercised by such Member's legal representative or successor. 7.7 OBLIGATION TO COMPLY WITH APPLICABLE LAW. At such time as a public ---------------------------------------- company is permitted under applicable law to own and operate a card club, or HPI or HPC is otherwise legally permitted to operate the Card Club, the Company shall promptly apply to obtain licensing and the necessary approvals to permit Newco to acquire the Company Assets and to operate the Card Club, the Hotel and related businesses and all Members hereby agree to obtain (and to cause each of their directors, officers, equity owners and other Affiliates, as applicable, to obtain) all required licenses and approvals as promptly as possible. If any Member or any director, officer, equity owner or other Affiliate of any Member (collectively a "Noncomplying Person") is unable, at any time, to obtain or maintain such licensing or otherwise comply with applicable law, such Member shall take such action, including without limitation, a corporate restructuring or the severing of its relationship with the Noncomplying Person, in order to comply with applicable law within thirty (30) days of the date on which the Noncomplying Person was unable or ceased to comply with such law. If a Member is unable to satisfy the requirements of the preceding sentence, then the Company (or, if the Company is unable to do so, the other Members) shall purchase such Member's Membership Interest (on a pro rata basis in accordance with their respective Profit Percentage Interests, if the purchasers are the other Members). The purchase price of the sale required by the previous sentence shall equal the Fair Value of such Member's Membership Interest determined in accordance with the procedures for determining the Fair Value of Chu's and DeBartolo's Membership Interests as set forth in Section 7.9.3 and shall be payable in equal quarterly installments over five (5) years with interest at the Rate. A Member that is removed from the Company pursuant to this Section shall have no further right to participate, in any way, in the business of the Company (specifically including the right to receive distributions from, or to share in the Net Profits, Net Losses or similar items of, the Company or to approve Company actions). 7.8 CHANGES OF CONTROL -- DEBARTOLO AND CHU. During the term of this --------------------------------------- Agreement, each of Chu and DeBartolo shall prohibit each of its equity owners from effecting any Transfer of their ownership interests that would result in a Change of Control, respectively, of Chu or DeBartolo. Chu represents and warrants to HPC and DeBartolo that attached hereto as Schedule 7.8A is a true ------------- and complete list setting forth each of the equity owners of Chu, showing the percentage interest owned. DeBartolo represents and warrants to HPC and Chu that attached hereto as Schedule 7.8B is a true and complete list setting forth ------------- each of the equity owners of DeBartolo, showing the percentage interest owned. Each of Chu and DeBartolo hereby agrees to provide the Manager (or HPC, if HPC is no longer the Manager) with prompt notice of any proposed sale by an equity owner of his, her or -19- its ownership interest. Concurrently with the execution of this Agreement, each of Chu and DeBartolo shall cause any certificates representing such ownership interests to bear a legend substantially as follows: "THE OWNERSHIP INTERESTS REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS CONTAINED IN THE OPERATING AGREEMENT OF CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF THE ISSUER. ANY TRANSFER OF SHARES IN VIOLATION OF SUCH PROVISIONS SHALL BE NULL AND VOID AB -- INITIO." ------- The Members hereby agree that any Change of Control, merger, sale of assets, recapitalization or other corporate restructuring of HPI shall not constitute a Transfer or Change of Control of HPC for purposes of this Agreement. 7.9 PUT/CALL. -------- 7.9.1 CHU/HPC. Within one-hundred twenty (120) days following ------- each of the following events, subject to CEI's rights pursuant to the Purchase Agreement, Chu shall have the right to notify HPC of its election to cause HPC to purchase its Membership Interest, and HPC shall have the right to notify Chu of its election to purchase Chu's Membership Interest, for a price equal to the Fair Value of Chu's Membership Interest, which price shall be payable in accordance with Section 7.9.4. This right and obligation shall be personal to Chu and may not be assigned or transferred, even if there is a permitted Transfer of Chu's Membership Interest. The events giving rise to rights of each of HPC and Chu under this Section 7.9.1 are as follows: (a) An HPI Change; (b) The death of Leo Chu; (c) The death of Ivy Chu; or (d) The date that is five (5) years after the date hereof. 7.9.2 DEBARTOLO/HPC. Within one-hundred twenty (120) days ------------- following each of the following events, subject to CEI's rights pursuant to the Purchase Agreement, DeBartolo shall have the right to notify HPC of its election to cause HPC to purchase its Membership Interest in the Company, and HPC shall have the right to notify DeBartolo of its election to purchase DeBartolo's Membership Interest, for a price equal to the Fair Value of DeBartolo's Membership Interest, which price shall be payable in accordance with Section 7.9.4. This right and obligation shall be personal to DeBartolo and may not be -20- assigned or transferred, even if there is a permitted Transfer of DeBartolo's Membership Interest. The events giving rise to the rights of each of DeBartolo and HPC under this Section 7.9.2 are as follows: (a) An HPI Change; or (b) The date that is five (5) years after the date hereof. 7.9.3 DETERMINATION OF FAIR VALUE. The Fair Value of the --------------------------- Membership Interest of Chu or DeBartolo for purposes hereof shall be determined as follows. (a) During the first eighteen (18) months after the date hereof, the Fair Value shall be determined by multiplying the Profit Percentage Interest of Chu or DeBartolo as applicable by the total Capital Contributions to the Company of all of the Members from its inception to the date of the purchase of such interest. (b) From and after the date that is eighteen (18) months after the date hereof, the Fair Value shall mean the price that an unaffiliated third party would be willing to pay for the Membership Interest of Chu or DeBartolo, as applicable (the "Acquired Interest"), considering the value of the Company's business and assets at the time and its liabilities (with no minority discount applied). HPC and DeBartolo or Chu, as applicable, shall attempt to agree on the Fair Value during the sixty (60) day period after the notification by HPC, on the one hand, or Chu or DeBartolo, on the other, of its election to purchase or sell the Acquired Interest pursuant to Section 7.9.1 or 7.9.2. If HPC and DeBartolo or Chu, as applicable, cannot agree on the Fair Value during such sixty (60) day period, then the Fair Value of the Acquired Interest shall be determined by an appraisal. Either HPC, on the one hand, or DeBartolo or Chu, on the other hand, may initiate an appraisal by notifying the other in writing of its designation of a nationally recognized investment banking firm to determine the Fair Value of the Acquired Interest. Within ten (10) days following receipt of such designation, the other shall either notify HPC or DeBartolo or Chu, as the case may be, of its designated appraiser, which shall also be a nationally recognized investment banking firm, or, in the absence of notice, shall be deemed to have accepted the investment banking firm designated by the other. The investment banking firm (or firms) so appointed shall make a determination of the Fair Value within thirty (30) days after the deemed acceptance of the first designated investment banking firm or, if applicable, the appointment of the second investment banking firm, and shall concurrently exchange and/or deliver such determinations to HPC or DeBartolo or Chu. If only one investment banking firm has been appointed, the determination by such firm of the Fair Value shall be final and binding. If two -21- firms have been appointed, and the determinations of the two firms are within ten percent (10%) of each other, the average of the two determinations shall be the Fair Value. If the two determinations are not within ten percent (10%) of each other, then the two investment banking firms shall select a third investment banking firm within fifteen (15) days after the determinations have been exchanged; and if the two investment banking firms are unable to agree within that period on a third firm, such appointment will be made by the American Arbitration Association. If a third investment banking firm is appointed, the third investment banking firm shall make the determination of the Fair Value, which shall be within the range of the determinations made by the first two firms, within fifteen (15) days after the appointment of the third firm. Each of HPC on the one hand and Chu or DeBartolo on the other shall pay one-half (1/2) of the cost of the investment banking firm, if only one is appointed; if two firms are appointed, HPC on the one hand, and Chu or DeBartolo, on the other hand, shall each pay the fees and costs of the investment banking firm appointed by such Person; and the fees and costs of a third investment banking firm shall be divided equally between them. 7.9.4 HPC OPTION. HPC shall have the option to pay for the ---------- Acquired Interest either by the issuance of HPI Common Stock (or common stock of any successor to HPI) in an amount equal to the Fair Value or by payment of the Fair Value in cash by wire transfer; provided, that HPC may elect to pay for the -------- Acquired Interest by issuing common stock only if HPI or its successor is a public company at the time. HPC shall make such election by notice to Chu or DeBartolo as applicable within thirty (30) days after the determination of the Fair Value of the Acquired Interest. If HPC elects to pay for the Acquired Interest by the issuance of HPI Common Stock, Chu or DeBartolo, as applicable, shall be entitled to exercise piggyback registration rights and demand registration rights on one occasion each with respect to such common stock, on the terms and conditions contained in Article 11 hereof. For purposes hereof, the value of HPI's stock shall be determined by reference to the closing price on the principal stock exchange on which such shares are then listed or, if such shares are not then listed on a stock exchange, by reference to the closing price (if approved for quotation on the Nasdaq National Market) or the mean between the bid and asked price (if other over-the-counter issue) of a share as supplied by the National Association of Securities Dealers, Inc. through Nasdaq (or its successor in function), in each case as reported by The Wall Street Journal, for the business day immediately following the date of the election made by HPC, DeBartolo or Chu pursuant to Section 7.9.1 or 7.9.2 (or, if for any reason no such price is available, in such other manner as the Board of Directors of HPI may deem appropriate to reflect the then fair market value thereof). If HPC is no longer the Manager at the time HPC, Chu or DeBartolo exercises its right hereunder, the parties acknowledge that Chu or DeBartolo must first offer its -22- Membership Interest to CEI in accordance with the terms of the Purchase Agreement. 7.9.5 CLOSING. The closing (the "Closing") of any sale pursuant ------- hereto shall be held at a mutually acceptable place, on a date (the "Closing Date") not more than the later of (i) one-hundred twenty (120) days after the election made by HPC, DeBartolo or Chu pursuant to Section 7.9.1 or 7.9.2, or (ii) thirty (30) days after determination of the Fair Value of the Membership Interest of Chu or DeBartolo as applicable, which date shall be established by HPC upon not less than ten (10) business days' prior written notice to Chu or DeBartolo, as applicable. Conveyance shall be made by an appropriate assignment, duly and validly executed by Chu or DeBartolo, as applicable, conveying the Acquired Interest, free and clear of all liens, claims, encumbrances and rights of others and containing customary representations and warranties to HPC, including without limitation, representations and warranties that (i) there are no outstanding options, warrants or other rights to purchase such Membership Interest; and (ii) Chu or DeBartolo, as applicable, has full power and authority to sell its Membership Interest and such sale is not prohibited by and will not conflict with the terms of any other understanding, agreement or arrangement to which Chu or DeBartolo, as applicable, is a party or by which it is bound. 7.10 TAG-ALONG RIGHTS. ---------------- 7.10.1 RIGHT TO PARTICIPATE IN SALE. Following compliance with ---------------------------- all applicable requirements of this Agreement governing the Transfer of Membership Interests, including the requirements of the Purchase Agreement regarding offering the Membership Interest to CEI, if any Member ("Selling Member") enters into an agreement to transfer, sell or otherwise dispose of any portion of its Membership Interest (other than a Transfer of an Economic Interest to an Affiliate or another Member as permitted by Section 7.1) (such transfer, sale or other disposition being referred to as a "Tag-Along Sale"), then each other Member ("Tag-Along Member") shall have the right, but not the obligation, to participate in such Tag-Along Sale. The portion of its Membership Interest that each Tag-Along Member will be entitled to include in such Tag-Along Sale (the "Member's Allotment") shall be determined by multiplying (i) the Profit Percentage Interest represented by the Membership Interest proposed to be sold, transferred or otherwise disposed of pursuant to the Tag-Along Sale, by (ii) such Tag-Along Member's Profit Percentage Interest on the day immediately preceding the Tag-Along Notice Date (as defined below). Any sales of any portion of its Membership Interest by a Tag-Along Member as a result of the foregoing "Tag-Along Rights" shall be on the same terms and conditions as the proposed Tag-Along Sale by the Selling Member. The "Tag-Along Notice Date" shall be the date that the Tag-Along Sale Notice (as defined below) is delivered to Members. -23- 7.10.2 SALE NOTICE. The Selling Member shall provide the other ----------- Members with written notice (the "Tag-Along Sale Notice") not more than sixty (60) nor less than thirty (30) days prior to the proposed date of the Tag-Along Sale (the "Tag-Along Sale Date"). Each Tag-Along Sale Notice shall set forth: (i) the name and address of each proposed transferee or purchaser of a Membership Interest in the Tag-Along Sale; (ii) the Profit Percentage Interest represented by the Membership Interest proposed to be transferred or sold by the Selling Member; (iii) the proposed amount and form of consideration to be paid for such Membership Interest and the terms and conditions of payment offered by each proposed transferee or purchaser; (iv) confirmation that the proposed purchaser or transferee has been informed of the "Tag-Along Rights" provided for herein and has agreed to purchase the Membership Interest in accordance with the terms hereof; and (v) the Tag-Along Sale Date. 7.10.3 TAG-ALONG NOTICE. If a Member wishes to participate in ---------------- the Tag-Along Sale, such Member shall provide written notice (the "Tag-Along Notice") to the Selling Member no less than ten (10) business days prior to the Tag-Along Sale Date. If a Tag-Along Notice is not received by the Selling Member from a Member prior to the ten (10) day period specified above, the Selling Member shall have the right to sell or otherwise transfer the Membership Interest specified in the Tag-Along Sale Notice to the proposed purchaser or transferee without any participation by such Member. The Tag-Along Notice shall set forth the Profit Percentage Interest represented by the Membership Interest that such Member elects to include in the Tag-Along Sale, which shall not exceed the Member's Allotment. The Tag-Along Notice shall also specify the aggregate Profit Percentage Interest represented by such Member's Membership Interest as of the close of business on the day immediately preceding the Tag-Along Notice Date, which such Member desires also to include in the sale ("Additional Membership Interests") in the event there is any under-subscription for the entire amount of all Members' Allotments. In the event there is an under- subscription in the aggregate of such Members' Allotments, the Selling Member shall apportion the unsubscribed Members' Allotments to such holders whose Tag- Along Notices specified an amount of Additional Membership Interests, which apportionment shall be on a pro rata basis among such Members in accordance with --- ---- the number of Additional Membership Interests specified by all such Members in their Tag-Along Notices. The Tag-Along Notice given by the Member shall constitute such Member's binding agreement to sell such Membership Interest on the terms and conditions applicable to the Tag-Along Sale, subject to the provisions of this Section 7.10. 7.10.4 VOID TRANSFERS. If the Selling Member fails to sell or -------------- otherwise Transfer its Membership Interest or any portion thereof on terms and conditions which are no more -24- favorable in any material respect to the Selling Member than as stated in the Tag-Along Sale Notice on or prior to the Tag-Along Sale Date, such sale or Transfer shall be null and void, and any subsequent sale or Transfer of such Membership Interest must comply with all of the requirements of this Agreement. 7.10.5 EXEMPT TRANSFERS. The provisions of this Section 7.10 ---------------- shall not apply to any Transfer, sale or other disposition by any Member to one of its Affiliates (provided that prior to any such disposition the Member complies with the requirements of this Agreement regarding Transfers). ARTICLE 8 ACCOUNTING, RECORDS, REPORTING BY MEMBERS 8.1 FISCAL YEAR. The fiscal year of the Company shall be the calendar ----------- year. The decision to engage outside accountants for the Company and the selection of such outside accountants, if any, shall be made by the Manager. 8.2 BOOKS AND RECORDS. Each Member and each Economic Interest Owner, ----------------- and their duly authorized representatives shall at all times, during regular business hours, have reasonable access to and may inspect and copy at its own expense any of the books and records of the Company set forth in this Section, for purposes reasonably related to such person's interest in the Company. Each Member shall be entitled at any time to have the Company's books and records examined or audited at such Member's expense, and HPC shall cooperate fully with the party or parties making such examination or audit on behalf of such Member. The books of account of the Company shall be maintained and prepared in accordance with generally accepted accounting principles, consistently applied. The Company shall maintain at its principal office in California all of the following: (a) A current list of the full name and last known business or residence address of each Member and Economic Interest Owner set forth in alphabetical order, together with the Capital Contributions, Capital Account and Profit Percentage Interest of each Member and Economic Interest Owner; (b) A current list of the full name and business or residence address of the Manager and each officer; (c) A copy of the Articles and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which the Articles or any amendments thereto have been executed; -25- (d) Copies of the Company's federal, state and local income tax or information returns and reports, if any, for the six (6) most recent taxable years; (e) A copy of this Agreement and any and all amendments thereto together with executed copies of any powers of attorney pursuant to which this Agreement or any amendments thereto have been executed; (f) Copies of the financial statements of the Company, if any, for the six (6) most recent Fiscal Years; (g) The Company's books and records as they relate to the internal affairs of the Company for at least the current and past four (4) Fiscal Years; (h) Originals or copies of all minutes, actions by written consent, consents to action and waivers of notice to Members and Member votes, actions and consent, if any; and (i) Any other information required to be maintained by the Company pursuant to the Act. 8.3 STATEMENTS. ---------- 8.3.1 ANNUAL REPORT. Within one-hundred twenty (120) days after ------------- the end of each calendar year, the Manager shall deliver to each of the other Members audited financial statements of the Company, certified by Arthur Anderson & Co., Inc. or such other "Big Six" accounting firm selected by the Manager. 8.3.2 TAX INFORMATION. The Manager shall cause to be prepared --------------- at least annually, at Company expense, information necessary for the preparation of the Members' and Economic Interest Owners' federal and state income tax returns. The Manager shall send or cause to be sent to each Member or Economic Interest Owner within ninety (90) days after the end of each taxable year such information as is necessary to complete federal and state income tax or information returns and a copy of the Company's federal, state, and local income tax or information returns for that year. 8.3.3 ANNUAL STATE REPORT. The Manager shall cause to be filed ------------------- at least annually with the California Secretary of State the statement required under California Corporations Code (S)17060. 8.3.4 MONTHLY REPORTS. As soon as practicable following the end --------------- of each month, the Manager shall deliver to each of the other Members a copy of such monthly financial reports of income and expense of the Company as are prepared by the Manager with respect to the Company. -26- 8.4 FILINGS. The Manager, at Company expense, shall cause the income ------- tax returns for the Company to be prepared and timely filed with the appropriate authorities. The Manager, at Company expense, shall cause to be prepared and timely filed, with appropriate federal and state regulatory and administrative bodies, amendments to, or restatements of, the Articles and all reports required to be filed by the Company with those entities under the Act or other then current applicable laws, rules, and regulations. If the Manager or any officer required by the Act to execute or file any document fails, after demand, to do so within a reasonable period of time or refuses to do so, any other officer or Member may prepare, execute and file that document with the California Secretary of State. 8.5 BANK ACCOUNTS. The Manager shall maintain the funds of the Company ------------- in one or more separate bank accounts in the name of the Company, and shall not permit the funds of the Company to be commingled in any fashion with the funds of any other Person. 8.6 TAX MATTERS FOR THE COMPANY HANDLED BY THE MANAGER AND TAX MATTERS ------------------------------------------------------------------ PARTNER. The Manager shall from time to time cause the Company to make such tax - ------- elections as the Manager deems to be in the best interests of the Company and the Members. The Tax Matters Partner, as defined in Code Section 6231, shall represent the Company (at the Company's expense) in connection with all examinations of the Company's affairs by tax authorities, including resulting judicial and administrative proceedings, and shall expend the Company funds for professional services and costs associated therewith. The Tax Matters Partner shall oversee the Company tax affairs in the overall best interests of the Company. If for any reason the Tax Matters Partner resigns or can no longer serve in that capacity, a Super Majority Interest may designate another Member to be Tax Matters Partner. ARTICLE 9 DISSOLUTION AND WINDING UP 9.1 EVENTS OF DISSOLUTION. The Company shall be dissolved, its assets --------------------- shall be disposed of, and its affairs wound up on the first to occur of the following: 9.1.1 The happening of any event of dissolution specified in the Articles; 9.1.2 The entry of a decree of judicial dissolution pursuant to Section 17351 of the Corporations Code; 9.1.3 The vote of a Super Majority Interest; -27- 9.1.4 The occurrence of a Dissolution Event unless there are at least two Remaining Members in addition to the Excluded Member (it being agreed that, if there are not at that time at least two Remaining Members in addition to the Excluded Member, the sole Remaining Member shall in its sole and absolute discretion have the right to admit another Member to the Company) and a Majority Interest consent within ninety (90) days of the Dissolution Event to the continuation of the business of the Company; or 9.1.5 The expiration of the period fixed for the duration of the Company as stated in the Articles. 9.2 EFFECT OF A DISSOLUTION EVENT (OTHER THAN DISSOLUTION). If ------------------------------------------------------ following a Dissolution Event, the Remaining Members vote to continue the business of the Company, such Remaining Member(s) shall purchase the Excluded Member's interest in the Company, on a pro rata basis in accordance with their respective Profit Percentage Interests, for an aggregate purchase price equal to the amount that the Excluded Member would be entitled to receive for the Fair Value of the Excluded Member's Membership Interest as determined in accordance with the procedures for determining the Fair Value of Chu's and DeBartolo's Membership Interests set forth in Section 7.9.3, payable in equal quarterly installments over five (5) years with interest at the Rate. Following such purchase, the Remaining Members shall continue the operation of the Company independently of the Excluded Member. Upon such vote by the Remaining Members to continue the business of the Company, the Excluded Member shall have no further right to participate, in any way, in the business of the Company (specifically including the right to receive distributions from, or to share in the Net Profits, Net Losses or similar items of, the Company or to approve Company actions). Election of the Remaining Member(s) to continue the business of the Company under this Section 9.2 shall not preclude such Remaining Member(s) from pursuing any and all other remedies available to it or them under this Agreement, at law or in equity. 9.3 CERTIFICATE OF DISSOLUTION. As soon as possible after the -------------------------- occurrence of any of the events specified in Section 9.1 above, any Member shall execute a Certificate of Dissolution in such form as shall be prescribed by the California Secretary of State and file the Certificate as required by the Act. 9.4 WINDING UP. Upon the occurrence of any event specified in Section ---------- 9.1 above, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors. The Manager shall be responsible for overseeing the winding up and liquidation of Company, shall take full account of the liabilities of Company and assets, shall either cause its assets to be sold or distributed, and if sold as promptly as is -28- consistent with obtaining the fair market value thereof, shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in Section 9.6. The Manager shall give written notice of the commencement of winding up by mail to all known creditors and claimants whose addresses appear on the records of the Company. The Manager shall be entitled to reasonable compensation for its services in winding up the Company's affairs. 9.5 DISTRIBUTIONS IN KIND. Any non-cash asset distributed to one or --------------------- more Members shall first be valued at its fair market value to determine the Net Profit or Net Loss that would have resulted if such asset were sold for such value, such Net Profit or Net Loss shall then be allocated pursuant to Article 3, and the Members' Capital Accounts shall be adjusted to reflect such allocations. The amount distributed and charged to the Capital Account of each Member receiving an interest in such distributed asset shall be the fair market value of such interest (which shall mean the price that an independent third party would pay for such asset, net of any liability secured by such asset that such Member assumes or takes subject to). The fair market value of such asset shall be determined by the Manager or if there is an objection by any Member, the fair market value shall be determined by an independent appraiser (which must be recognized as an expert in valuing the type of asset involved) selected by the Manager or liquidating trustee and approved by a Super Majority Interest. 9.6 ORDER OF PAYMENT UPON DISSOLUTION. After determining that all known --------------------------------- debts and liabilities of the Company in the process of winding-up, including, without limitation, debts and liabilities to Members who are creditors of the Company, have been paid or adequately provided for, the remaining assets shall be distributed to the Members in accordance with their positive Capital Account balances, after taking into account income and loss allocations for the Company's taxable year during which liquidation occurs. Such liquidating distributions shall be made by the end of the Company's taxable year in which the Company is liquidated, or, if later, within ninety (90) days after the date of such liquidation. 9.7 COMPLIANCE WITH REGULATIONS. All payments to the Members upon the --------------------------- winding up and dissolution of the Company shall be strictly in accordance with the positive capital account balance limitation and other requirements of Regulations Section 1.704-1(b)(2)(ii)(d). 9.8 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION. Except as otherwise ------------------------------------------- specifically provided in this Agreement, each Member shall be entitled to look solely at the assets of the Company for the return of its positive Capital Account balance and shall have no recourse for such Member's Capital -29- Contribution and/or share of Net Profits (upon dissolution or otherwise) against the Manager, officers, or any other Member. 9.9 CERTIFICATE OF CANCELLATION. The Persons who filed the Certificate --------------------------- of Dissolution shall cause to be filed in the office of, and on a form prescribed by, the California Secretary of State, a certificate of cancellation of the Articles upon the completion of the winding up of the affairs of the Company. 9.10 NO ACTION FOR DISSOLUTION. No Member or Economic Interest Owner has ------------------------- any interest in specific property of the Company. Without limiting the foregoing, each Member and Economic Interest Owner irrevocably waives during the term of the Company any right that he or it may have to maintain any action for partition with respect to the property of the Company. Except as expressly permitted in this Agreement, a Member or Economic Interest Owner shall not take any voluntary action that directly causes a Dissolution Event. The Members acknowledge that irreparable damage would be done to the goodwill and reputation of the Company if any Member should bring an action in court to dissolve the Company under circumstances where dissolution is not required by Section 9.1. This Agreement has been drawn carefully to provide fair treatment of all parties and equitable payment in liquidation of the Economic Interests. Accordingly, except where the Members have failed to liquidate the Company as required by this Article 9, each Member hereby waives and renounces such Member's right to initiate legal action to seek the appointment of a receiver or trustee to liquidate the Company or to seek a decree of judicial dissolution of the Company on the ground that (a) it is not reasonably practicable to carry on the business of the Company in conformity with the Articles or this Agreement, or (b) dissolution is reasonably necessary for the protection of the rights or interests of the complaining Member. Damages for breach of this Section 9.10 shall be monetary damages only (and not specific performance), and the damages may be offset against distributions by the Company to which such Member would otherwise be entitled. ARTICLE 10 INDEMNIFICATION AND INSURANCE 10.1 INDEMNIFICATION OF COMPANY PERSONS. The Company shall indemnify any ---------------------------------- Company Person who was or is a party or is threatened to be made a party to, or otherwise becomes involved in, any Proceeding (including a Proceeding by or in the right of the Company) by reason of the fact that such Company Person is or was an agent of the Company against all Expenses, amounts paid in settlement, judgments, fines, penalties and ERISA excise taxes actually and reasonably incurred by or levied against such Company Person in connection with such Proceeding -30- if such Company Person acted in good faith and in a manner such Company Person reasonably believed to be in or not opposed to the best interests of the Company and, with respect to any criminal Proceeding, had no reasonable cause to believe such Company Person's conduct was unlawful. The termination of any Proceeding, whether by judgment, order, settlement or conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that a Company Person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the Company or, with respect to any criminal Proceeding, that a Company Person had reasonable cause to believe that such Company Person's conduct was unlawful. To the fullest extent permitted by applicable law, a Company Person shall be conclusively presumed to have met the relevant standards of conduct, as defined by the laws of the State of California or other applicable jurisdictions, for indemnification pursuant to this Section 10.1, unless and until a court of competent jurisdiction, after all appeals, finally determines to the contrary, and the Company shall bear the burden of proof of establishing by clear and convincing evidence that such Company Person failed to meet such standards of conduct. In any event, the Company Person shall be entitled to indemnification from the Company to the fullest extent permitted by applicable law, including, without limitation, any amendments thereto subsequent to the date of this Agreement that increase the protection of Company Persons allowable under such laws. 10.2 SUCCESSFUL DEFENSE. Notwithstanding any other provision of this ------------------ Agreement, to the extent that a Company Person has been successful on the merits or otherwise in defense of any Proceeding referred to in Section 101, or in defense of any claim, issue or matter therein, such Company Person shall be indemnified against Expenses actually and reasonably incurred in connection therewith to the fullest extent permitted by the laws of California or other applicable jurisdictions, including, without limitation, any amendments thereto subsequent to the date of this Agreement that increase the protection of Company Persons allowable under such laws. 10.3 INDEMNIFICATION OF OTHER AGENTS. The Company may, but shall not be ------------------------------- obligated to, indemnify any Person (other than a Company Person) who was or is a party or is threatened to be made a party to, or otherwise becomes involved in, any Proceeding (including any Proceeding by or in the right of the Company) by reason of the fact that such Person is or was an agent of the Company, against all Expenses, amounts paid in settlement, judgments, fines, penalties and ERISA excise taxes actually and reasonably incurred by such Person in connection with such Proceeding under the same circumstances and to the same extent as is provided for or permitted in this Article 10 with respect to a Company Person, or with respect to such circumstances and on such terms as the Manager may determine. -31- 10.4 RIGHT TO INDEMNIFICATION UPON APPLICATION. ----------------------------------------- 10.4.1 TIMING. Any indemnification or advance under Section 10.1 ------ or 10.3 shall be made promptly, and in no event later than sixty (60) days, after the Company's receipt of the written request of a Company Person therefor, unless, in the case of an indemnification, a determination shall have been made as provided in Section 10.1 that such Company Person has not met the relevant standard for indemnification set forth in that Section. 10.4.2 ENFORCEMENT. The right of a Person to indemnification or ----------- an advance of Expenses as provided by this Article 10 shall be enforceable in any court of competent jurisdiction. The burden of proving by clear and convincing evidence that indemnification or advances are not appropriate shall be on the Company. Neither the failure by the Manager or Members of the Company or its independent legal counsel to have made a determination that indemnification or an advance is proper in the circumstances, nor any actual determination by the Manager or Members of the Company or its independent legal counsel that indemnification or an advance is not proper, shall be a defense to the action or create a presumption that the relevant standard of conduct has not been met. In any such action, the Person seeking indemnification or advancement of Expenses shall be entitled to recover from the Company any and all expenses of the types described in the definition of Expenses actually and reasonably incurred by such Person in such action, but only if such Person prevails therein. A Person's Expenses incurred in connection with any Proceeding concerning such Person's right to indemnification or advances in whole or in part pursuant to this Agreement shall also be indemnified by the Company regardless of the outcome of such a Proceeding, unless a court of competent jurisdiction finally determines that each of the material assertions made by such Person in the Proceeding was not made in good faith or was frivolous. 10.5 PAYMENT OF EXPENSES IN ADVANCE. Expenses incurred by a Company ------------------------------ Person in connection with a Proceeding shall be paid by the Company in advance of the final disposition of such Proceeding upon receipt of a written undertaking by or on behalf of such Company Person to repay such amount if it shall ultimately be determined that such Company Person is not entitled to be indemnified by the Company as authorized in this Article 10. 10.6 LIMITATIONS ON INDEMNIFICATION. No payments pursuant to this ------------------------------ Agreement shall be made by the Company: (a) To indemnify or advance funds to any Person with respect to a Proceeding initiated or brought voluntarily by such Person and not by way of defense, except as provided in Section 10.4.2 with respect to a Proceeding brought to establish or enforce a right to indemnification under this Agreement, -32- otherwise than as required under California law, but indemnification or advancement of Expenses may be provided by the Company in specific cases if a determination is made that such indemnification or advancement is appropriate. The determination as to whether any such indemnification or advancement of Expenses is appropriate shall be made (i) by the Manager or, if there is more than one Manager (provided the Manager is not a party to such Proceeding) Managers by a majority vote of a quorum consisting of Managers who were not parties to such Proceeding, or (ii) if such quorum is not obtainable or, even if obtainable, a quorum of such disin terested Managers so directs, by independent legal counsel in a written opinion, or (iii) by the Members by a vote of Members holding a Super Majority Interest, whether or not constituting a quorum, who were not parties to such Proceeding; (b) To indemnify or advance funds to any Person for any Expenses, judgments, amounts paid in settlement, fines, penalties or ERISA excise taxes resulting from the such Person's conduct which is finally adjudged to have been willful misconduct, knowingly fraudulent or deliberately dishonest; or (c) If a court of competent jurisdiction finally determines that any indemnification or advance of Expenses hereunder is unlawful. 10.7 OTHER TERMS OF INDEMNIFICATION. ------------------------------ 10.7.1 PARTIAL INDEMNIFICATION. If a Person is entitled under ----------------------- any provision of this Article 10 to indemnifica tion by the Company for a portion of Expenses, amounts paid in settlement, judgments, fines, penalties or ERISA excise taxes incurred by such Person in any Proceeding but not, however, for the total amount thereof, the Company shall nevertheless indemnify such Person for the portion of such Expenses, amounts paid in settlement, judgments, fines, penalties or ERISA excise taxes to which such Person is entitled, except that no indemnification shall be given for Expenses in connection with a Proceeding brought by the Company if the Person is found liable on any portion of the claims in such Proceeding. 10.7.2 INDEMNITY NOT EXCLUSIVE. The indemnification and ----------------------- advancement of Expenses provided by, or granted pursuant to, the provisions of this Article 10, shall not be deemed exclusive of any rights to which any Person seeking indemnification or advancement of Expenses may be entitled under any agreement, vote of Members, determination of the Board, or otherwise, both as to action in such Person's capacity as an agent of the Company and as to action in another capacity while serving as an agent. 10.7.3 INSURANCE. The Company shall have the power to purchase --------- and maintain insurance or other financial arrangement on behalf of any Person who is or was an agent of -33- the Company against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person's status as an agent, whether or not the Company would have the power to indemnify such Person against such liability under the provisions of this Article 10 or of Section 17155 of the Act. In the event a Person shall receive payment from any insurance carrier or from the Plaintiff in any action against such Person with respect to indemnified amounts after payment on account of all or part of such indemnified amounts having been made by the Company pursuant to this Article 10, such Person shall reimburse the Company for the amount, if any, by which the sum of such payment by such insurance carrier or such plaintiff and payments by the Company to such Person exceeds such indemnified amounts; provided, however, that such portions, if any, of such insurance proceeds that are required to be reimbursed to the insurance carrier under the terms of its insurance policy shall not be deemed to be payments to such Person hereunder. In addition, upon payment of indemnified amounts under the terms and conditions of this Agreement, the Company shall be subrogated to such Person's rights against any insurance carrier with respect to such indemnified amounts (to the extent permitted under such insurance policies). Such right of subrogation shall be terminated upon receipt by the Company of the amount to be reimbursed by such Person pursuant to the second sentence of this Section 10.7.3. 10.7.4 HEIRS, EXECUTORS AND ADMINISTRATORS. The indemnification ----------------------------------- and advancement of Expenses provided by, or granted pursuant to, this Article 10 shall, unless otherwise provided when authorized or ratified, continue as to a Person who has ceased to be an agent of the Company and shall inure to the benefit of such Person's heirs, executors and administrators. ARTICLE 11 REGISTRATION RIGHTS In the event that, following the exercise of a right to cause a Membership Interest to be purchased or sold pursuant to Section 7.9, HPC exercises its right pursuant to Section 7.9.4 to pay for the Acquired Interest with HPI Common Stock, then the provisions of this Article 11 shall apply. The rights set forth in this Article 11 shall be personal to Chu and DeBartolo and may not be assigned or transferred. 11.1 INCIDENTAL REGISTRATION. Each time HPI proposes to file a ----------------------- Registration Statement, if Chu or DeBartolo, as applicable, has not theretofore exercised its rights pursuant to Section 11.1A hereof, HPI shall take the following steps: -34- 11.1.1 NOTICE. Mail a written notice of the offering and the name of ------ the managing underwriter (if any) to each Holder at the address shown on the books and records of HPI at least thirty (30) days prior to the filing of any such Registration Statement; and 11.1.2 INCLUSION OF SHARES. Include in such Registration ------------------- Statement any and all Registrable Securities specified in a notice by the Holder which is received by the Company not less than fifteen (15) days following the mailing of the notice specified in Section 1111 above. In connection with any registration, the Selling Holder must: (i) sell such Registrable Securities in the manner and on the terms adopted by or through the underwriter(s) acting on behalf of HPI in connection with such registration, if such underwriter(s) so requests; and (ii) accept a reduction (including a total elimination) in the number of shares to be included in such registration on a pro rata basis (based on the number of shares held by each) with any other selling shareholders holding contractual registration rights (except that HPI and any shareholder who has exercised demand registration rights with respect to such Registration Statement shall not be affected by such reduction) if the underwriter(s) reasonably deem that without such reduction (or elimination) HPI might be substantially hindered in the terms or number of securities which it could sell in such registration. Nothing in this Section 11.1.2 shall limit the ability of HPI to withdraw a Registration Statement it has filed either before or after effectiveness thereof. In the case of an underwritten offering, a Selling Holder may withdraw his, her or its included shares after the filing of the Registration Statement only (i) with the consent of the underwriter; (ii) if the final price is less than the range of prices given in the preliminary prospectus; (iii) if HPI breaches its obligations; or (iv) as provided in Section 11.2.2. 11.1A DEMAND REGISTRATION. ------------------- 11.1A.1 NOTICE OF DEMAND. At any time after Chu or DeBartolo ---------------- receives Registrable Securities, each of Chu or DeBartolo shall have the right to request by written notice to HPI that HPI register the Registrable Securities under the 1933 Act. Each of Chu and DeBartolo shall have the right to make one such demand (except that if such demand is withdrawn pursuant to Section 11.1A.3, such demand shall not be deemed to have been made for purposes of this limitation); and each such demand must include all Registrable Securities held by Chu or DeBartolo, as applicable. Each notice shall set forth (i) the number of shares to be included; (ii) the names of the Selling Holder; and (iii) the proposed manner of sale. Within ten (10) days after receipt of such notice, the Company shall notify the other Holder (if any) and offer to such Holder the opportunity to include its shares in such registration. -35- 11.1A.2 HOLDER AND REGISTRATION. Promptly after receipt of any ----------------------- notice pursuant to Section 11.1A.1, HPI shall prepare and file with the SEC, a Registration Statement on any applicable form, with respect to all the Registrable Securities held by such Selling Holder. 11.1A.3 HOLDBACK. In the event that registration is demanded -------- pursuant to Section 11.1A.1, and HPI determines that the shares for which registration is requested cannot be sold without serious injury to HPI or its existing shareholders, HPI shall have the option to require the Selling Holders to withdraw such registration demand and not make any other demand for a period of up to one-hundred eighty (180) days (which may be extended if such facts continue to be in effect). 11.2 REGISTRATION PROCEDURES. Whenever HPI shall register any securities ----------------------- pursuant to this Article 11, the parties agree as follows: 11.2.1 SELLING HOLDER INFORMATION. Each Selling Holder shall -------------------------- provide HPI with such information about such Holder and his, her or its intended manner of distributing the Registrable Securities, and shall otherwise cooperate with HPI and the underwriter(s) as may be needed or helpful in the reasonable opinion of HPI to complete any obligation of HPI hereunder. Failure to comply with this requirement shall excuse HPI from any further obligation to a Selling Holder to include his, her or its shares in that Registration Statement; 11.2.2 CONSULTATION. HPI shall supply copies of any Registration ------------ Statement, any amendment thereto and any communications of the SEC related thereto to each Selling Holder and Seller's Underwriter and shall provide each Selling Holder and Seller's Underwriter with a reasonable opportunity, prior to filing such document with the SEC, to provide comments with respect to any matters in such documents that describe such Selling Holder, the Seller's Underwriter or the distribution of securities held by such Selling Holder ("Selling Holder Matters"). HPI will immediately amend such Registration Statement to include such reasonable changes relating to Selling Holder Matters as the Selling Holders and the Seller's Underwriter reasonably agree should be included therein. Any Selling Holder requesting a change refused by HPI may withdraw his, her or its shares from the Registration Statement; 11.2.3 PROVISION OF PROSPECTUSES. HPI shall furnish each Selling ------------------------- Holder such number of copies of preliminary and final prospectuses, each in conformity with the requirements of the 1933 Act, and such other documents as such Selling Holder may reasonably request in order to facilitate the public sale or other disposition of such securities; 11.2.4 BLUE SKY COMPLIANCE. HPI shall use its reasonable efforts ------------------- to register or qualify the securities covered -36- by such Registration Statement under the securities or "blue sky" laws of such jurisdictions as each Selling Holder shall reasonably request (provided, however, that HPI shall not be required (i) to consent to, or take any action which would subject it to, general service of process for all purposes or (ii) to qualify to do business in any jurisdiction where it is not then subject or qualified); 11.2.5 AMENDMENTS. HPI shall use its reasonable efforts to ---------- prepare and file promptly with the SEC such amendments and supplements to such Registration Statement and the prospectus used in connection therewith, as may be necessary to keep such Registration Statement continuously effective and in compliance with the 1933 Act for up to four (4) months, or until all Registrable Securities registered in that Registration Statement are sold, whichever is earlier; 11.2.6 PROSPECTUS DELIVERY. At any time when a sale or other ------------------- public disposition pursuant to a Registration Statement is subject to a prospectus delivery requirement, HPI shall immediately notify each Selling Holder and Sellers' Underwriter of the occurrence of any event as a result of which the prospectus included in such Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then existing. Upon receipt of such a notice, each Selling Holder shall immediately discontinue sales or other dispositions of Registrable Securities pursuant to the Registration Statement. The Selling Holders may resume sales only upon receipt of amended prospectuses or after such Selling Holders have been advised by HPI that the use of the previous prospectus may be legally resumed; 11.2.7 STOP-ORDERS. HPI agrees to immediately notify each ----------- Selling Holder (i) of the issuance by the SEC of any stop order or order suspending the effectiveness of any Registration Statement or the initiation of any proceedings for that purpose, or (ii) of the receipt by HPI of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction, or the initiation of any proceedings for such purpose. HPI, with the reasonable cooperation of the Selling Holders, shall make every reasonable effort to contest any such proceedings and to obtain the withdrawal of any such order at the earliest possible moment; 11.2.8 UNDERWRITING AGREEMENT. At the request of HPI or any ---------------------- underwriter of the offering, each Selling Holder shall enter into an underwriting agreement in a form reasonably agreed upon by HPI and such underwriter(s); and 11.2.9 COMPLIANCE WITH LAWS. In all actions taken under this -------------------- Agreement, each Selling Holder agrees to use -37- his, her or its best efforts to comply with all provisions of the 1933 Act as well as any other applicable law. 11.3 REGISTRATION NOT REQUIRED. HPI shall have no obligation to any ------------------------- Holder under this Article 11 with respect to whom HPI has obtained an opinion of counsel, in form reasonably satisfactory to such Holder, to the effect that the Registrable Securities involved may be immediately sold to the public without registration thereof, whether pursuant to Rule 144 or otherwise. 11.4 DELAY OF REGISTRATION. No Holder shall have any right to take any --------------------- action to restrain, enjoin or otherwise delay the filing or effectiveness of any Registration Statement on the basis of any controversy which might arise with respect to the interpretation or implementation of this Article 11. 11.5 INDEMNITY. --------- 11.5.1 HPI'S INDEMNITY. HPI will indemnify each Selling Holder --------------- and any Sellers' Underwriter (and any of their officers and directors and persons who control such Holder or Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) against all claims, losses, damages, liabilities and expenses resulting from any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement or from any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as the same is based on (i) information furnished in writing to the Company by such Holder, an underwriter, or any Selling Holder expressly for use therein, or (ii) the circumstances set forth in Section 1152(y) hereof. 11.5.2 THE HOLDER'S INDEMNITY. Each Selling Holder will ---------------------- indemnify (i) HPI, any underwriter, and any other person selling under a Registration Statement (and any of their officers and directors and persons who control HPI, such underwriter or such other persons within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act) against all claims, losses, damages, liabilities and expenses resulting from (x) any untrue statement or alleged untrue statement of a material fact contained in that Registration Statement or from any omission or alleged omission to state a material fact required to be stated or necessary to make the statements therein not misleading, but only to the extent based upon information furnished in writing to the Company by such Holder expressly for inclusion in that Registration Statement or other document or (y) any untrue statement or alleged untrue statement of a material fact contained in, or any omission or alleged omission of a material fact from, a prospectus if (i) a later prospectus corrected the untrue statement or alleged untrue statement, or omission or alleged omission, (ii) at such time the Company had advised the Holder of the availability of -38- the revised prospectus, and (iii) there would have been no such liability had such later prospectus actually been delivered to the purchaser at or prior to confirmation of sale. 11.6 EXPENSES OF REGISTRATION. The Selling Holder shall bear all ------------------------ expenses incurred in any Registration undertaken pursuant to Section 11.1A, including, without limitation, all registration and filing fees (including all expenses incident to filing with the National Association of Securities Dealers, Inc.), legal fees, brokerage or underwriting fees, expenses or commissions, fees and expenses of complying with securities and blue sky laws and regulations, printing expenses and fees and disbursements of the independent certified public accountants and of HPI's counsel. With respect to any Registration undertaken pursuant to Section 111, HPI shall bear all expenses other than Selling Holder Expenses (defined below). Each Selling Holder shall bear his, her or its equitable share of any Selling Holder Expenses. "Selling Holder Expenses" shall consist of (i) Selling Holder's legal costs, (ii) any proportionate share of brokerage or underwriting fees, expenses or commissions, (iii) any fees and expenses of complying with blue sky laws to the extent registration in the applicable state is requested by a Selling Holder pursuant to Section 1124 hereof, and (iv) any other costs required to be paid by Selling Holders in order to comply with state securities laws and regulations. 11.7 TERMINATION. Each Holder shall have no further rights under this ----------- Article at any time (i) after such time as no further Registrable Securities of such Holder remain outstanding or (ii) such Holder has exercised his, her or its registration rights under Section 11.1A on one occasion, whichever comes first. Further, each Holder shall have the right to participate in any Registration undertaken pursuant to Section 111 only once. ARTICLE 12 MISCELLANEOUS 12.1 OTHER VENTURES; COMPETITION. --------------------------- (a) Nothing contained in this Agreement or in law shall be construed to limit or restrict in any way the freedom of any Member, or any shareholders or affiliates of a Member, to conduct any other business venture or activity whatsoever, including the ownership, development, leasing, sale, financing, operation and management of other card clubs or casinos nor to require any accountability to the Company or to any other Member, whether or not such other business ventures are in direct or indirect competition with the business of the Company. -39- (b) No Member need afford the Company or any other Member or any affiliate of a Member the opportunity to acquire or invest in any other property, project or enterprise, regardless of whether such property, project or enterprise would, but for this sentence, be deemed an opportunity of the Company. 12.2 COUNSEL TO THE COMPANY. Counsel to the Company may also be counsel ---------------------- to any Member or any Affiliate of a Member. The officers of the Company may execute on behalf of the Company and the Members any consent to the representation of the Company that counsel may request pursuant to the California Rules of Professional Conduct or similar rules in any other jurisdiction. 12.3 GENERAL PROVISIONS. ------------------ 12.3.1 COMPLETE AGREEMENT. This Agreement and any documents ------------------ referred to herein or executed contemporaneously herewith constitute the parties' entire agreement with respect to the subject matter hereof and supersede all prior or contemporaneous agreements, representations, warranties, statements, promises and understandings, whether oral or written, with respect to the subject matter hereof. 12.3.2 DISPUTES. -------- 12.3.2.1 GOVERNING LAW; JURISDICTION. This Agreement has been --------------------------- negotiated and entered into in the State of California, concerns a California business and all questions with respect to the Agreement and the rights and liabilities of the parties will be governed by the laws of that state, regardless of the choice of law provisions of California or any other jurisdiction. Any and all disputes between the parties which may arise pursuant to this Agreement not covered by arbitration will be heard and determined before an appropriate federal or state court located in Los Angeles, California. The parties hereto acknowledge that such court has the jurisdiction to interpret and enforce the provisions of this Agreement and the parties waive any and all objections that they may have as to personal jurisdiction or venue in any of the above courts. 12.3.2.2 ARBITRATION AS EXCLUSIVE REMEDY. Except for actions ------------------------------- seeking injunctive relief and for actions pursuant to Sections 101 and 1042, which may be brought before any court having jurisdiction, any claim arising out of or relating to (i) this Agreement, including without limitation its validity, interpretation, enforceability or breach, or (ii) the relationship between the parties (including without limitation its commencement and termination) whether based on breach of covenant, breach of an implied covenant or intentional infliction of emotional distress or other tort or contract theories, which are not settled by agreement between the parties, shall be settled by arbitration in Los Angeles County, California, before a sole arbitrator who shall be a retired -40- judge of the Los Angeles Superior Court or retired justice of the California Court of Appeal or Supreme Court. The sole arbitrator shall be selected by mutual agreement of the parties within fifteen (15) days after service of a notice of intent to arbitrate by any party. If the parties are unable to select a mutually agreeable arbitrator, then a retired judge or justice of the California state courts shall be selected by order of the court pursuant to the provisions of Code of Civil Procedure (S)1281.6. The parties hereby (i) consent to the in personam jurisdiction of the Superior Court of the State of California for purposes of the enforcement of this arbitration provision and confirming any such award and entering judgment thereof; (ii) agree to use their best efforts to keep all matters relating to any arbitration hereunder confidential; and (iii) agree that the arbitrators may not assess any remedy other than the awarding of actual out-of-pocket damages suffered and/or punitive damages when appropriate. In any arbitration proceedings hereunder (a) all testimony of witnesses shall be taken under oath; (b) discovery will be allowed under the provisions of Section 1283.05 of the Code of Civil Procedure, as presently in force, which are incorporated herein; (c) production of documents will be allowed as provided for by Section 2031 of the Code of Civil Procedure; and (d) upon conclusion of any arbitration, the arbitrator shall render findings of fact and conclusions of law in a written opinion setting forth the basis and reasons for any decision reached and deliver such documents to each party to this Agreement along with a signed copy of the award in accordance with Section 1283.6 of the California Code of Civil Procedure. Each party agrees that, except as expressly provided above, the arbitration provisions of this Agreement are its exclusive remedy and expressly waives any right to seek redress in another forum. Each party shall share equally the fees of the arbitrator during the arbitration, but the fees of the arbitrator shall be borne by the losing party. Any arbitration shall be commenced within forty-five (45) days, and completed within ninety (90) days, of the appointment of the arbitrator. 12.3.3 ADDITIONAL DOCUMENTS. Each party hereto agrees to execute -------------------- any and all further documents and writings and to perform such other actions which may be or become necessary or expedient to effectuate and carry out this Agreement. 12.3.4 NOTICES. Unless otherwise specifically permitted by this ------- Agreement, all notices under this Agreement shall be in writing and shall be delivered by personal service, telecopy, federal express or comparable overnight service or certified mail (if such service is not available, then by first class mail), postage prepaid, to such address as may be designated from time to time by the relevant party, and which shall initially be as set forth on Exhibit A. --------- All other notices shall be deemed given when received. No objection may be made to the manner of delivery of any notice actually received in writing by an authorized agent of a party. -41- 12.3.5 PARTIES. ------- 12.3.5.1 NO THIRD-PARTY BENEFITS. None of the provisions of ----------------------- this Agreement shall be for the benefit of, or enforceable by, any third party. 12.3.5.2 SUCCESSORS AND ASSIGNS. Except as provided herein to ---------------------- the contrary, this Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and permitted assigns. 12.3.6 GOVERNING LAW; JURISDICTION. This Agreement has been --------------------------- negotiated and entered into in the State of California, concerns a California business and all questions with respect to the Agreement and the rights and liabilities of the parties will be governed by the laws of that state, regardless of the choice of law provisions of California or any other jurisdiction. 12.3.7 WAIVER OF JURY. WITH RESPECT TO ANY DISPUTE ARISING UNDER -------------- OR IN CONNECTION WITH THIS AGREEMENT OR ANY RELATED AGREEMENT, AS TO WHICH NO MEMBER INVOKES THE RIGHT TO ARBITRATION HEREINABOVE PROVIDED, OR AS TO WHICH LEGAL ACTION NEVERTHELESS OCCURS, EACH MEMBER HEREBY IRREVOCABLY WAIVES ALL RIGHTS IT MAY HAVE TO DEMAND A JURY TRIAL, INCLUDING ITS CONSTITUTIONAL RIGHTS. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY THE MEMBERS AND EACH MEMBER ACKNOWLEDGES THAT NONE OF THE OTHER MEMBERS NOR ANY PERSON ACTING ON BEHALF OF THE OTHER PARTIES HAS MADE ANY REPRESENTATION OF FACT TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS EFFECT. THE MEMBERS EACH FURTHER ACKNOWLEDGE THAT IT HAS BEEN REPRESENTED (OR HAS HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS HAD THE OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL. THE MEMBERS EACH FURTHER ACKNOWLEDGES THAT IT HAS READ AND UNDERSTAND THE MEANING AND RAMIFICATIONS OF THIS WAIVER PROVISION. 12.3.8 WAIVERS STRICTLY CONSTRUED. With regard to any power, -------------------------- remedy or right provided herein or otherwise available to any party hereunder (i) no waiver or extension of time shall be effective unless expressly contained in a writing signed by the waiving party; and (ii) no alteration, modification or impairment shall be implied by reason of any previous waiver, extension of time, delay or omission in exercise, or by any other indulgence. 12.3.9 RULES OF CONSTRUCTION. --------------------- 12.3.9.1 HEADINGS. The Article and Section headings in this -------- Agreement are inserted only as a matter of convenience, and in no way define, limit, or interpret the scope of this Agreement or of any particular Article or Section. -42- 12.3.9.2 TENSE AND CASE. Throughout this Agreement, as the context -------------- may require, references to any word used in one tense or case shall include all other appropriate tenses or cases. 12.3.9.3 SEVERABILITY. The validity, legality or enforceability ------------ of the remainder of this Agreement will not be affected even if one or more of the provisions of this Agreement will be held to be invalid, illegal or unenforceable in any respect. 12.3.9.4 AGREEMENT NEGOTIATED. The parties hereto are -------------------- sophisticated and have been represented by lawyers throughout this transaction who have carefully negotiated the provisions hereof. As a consequence, the parties do not believe that the presumptions of Civil Code Section 1654 and similar laws or rules relating to the interpretation of contracts against the drafter of any particular clause should be applied in this case and therefore waive their effects. Only the final executed version of this Agreement may be admitted into evidence or used for any purpose, and drafts of this Agreement shall be disregarded for all purposes. 12.3.10 COUNTERPARTS. This Agreement may be executed ------------ simultaneously in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. 12.4 AMENDMENTS. Except as set forth in the next sentence, all ---------- amendments to this Agreement shall be in writing and approved by all of the Members. The Manager may amend Exhibit A hereto at any time and from time to --------- time to reflect the admission or withdrawal of any Member, or the change in any Member's Capital Contributions, Profit Percentage Interests, or any changes in the Member's addresses, all as contemplated by this Agreement. 12.5 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT. If a Member is ------------------------------------------------- not a natural person, neither the Company nor any Member will be required to determine the authority of the individual signing this Agreement to make any commitment or undertaking on behalf of such entity or to determine any fact or circumstance bearing upon the existence of the authority of such individual. 12.6 INVESTMENT REPRESENTATION. Each Member hereby represents and ------------------------- warrants to, and agrees with, the other Members and the Company that he or it is acquiring the Membership Interest for investment purposes for his or its own account only and not with a view to or for sale in connection with any distribution of all or any part of the Membership Interest. No other person will have any direct or indirect beneficial interest in or right to the Membership Interest. -43- 12.7 LLC AS CARD CLUB OPERATOR. At such time as HPI or HPC may be ------------------------- licensed as an owner and operator of a card club under applicable California law and the City ordinance, if applicable law then prohibits a card club operator from being organized as a limited liability company or the Company as a limited liability company from being the manager or the managing general partner of Newco, the Company shall be reorganized as a California limited partnership, with HPC as the managing general partner, and the Members shall enter into a Limited Partnership Agreement containing substantially the same terms and provisions hereof, modified as necessary to reflect the fact that the entity is a California limited partnership. -44- IN WITNESS WHEREOF, this Agreement is executed as of the day and year set forth above. HP/COMPTON, INC. By: ___________________________ G. Michael Finnigan Its: Vice President REDWOOD GAMING LLC By: ___________________________ Its: __________________________ FIRST PARK INVESTMENTS, LLC By: ___________________________ Leo Chu Its: __________________________ SCHEDULE I ---------- DEFINITIONS When used in this Agreement, the following terms shall have the meanings set forth below (all terms used in this Agreement that are not defined in this Schedule I shall have the meanings set forth elsewhere in this Agreement): - ---------- "1933 ACT" shall mean the Securities Act of 1933, as amended, or any -------- future comparable law. "1934 ACT" shall mean the Securities Exchange Act of 1934, as amended, or -------- any future comparable law. "ACQUIRED INTEREST" is defined in Section 793. ----------------- "ACT" means the Beverly-Killea Limited Liability Company Act, codified in --- the California Corporations Code, Section 17000 et seq., as the same may be -- --- amended from time to time. "ADDITIONAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section -------------------------------- 22. "ADJUSTED CAPITAL ACCOUNT DEFICIT" means, with respect to any Member, the -------------------------------- deficit balance, if any, in such Member's Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (a) Credit to such Capital Account any amounts that such Member is obligated to restore pursuant to any provision of this Agreement or is deemed to be obligated to restore pursuant to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5); (b) Credit to such Capital Account the amount of the deductions and losses referable to any outstanding recourse liabilities owed by the Company to such Member for which no other Member bears any economic risk of loss and the amount of the deductions and losses referable to such Member's share (determined in accordance with the Member's Profit Percentage Interest) of outstanding recourse liabilities owed by the Company to non-Members for which no Member bears any economic risk of loss; and (c) Debit to such Capital Account the items described in Regulations Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704- - - - - 1(b)(2)(ii)(d)(6). - - The foregoing definition of Adjusted Capital Account Deficit is intended to comply with the provisions of Regulations Section 1.704- 1(b)(2)(ii)(d) and shall be interpreted consistently therewith. - ------------- -1- "ADVANCES" has the meaning set forth in Section 2.6. -------- "AFFILIATE" means any individual, partnership, corporation, trust or --------- other entity or association, directly or indirectly, through one or more intermediaries, controlling, controlled by, or under common control with, a Member. The term "control," as used in the immediately preceding sentence, means, with respect to a corporation or limited liability company, the right to exercise, directly or indirectly, fifty percent (50%) of the voting rights attributable to the controlled corporation or limited liability company and, with respect to any individual, partnership, trust, other entity or association, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of the controlled entity. "AGREEMENT" means this Operating Agreement, as originally executed and as --------- amended and/or restated from time to time. "ARTICLES" means the Articles of Organization for the Company originally -------- filed with the California Secretary of State, as amended and/or restated from time to time. "BANKRUPTCY" means: (i) being adjudicated bankrupt or insolvent in ---------- proceedings filed against a Person or its ultimate "parent" entity under any section or chapter of the United States Bankruptcy Code, as amended from time to time, or any similar law or statute of any state thereof (collectively "Bankruptcy Laws"); (ii) any petition for reorganization or arrangement under any Bankruptcy Laws; (iii) proceedings under any Bankruptcy Laws to have a Person adjudicated a bankrupt or insolvent, which proceedings are not dismissed within ninety (90) days of commencement; (iv) the general assignment by any Person for the benefit of creditors; (v) the appointment of a receiver for all or substantially all of the assets of any Person and the failure to have such receiver discharged within ninety (90) days after appointment; (vi) the suffering by any Member of any assignment by operation of law, or any attachment, sequestration, garnishment or lien against, or the occurrence of a levy on, such Person's interest in the Company, or any portion thereof, with the same not being discharged of record by bonding or otherwise within ninety (90) days after notice to such Member of such event. "CAPITAL ACCOUNT" means with respect to any Member the capital account --------------- that the Company establishes and maintains for such Member pursuant to Section 23. "CAPITAL CONTRIBUTION" means the total value of cash and the fair market -------------------- value (as determined by the Managers or as agreed upon by the Members under this Agreement) of property (including promissory notes or other obligations to contribute cash or property) or services contributed by Members. -2- "CAPITAL INTERESTS" means the ratio of each Member's Capital Account to ----------------- the total of all Member's Capital Accounts at any time. "CARD CLUB" has the meaning set forth in Recital A of this Agreement. --------- "CARD CLUB OPERATOR" has the meaning set forth in Section 641. ------------------ "CARD CLUB SITE" has the meaning set forth in Recital A of this -------------- Agreement. "CHANGE OF CONTROL" means that, with respect to a Person, more than 50% ----------------- of the beneficial ownership (within the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as amended, whether or not such provision is applicable to such Person) of its securities, as of the date of this Agreement, is Transferred to another Person or group of Persons that is not an Affiliate of the current owners. In the case of Chu, a Change of Control shall occur if Leo and Ivy Chu together do not own more than 50% of the beneficial ownership of Chu; and in the case of DeBartolo, a Change of Control shall occur if Edward J. DeBartolo or Cynthia R. DeBartolo do not own more than 50% of the beneficial ownership of DeBartolo. "CHU" means FIRST PARK INVESTMENTS, LLC, a California limited liability --- company. "CITY" has the meaning set forth in Recital A of this Agreement. ---- "CODE" means the Internal Revenue Code of 1986, as amended from time to ---- time, the provisions of succeeding law and to the extent applicable, the Regulations. "COMPANY" means CRYSTAL PARK HOTEL AND CASINO DEVELOPMENT COMPANY, LLC, a ------- California limited liability company. "COMPANY MINIMUM GAIN" has the meaning ascribed to the term "Partnership -------------------- Minimum Gain" in the Regulations Section 1.704-2(d). "COMPANY PERSON" means a Member, Manager or officer of the Company. -------------- "COMPANY PROPERTY" has the meaning set forth in Section 14. ---------------- "CORPORATIONS CODE" means the California Corporations Code, as amended ----------------- from time to time, and the provisions of succeeding law. -3- "DDA" has the meaning set forth in Recital B of this Agreement. --- "DEBARTOLO" means REDWOOD GAMING LLC, a California limited liability --------- company. "DEFAULTING MEMBER" means any Member that has committed a material breach ----------------- of this Agreement, including without limitation a breach pursuant to Section 27 hereof. "DISSOLUTION EVENT" means (i) the death, insanity, expulsion, Bankruptcy ----------------- or dissolution of any Member or the commission by a Member of a material default under this Agreement which is incapable of cure or (ii) the withdrawal, resignation or retirement of a Member without the prior consent of all of the other Members. "ECONOMIC INTEREST" means a Member's or Economic Interest Owner's share ----------------- of one or more of the Company's Net Profits, Net Losses and distributions of the Company's assets pursuant to this Agreement and the Act, but shall not include any other rights of a Member including, without limitation, the right to vote or participate in the management or, except as provided in Section 17106 of the Corporations Code, any right to information concerning the business and affairs of Company. "ECONOMIC INTEREST OWNER" means the owner of an Economic Interest who is ----------------------- not a Member. "EXCLUDED MEMBER" means a Member that caused a Dissolution Event. --------------- "EXPENSES" shall include, without limitation, attorneys' fees, -------- disbursements and retainers, court costs, transcript costs, fees of accountants, experts and witnesses, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness or other participant in a Proceeding. "FAIR VALUE" shall be determined in accordance with Section 793. ---------- "FIRST OPPORTUNITY OFFER" has the meaning set forth in Section 72. ----------------------- "FISCAL YEAR" means (i) the period commencing upon the formation of the ----------- Company and ending on December 31, 1996, (ii) any subsequent twelve (12) month period commencing on January 1 and ending on December 31, or (iii) any portion of the period described in Clause (ii) of this sentence for which the Company is required to allocate Profits, Losses, and other items -4- of Company income, gain, loss, or deduction pursuant to Article 3 hereof. "HOLDER" means either Chu or DeBartolo, who at that time, is the holder ------ of any Registrable Securities based on the records of HPI. "HOTEL" is defined in Recital C. ----- "HPC" means HP/Compton, Inc., a California corporation. --- "HPI" means Hollywood Park, Inc., a Delaware corporation. --- "HPI CHANGE" means that either R. D. Hubbard or G. Michael Finnigan ---------- ("Finnigan") no longer serves in either (i) his current capacity or (ii) a capacity that is senior to his current capacity with HPI or a successor (as long as, in the case of Finnigan, the individual at HPI or its successor who is primarily responsible for the Company reports directly or indirectly to Finnigan). "INITIAL CAPITAL CONTRIBUTIONS" has the meaning set forth in Section 21. ----------------------------- "INITIAL CARD CLUB ASSETS" has the meaning set forth in Section 21. ------------------------ "INITIAL EXPENSES" means all monies expended or committed by HPC or HPI ---------------- with respect to the Card Club, the Hotel and related businesses prior to the assignment of the Initial Card Club Assets to the Company, including without limitation the costs of acquiring the Card Club Site. "LEASE" has the meaning set forth in Recital D of this Agreement. ----- "LICENSE RIGHTS OPTION" has the meaning set forth in Recital B of this --------------------- Agreement. "MAJORITY INTEREST" means Members holding in the aggregate over fifty ----------------- percent (50%) of the aggregate of all Profit Percentage Interests; provided, -------- however, that for purposes of Section 91, "Majority Interest" means more than - ------- fifty percent (50%) of both the capital and profit interests in the Company (within the meaning of such terms in Revenue Procedure 94-46, 1994-28 IRB 1) held by the Remaining Members. "MANAGER" shall mean the manager who is designated from time to time as ------- provided in Section 62. "MEMBER" means each Person who (a) is an Original Member, has been ------ admitted to the Company as a Member in accordance with the Articles and this Agreement or is an assignee who has become a Member in accordance with Article 7 and (b) has not resigned, -5- withdrawn, been expelled or, if other than an individual, dissolved. "MEMBER-MANAGER" means a Manager who is a Member. -------------- "MEMBER NONRECOURSE DEBT" has the meaning ascribed to the term "Partner ----------------------- Nonrecourse Debt" in Regulations Section 1.704-2(b)(4). "MEMBER NONRECOURSE DEDUCTIONS" means items of Company loss, deduction or ----------------------------- Code Section 705(a)(2)(B) expenditures that are attributable to Member Nonrecourse Debt or to other loans by a Member to the Company for which no other Member bears the economic risk of loss. "MEMBERSHIP INTEREST" means a Member's entire interest in the Company or ------------------- any portion thereof, including without limitation the Member's Economic Interest, the right to vote on or participate in the management and the right to receive information concerning the business and affairs of the Company. "NET CASH FLOW" means the sum of Net Cash From Operations and Net Cash ------------- From Sales or Refinancings, where: (a) "NET CASH FROM OPERATIONS" means the gross cash proceeds from ------------------------ Company operations (including sales and dispositions of property in the ordinary course of business) less the portion thereof used to pay or establish reserves for all Company expenses, debt payments, capital improvements, replacements, and contingencies, all as determined by the Manager, subject to the reasonable approval of all of the Members. Net Cash From Operations shall not be reduced by depreciation, amortization, cost recovery deductions, or similar allowances, but shall be increased by any reductions of reserves previously established pursuant to the first sentence of this clause (a) and pursuant to the definition below of Net Cash From Sales or Refinancings. (b) "NET CASH FROM SALES OR REFINANCINGS" means the net cash proceeds ----------------------------------- from all sales and other dispositions (other than in the ordinary course of business) and all refinancings of property, less any portion thereof used to establish reserves, all as determined by the Manager, subject to the reasonable approval of all of the Members. Net Cash From Sales or Refinancings shall include all principal and interest payments with respect to any note or other obligation received by the Company in connection with sales and other dispositions (other than in the ordinary course of business) of property. "NET PROFITS" and "NET LOSSES" means the income, gain, loss, deductions ----------- ---------- and credits of the Company in the aggregate or separately stated, as appropriate, determined in accordance with the method of accounting used on the Company's information tax return filed for federal income tax purposes. Notwithstanding -6- the foregoing, any items of income, gain, loss or deduction that are specially allocated pursuant to Section 33 or 34 shall not be taken into account in computing Net Profits or Net Losses. "NEWCO" means the limited liability company, general partnership or other ----- entity formed by the Company and CEI to which the Company Assets will be transferred in accordance with the Purchase Agreement after such time as applicable law is amended to permit public companies to operate card clubs or HPI or HPC is otherwise legally permitted to operate the Card Club. "NONCOMPLYING PERSON" has the meaning set forth in Section 7.7. ------------------- "NONRECOURSE LIABILITY" has the meaning set forth in Regulations Section --------------------- 1.752-1(a)(2). "OFFEREES" has the meaning set forth in Section 7.2. -------- "ORIGINAL MEMBERS" means HPC, DeBartolo and Chu. ---------------- "PERSON" means an individual, general partnership, limited partnership, ------ limited liability company, corporation, trust, estate, real estate investment trust association or any other entity. "PROCEEDING" means any action, suit, arbitration, alternative dispute ---------- resolution mechanism, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative or investigative in nature. "PROFIT PERCENTAGE INTEREST" means the percentage interest of a Member in -------------------------- Net Profits, as set forth in Section 3.1 and as adjusted from time to time in accordance with Section 2.7. "PURCHASE AGREEMENT" has the meaning set forth in Recital B of this ------------------ Agreement. "RATE" means interest at an annual rate equal to the Bank of America's ---- prime interest rate in effect from time to time (but in no event greater than the maximum rate permitted under applicable law). "REAL PROPERTY RIGHTS" has the meaning set forth in Recital B of this -------------------- Agreement. "REGISTRABLE SECURITIES" means those shares of HPI Common Stock received ---------------------- or receivable by either Chu or DeBartolo under Section 7.9 of this Agreement (including shares received from HPI with respect to or in replacement of such shares by reason of splits, dividends and recapitalizations) but excluding any shares which may be then sold to the public without registration -7- pursuant to Rule 144 or other comparable provision under the 1933 Act ("Rule 144"). "REGISTRATION STATEMENT" means any registration statement or comparable ---------------------- document under the 1933 Act through which a public sale or disposition of HPI's Common Stock may be registered or exempted from registration (except a form exclusively for the sale or distribution of securities by HPI or to employees of HPI or its subsidiaries or for use exclusively in connection with a business combination). "REGULATIONS" means, unless the context clearly indicates otherwise, the ----------- regulations currently in force from time to time as final or temporary that have been issued by the U.S. Department of Treasury pursuant to its authority under the Code. "REMAINING MEMBERS" means the Members other than the Excluded Member. ----------------- "SEC" means the Securities and Exchange Commission. --- "SELLING HOLDER" means with respect to any Registration Statement, any -------------- Holder whose securities are included therein. "SELLERS' UNDERWRITER" means with respect to any Registration Statement -------------------- and only to the extent that HPI has not retained an underwriter for such offering, the underwriter designated in writing by the Selling Holders, subject to the prior approval of HPI, which may be withheld for any reason. "SUPER MAJORITY INTEREST" means Members holding in the aggregate at least ----------------------- eighty percent (80%) of all Profit Percentage Interests. "TAX MATTERS PARTNER" shall be HPC or its successor as designated ------------------- pursuant to Section 8.6. "THIRD PARTY LOANS" has the meaning set forth in Section 2.5. ----------------- "TRANSFER" means any sale, transfer, assignment, hypothecation or other -------- voluntary disposition, whether by gift, bequest or otherwise. In the case of a hypothecation, the Transfer shall be deemed to occur both at the time of the initial pledge and at any pledgee's sale or a sale by any secured creditor. "TRANSFERABLE INTEREST" has the meaning set forth in Section 7.2. --------------------- -8- SCHEDULE 2.1 ------------ INITIAL CARD CLUB ASSETS ------------------------ A. AGREEMENTS WITH COMPTON ENTERTAINMENT, INC. ("CEI") 1. Agreement In Principle, dated April 29, 1994, by and among Hollywood Park, Inc., a Delaware corporation ("HPI") and CEI. 2. Amended and Restated Agreement Respecting Pyramid Casino, dated July 14, 1995, by and among HPI as Buyer, CEI as Seller and Shareholder, together with (i) Exhibit A: Form of Lease, by and among HP/Compton --------- as Landlord and CEI as Tenant; (ii) Exhibit B-1: Form of ----------- Partnership Agreement Of Pyramid Casino Partners, a California general partnership, by and among HPI and CEI; and Exhibit B-2: ----------- Form of Limited Liability Company Operating Agreement Of Pyramid Casino Company, LLC, by and among HPI and CEI. 3. Lease, dated August 3, 1995, by and among HPC as Landlord and CEI as Tenant, as amended by that certain First Amendment to Lease. 4. Assignment, Acceptance and Assumption and Consent, dated August 2, 1995, to transfer and assign to HPC, all of its right, title and interest in that certain Amended and Restated Agreement Respecting Pyramid Casino, dated as of July 14, 1995, by and between HPI and CEI and Shareholder. 5. License Rights Option Agreement, dated August 3, 1995, by and among CEI as Optionor and HPC as Optionee. B. AGREEMENTS WITH THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF COMPTON ("the Agency") 1. Amended and Restated Disposition and Development Agreement, Agreement of Purchase and Sale, and Lease with Option to Purchase, dated April 4, 1995 (the "DDA"), by and among the Agency and CEI. 2. Assignment, Assumption & Consent Agreement, dated July 31, 1995, by and among CEI as Assignor, HPC as Assignee, HPI as Guarantor and the Agency. 3. Guaranty, dated July 31, 1995, by HPI as Guarantor, in favor of the Agency. -1- 4. Memorandum of Lease and Option to Purchase, dated July 31, 1995, by and among the Agency as Landlord and HPC as Tenant, recorded August 3, 1995, as Instrument No. 95-1265412, in the Official Records, Los Angeles County, California. 5. Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated July 31, 1995, by HPC as Trustor, Chicago Title Company, a California corporation, as Trustee and the Agency as Beneficiary, recorded August 3, 1995, as Instrument No. 95-1265414, in the Official Records, Los Angeles County, California. 6. UCC-1 Financing Statement dated July 31, 1995, executed by HPC as Debtor, in favor of the Agency as Secured Creditor, recorded August 3, 1995, as Instrument No. 95-1265415, in the Official Records of Los Angeles County, California. 7. UCC-1 Financing Statement, dated July 31, 1995, executed by HPC as Debtor, in favor of the Agency as Secured Creditor, filed with the Secretary of State-California. 8. Offset Agreement, dated as of July 31, 1995, by and among the Agency, the City of Compton, HPC and CEI. 9. Representations and Warranties Agreement, dated August 2, 1995, by and among CEI, HPC and the Agency. 10. Slope Maintenance Agreement, dated August 2, 1995, by HPC in favor of the City of Compton, recorded August 3, 1995, as Instrument No. 95-1265419, in the Official Records of Los Angeles County, California. -2- SCHEDULE 6.5 ------------ -1- SCHEDULE 7.8A ------------- Interests in FIRST PARK INVESTMENTS, LLC Member Profit Percentage Interest - ------ -------------------------- Leo Chu 50% Ivy Chu 50% -1- SCHEDULE 7.8B ------------- Interests in REDWOOD GAMING LLC Member Profit Percentage Interest - ------ -------------------------- Cynthia R. DeBartolo 90% Christine Catherine Muranski 10% -1- Exhibit A ---------
Initial Profit Initial Percentage Capital Member's Name Member's Address Interests Contributions - ---------------- -------------------------- ----------- -------------- HPC 1050 South Prairie Avenue 88% $22,000,000 Inglewood, CA 90301 Attn: G. Michael Finnigan DeBartolo 999 Baker Way, Suite 420 8% $ 2,000,000 San Mateo, CA 94404 Attn: Mark Rivers Chu 515 North Camden Drive 4% $ 1,000,000 Beverly Hills, CA 90210 Attn: Leo Chu
A-1 TABLE OF CONTENTS -----------------
Page ---- ARTICLE 1 ORGANIZATIONAL MATTERS......................................... 2 1.1 FORMATION...................................................... 2 1.2 NAME........................................................... 2 1.3 TERM........................................................... 3 1.4 COMPANY PROPERTY............................................... 3 1.5 OFFICE AND AGENT............................................... 3 1.6 ADDRESSES OF THE MEMBERS....................................... 3 1.7 PURPOSE OF COMPANY............................................. 3 ARTICLE 2 CAPITAL CONTRIBUTIONS.......................................... 4 2.1 INITIAL CAPITAL CONTRIBUTIONS.................................. 4 2.2 ADDITIONAL CAPITAL CONTRIBUTIONS............................... 5 2.3 CAPITAL ACCOUNTS............................................... 5 2.4 NO INTEREST ON OR WITHDRAWAL OF CAPITAL........................ 6 2.5 THIRD PARTY LOANS.............................................. 6 2.6 SHORT-TERM ADVANCES............................................ 6 2.7 DILUTION....................................................... 6 ARTICLE 3 ALLOCATIONS OF NET PROFITS AND NET LOSSES....................... 7 3.1 ALLOCATIONS OF INCOME AND NET PROFITS......................... 7 3.2 ALLOCATIONS OF NET LOSSES..................................... 7 3.2.1 POSITIVE CAPITAL ACCOUNTS.............................. 7 3.2.2 PROFIT PERCENTAGE INTERESTS............................ 7 3.3 SPECIAL ALLOCATIONS........................................... 7 3.3.1 MEMBER NONRECOURSE DEDUCTIONS......................... 7
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PAGE ---- 3.3.2 NONRECOURSE DEDUCTIONS REFERABLE TO LIABILITIES OWED TO NON-MEMBERS......................................... 8 3.3.3 MEMBER MINIMUM GAIN CHARGEBACK......................... 8 3.3.4 MINIMUM GAIN CHARGEBACK................................. 8 3.3.5 QUALIFIED INCOME OFFSET................................. 9 3.4 CURATIVE ALLOCATIONS............................................ 9 3.5 APPLICATION OF SECTION 704(c) PRINCIPLES........................ 9 3.6 ALLOCATION OF EXCESS NON-RECOURSE LIABILITIES................... 9 3.7 INTENTION TO BE TAXED AS A PARTNERSHIP.......................... 9 3.8 ALLOCATION OF NET PROFITS AND LOSSES IN RESPECT OF A TRANSFERRED INTEREST............................................ 9 3.9 OBLIGATIONS OF MEMBERS TO REPORT ALLOCATIONS.................... 10 ARTICLE 4 DISTRIBUTIONS................................................. 10 4.1 DISTRIBUTION OF ASSETS BY THE COMPANY......................... 10 4.2 NET CASH FLOW................................................. 10 4.3 PERSONS TO RECEIVE DISTRIBUTION............................... 10 4.4 FORM OF DISTRIBUTION.......................................... 10 4.5 WITHHOLDING ON DISTRIBUTIONS.................................. 10 4.6 RETURN OF DISTRIBUTIONS....................................... 11 ARTICLE 5 MEMBERS....................................................... 11 5.1 LIMITED LIABILITY............................................. 11 5.2 ADMISSION OF ADDITIONAL MEMBERS............................... 11 5.3 TRANSACTIONS WITH THE COMPANY................................. 11 5.4 MEMBERS ARE NOT AGENTS........................................ 12
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PAGE ---- 5.5 VOTING RIGHTS................................................... 12 5.5.1 GENERAL RULE............................................. 12 5.5.2 MEETINGS OF MEMBERS...................................... 12 5.5.3 PROXIES.................................................. 12 5.6 WITHDRAWAL, RESIGNATION AND RETIREMENT.......................... 13 ARTICLE 6 MANAGEMENT AND CONTROL OF THE COMPANY......................... 13 6.1 MANAGEMENT OF THE COMPANY BY THE MANAGER........................ 13 6.1.1 EXCLUSIVE MANAGEMENT BY THE MANAGER...................... 13 6.1.2 AGENCY AUTHORITY OF THE MANAGER.......................... 13 6.2 MANAGER......................................................... 14 6.2.1 INITIAL MANAGER.......................................... 14 6.2.2 TERM OF OFFICE; SUCCESSOR MANAGER........................ 14 6.2.3 RESIGNATION.............................................. 14 6.3 LIMITATIONS ON MANAGER'S AUTHORITY.............................. 14 6.4 CARD CLUB OPERATOR; HOTEL OPERATOR; OTHER OFFICERS.............. 15 6.4.1 CARD CLUB OPERATOR; HOTEL OPERATOR....................... 15 6.4.2 OTHER OFFICERS........................................... 15 6.5 REMUNERATION AND REIMBURSEMENT OF MEMBERS....................... 15 6.6 BUDGETS......................................................... 16 6.7 BANK ACCOUNTS................................................... 16 6.8 INSURANCE....................................................... 16 ARTICLE 7 TRANSFER AND ASSIGNMENT OF INTERESTS........................... 16
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Page ---- 7.1 RESTRICTIONS ON TRANSFER; TRANSFERS OF ECONOMIC INTERESTS....... 16 7.2 RIGHTS OF FIRST REFUSAL......................................... 17 7.3 TRANSFERS SUBJECT TO LICENSES AND APPROVALS..................... 18 7.4 EFFECT OF NON-COMPLIANCE........................................ 18 7.5 EFFECT OF TRANSFER.............................................. 18 7.6 RIGHTS OF LEGAL REPRESENTATIVES................................. 18 7.7 OBLIGATION TO COMPLY WITH APPLICABLE LAW........................ 19 7.8 CHANGES OF CONTROL -- DEBARTOLO AND CHU......................... 19 7.9 PUT/CALL........................................................ 20 7.9.1 CHU/HPC................................................... 20 7.9.2 DEBARTOLO/HPC............................................. 20 7.9.3 DETERMINATION OF FAIR VALUE............................... 21 7.9.4 HPC OPTION................................................ 22 7.9.5 CLOSING................................................... 23 7.10 TAG-ALONG RIGHTS................................................ 23 7.10.1 RIGHT TO PARTICIPATE IN SALE............................. 23 7.10.2 SALE NOTICE.............................................. 24 7.10.3 TAG-ALONG NOTICE......................................... 24 7.10.4 VOID TRANSFERS........................................... 24 7.10.5 EXEMPT TRANSFERS......................................... 25 ARTICLE 8 ACCOUNTING, RECORDS, REPORTING BY MEMBERS...................... 25 8.1 FISCAL YEAR..................................................... 25 8.2 BOOKS AND RECORDS............................................... 25 8.3 STATEMENTS...................................................... 26
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Page ---- 8.3.1 ANNUAL REPORT..................................... 26 8.3.2 TAX INFORMATION................................... 26 8.3.3 ANNUAL STATE REPORT............................... 26 8.3.4 MONTHLY REPORTS................................... 26 8.4 FILINGS.................................................. 27 8.5 BANK ACCOUNTS............................................ 27 8.6 TAX MATTERS FOR THE COMPANY HANDLED BY THE MANAGER AND TAX MATTERS PARTNER.................................. 27 ARTICLE 9 DISSOLUTION AND WINDING UP............................. 27 9.1 EVENTS OF DISSOLUTION.................................... 27 9.2 EFFECT OF A DISSOLUTION EVENT (OTHER THAN DISSOLUTION)... 28 9.3 CERTIFICATE OF DISSOLUTION............................... 28 9.4 WINDING UP............................................... 28 9.5 DISTRIBUTIONS IN KIND.................................... 29 9.6 ORDER OF PAYMENT UPON DISSOLUTION........................ 29 9.7 COMPLIANCE WITH REGULATIONS.............................. 29 9.8 LIMITATIONS ON PAYMENTS MADE IN DISSOLUTION.............. 29 9.9 CERTIFICATE OF CANCELLATION.............................. 30 9.10 NO ACTION FOR DISSOLUTION................................ 30 ARTICLE 10 INDEMNIFICATION AND INSURANCE......................... 30 10.1 INDEMNIFICATION OF COMPANY PERSONS....................... 30 10.2 SUCCESSFUL DEFENSE....................................... 31 10.3 INDEMNIFICATION OF OTHER AGENTS.......................... 31 10.4 RIGHT TO INDEMNIFICATION UPON APPLICATION................ 32 10.4.1 TIMING............................................ 32
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Page ---- 10.4.2 ENFORCEMENT....................................... 32 10.5 PAYMENT OF EXPENSES IN ADVANCE........................... 32 10.6 LIMITATIONS ON INDEMNIFICATION........................... 32 10.7 OTHER TERMS OF INDEMNIFICATION........................... 33 10.7.1 PARTIAL INDEMNIFICATION.......................... 33 10.7.2 INDEMNITY NOT EXCLUSIVE.......................... 33 10.7.3 INSURANCE........................................ 33 10.7.4 HEIRS, EXECUTORS AND ADMINISTRATORS.............. 34 ARTICLE 11 REGISTRATION RIGHTS................................... 34 11.1 INCIDENTAL REGISTRATION................................... 34 11.1.1 NOTICE............................................ 35 11.1.2 INCLUSION OF SHARES............................... 35 11.1A DEMAND REGISTRATION............................... 35 11.1A.1 NOTICE OF DEMAND......................... 35 11.1A.2 HOLDER AND REGISTRATION.................. 36 11.1A.3 HOLDBACK................................. 36 11.2 REGISTRATION PROCEDURES................................... 36 11.2.1 SELLING HOLDER INFORMATION........................ 36 11.2.2 CONSULTATION...................................... 36 11.2.3 PROVISION OF PROSPECTUSES......................... 36 11.2.4 BLUE SKY COMPLIANCE............................... 36 11.2.5 AMENDMENTS........................................ 37 11.2.6 PROSPECTUS DELIVERY............................... 37 11.2.7 STOP-ORDERS....................................... 37 11.2.8 UNDERWRITING AGREEMENT............................ 37 11.2.9 COMPLIANCE WITH LAWS.............................. 37
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Page ---- 11.3 REGISTRATION NOT REQUIRED.................................... 38 11.4 DELAY OF REGISTRATION........................................ 38 11.5 INDEMNITY.................................................... 38 11.5.1 HPI'S INDEMNITY...................................... 38 11.5.2 THE HOLDER'S INDEMNITY............................... 38 11.6 EXPENSES OF REGISTRATION..................................... 39 11.7 TERMINATION.................................................. 39 ARTICLE 12 MISCELLANEOUS............................................ 39 12.1 OTHER VENTURES; COMPETITION.................................. 39 12.2 COUNSEL TO THE COMPANY....................................... 40 12.3 GENERAL PROVISIONS........................................... 40 12.3.1 COMPLETE AGREEMENT.................................. 40 12.3.2 DISPUTES............................................ 40 12.3.2.1 GOVERNING LAW; JURISDICTION................ 40 12.3.2.2 ARBITRATION AS EXCLUSIVE REMEDY............ 40 12.3.3 ADDITIONAL DOCUMENTS................................ 41 12.3.4 NOTICES............................................. 41 12.3.5 PARTIES............................................. 42 12.3.5.1 NO THIRD-PARTY BENEFITS.................... 42 12.3.5.2 SUCCESSORS AND ASSIGNS..................... 42 12.3.6 GOVERNING LAW; JURISDICTION......................... 42 12.3.7 WAIVER OF JURY...................................... 42 12.3.8 WAIVERS STRICTLY CONSTRUED.......................... 42 12.3.9 RULES OF CONSTRUCTION............................... 42 12.3.9.1 HEADINGS.................................. 42
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Page ---- 12.3.9.2 TENSE AND CASE.................................. 43 12.3.9.3 SEVERABILITY.................................... 43 12.3.9.4 AGREEMENT NEGOTIATED............................ 43 12.3.10 COUNTERPARTS............................................... 43 12.4 AMENDMENTS......................................................... 43 12.5 RELIANCE ON AUTHORITY OF PERSON SIGNING AGREEMENT.................. 43 12.6 INVESTMENT REPRESENTATION.......................................... 43 12.7 LLC AS CARD CLUB OPERATOR.......................................... 44
viii EX-3.13 10 RESTATED ARTICLES OF INCOPORATION OF TURF PARADISE EXHIBIT 3.13 RESTATED ARTICLES OF INCORPORATION OF TURF PARADISE, INC. Robert L. Walker, President, and Michael P. Perikly, Secretary, of Turf Paradise, Inc., an Arizona corporation hereby certify as follows: On November 17, 1993, by resolution adopted by the Board of Directors of Turf Paradise, Inc., in accordance with Arizona Revised Statutes (S) 10-064, the Articles of Incorporation of Turf Paradise, Inc., were restated as follows: ARTICLE I The names, residences and post office addresses of the incorporators are:
NAME RESIDENCE POST OFFICE ADDRESS - ---- --------- ------------------- Walter R. Cluer 216 W. Turney Avenue Phoenix, Arizona C. Thad Mullen 902 W. Campus Dr. Phoenix, Arizona Charles L. Strouss 742 W. Monte Vista Rd. Phoenix, Arizona
The name of this corporation shall be TURF PARADISE, INC. and its principal place of business shall be in Phoenix, Maricopa County, Arizona, but other offices may be established and maintained, within or outside of the State of Arizona at such places as the Board of Directors may designate, where meetings of shareholders and directors may be held, and any and all corporate business transacted. ARTICLE II The general nature of the business in which this corporation shall engage is as follows, to wit: To carry on, or cause to be carried on, the business of a racecourse in all its branches; to lay out and prepare, or cause to be layed out and prepared, lands for the running of horse races, greyhound races and races of all other kind and description without limitation; to purchase, lease, build, construct, erect or otherwise acquire and to own, control, manage and conduct racecourses, grand and other stands, stables, paddocks, parking facilities, clubhouses, refreshment rooms, booths, concessions and other structures, buildings and conveniences without limitation, and to contract, let, lease and rent the same to others; to promote, hold and conduct race meetings and other shows and exhibitions. To purchase, lease, build, construct, erect or otherwise acquire grounds and improvements for giving public exhibitions of baseball and other field games, and outdoor entertainment of all kinds, and to promote, hold and conduct the same; to contract, let, lease and rent such grounds and improvements to others. To purchase, lease or otherwise acquire and to own, control, operate and conduct amusement enterprises of every kind and character without limitation, and to purchase, lease, construct or otherwise acquire any lands, building, improvements and conveniences incident to the conduct and operation of such amusement enterprises. To construct, purchase, lease or otherwise acquire, own, maintain, operate, sell, lease or otherwise dispose of restaurants, inns, eating houses, taverns, concessions and places of entertainment and refreshment. To buy, sell and generally trade and deal in ice cream, confections, delicacies and food products of every kind and description, soft drinks and beverages of all kinds, and spirituous, vinous and malt liquors. To purchase, buy, sell, acquire, rent, lease, hire, hypothecate, mortgage, manufacture, handle, repair and dispose of automobiles, equipment and parts thereof and therefor, and to dispose of automobile accessories, automobile parts, tires and tubes, and to engage in a general automobile accessory, automobile parts, replacement, tire and tube business. To purchase, buy, sell, acquire, rent, lease, hire, hypothecate, mortgage, manufacture, handle, repair and dispose of merchandise of all kinds, including specifically (but not thereby excluding any merchandise) sporting goods, guns, ammunition, athletic supplies, uniforms, hardware, books, periodicals, animals, electric equipment, radio apparatus and the equipment thereof and therefor, and to engage generally in the mercantile and sporting goods business. To buy, sell, rent, lease and otherwise deal in all kinds of automobiles, tractors, trucks, motor vehicles, and motor equipment and accessories, parts and appliances thereof, and to act as purchasing and selling agent therefor; to lease, construct, buy or otherwise acquire, own, maintain and operate sales rooms, storage houses, garages, factories, shops and buildings for the sale, distribution, storage and repair of motor vehicles and equipment of all kinds. -2- To deal generally in airplanes, flying machines, and dirigible balloons of any and all types whatsoever, of every name and nature, whether of domestic or foreign make; to deal in parts and supplies for said machines; to carry for hire passengers or freight in said machines, on special trips, or as common carriers on regularly established routes; to maintain a service station for the repair, overhauling and testing of said machines, and to maintain supply depots for airplanes and flying machines service generally. Also to manufacture and to buy and sell any and all machinery, supplies and equipment necessary or incidental to carrying on the general business of buying, selling, repairing, testing and flying airplanes and flying machines of every description, and to do any and all things necessary and incidental to the carrying on of said business, including the right to own, buy, lease or otherwise acquire such real estate, as may be necessary for carrying out the purposes for which this corporation is organized. To buy, contract for, lease and in any and all other ways acquire, take, hold and own, and to sell, mortgage, lease and otherwise dispose of lands, and all other kinds and classes of real property and rights and interests therein, and to improve, develop, subdivide and otherwise manage and operate the same; to lend and invest its funds and secure the same by mortgage, deed of trust, collateral or otherwise. To buy, contract for, lease and in any and all other lawful ways acquire, take, hold and own personal property of all kinds, and to sell, mortgage, lease and otherwise dispose of the same; and to buy, sell, hold, use, lease and deal in franchises, easements, licenses, privileges, rights of way, and deal in personal property of every kind and character. To borrow money and to issue bonds, debentures, notes and other evidences of indebtedness and obligations from time to time for any lawful corporate purpose and to mortgage, pledge and otherwise charge any or all of its properties, rights, privileges and assets to secure the payment thereof. To purchase, own, hold, hypothecate any patent rights, privileges, trademarks or secret processes; to act as agent, trustee, broker, or in any other fiduciary capacity. To lend money, also purchase, acquire, own, hold, sell, assign, transfer, mortgage, pledge or otherwise dispose of and deal in shares of the capital stock, bonds, notes or other securities or evidences of indebtedness of this or any other corporation or association, and to exercise all the rights, powers and privileges of ownership, including the right to vote thereon to the same extent as a natural person might or could do. -3- To make and perform contracts of every kind and description, and in carrying on its business or for the purpose of attaining and furthering any of its objects, to do any and all things which a natural person could do, and which now or hereafter may be authorized by law, and in general do and perform such acts and things and transact such business in connection with the foregoing objects not inconsistent with law, in any part of the world. ARTICLE III The capital stock of the corporation shall consist of 10,000,000 shares of common stock having no par value per share, and 300,000 shares of preferred stock of the par value of $20.00 each share. All issued shares of the capital stock shall be deemed fully paid and non-assessable. The shares of capital stock may be issued and sold from time to time by the corporation for such consideration and upon such terms as may from time to time be fixed by the Board of Directors without action by the shareholders. All or any portion of the capital stock may be issued in payment for real or personal property, services, or any other right or thing of value, for the use and purposes of the corporation, and when so issued shall become and be fully paid and non- assessable; and the directors shall be the sole judges of any property, right or thing acquired in exchange for capital stock. The holders of preferred stock shall be entitled to receive out of funds legally available therefor an annual dividend at the rate of and up to the amount of One Dollar ($1.00) per share, payable before any dividends are paid upon common stock, and such preferential dividend shall be cumulative. Upon any dissolution, liquidation, merger or consolidation of the company (whether voluntary or involuntary) or upon any distribution of capital, or in the event of insolvency, there shall be paid to the holders of the preferred stock Twenty Dollars ($20.00) per share before any sum shall be paid to or any assets distributed among the holders of common stock. The corporation may at any time, and from time to time, at the option of the Board of Directors, upon sixty (60) days' notice by mail to the holders of record thereof, redeem and retire the whole or an part of the outstanding preferred stock on any dividend paying date after the issuance thereof, by paying all unpaid dividends accrued thereon together with the redemption price determined as follows: (a) if such redemption is made within three years after the issuance thereof, the redemption price shall be Twenty and 40/100 Dollars ($20.40) for each share redeemed; -4- (b) if such redemption is made more than three but less than five years after the issuance thereof, the redemption price shall be Twenty and 20/100 Dollars ($20.20) for each share redeemed; (c) if such redemption is made more than five years after the issuance thereof, the redemption price shall be Twenty Dollars ($20.00) for each share redeemed. If less than all of the outstanding shares of preferred stock are to be redeemed, the shares to be redeemed shall be selected by lot in such manner as the Board of Directors shall determine. If the holder of any preferred stock called for redemption shall fail to surrender the certificates evidencing such shares, such shares shall nevertheless be deemed to have been redeemed, retired and cancelled upon the date fixed for redemption, and the former holder thereof shall not have or exercise any right with respect thereto except to receive the amount payable on account of such redemption, without interest, upon surrender of the certificate evidencing the shares redeemed. Holders of the preferred stock shall have no right to vote at any regular or special meeting of the shareholders, and shall have no voice in the management of the affairs of the corporation; except that in the event of the failure of the corporation to pay two annual dividends to the preferred shareholders, then and thereafter until all past dividends are paid the preferred shareholders shall have equal voting rights and powers with the common shareholders. ARTICLE IV The duration of the Corporation shall be perpetual. ARTICLE V The affairs of the corporation shall be conducted by a Board of Directors and such officers as the said directors may elect or appoint. The number of directors shall be designated in the bylaws from time to time but shall not be less than five nor more than fifteen. The directors shall be elected each year at the Annual Meeting and shall serve until their successors have been elected and shall qualify. The initial directors of the corporation were: Walter R. Cluer C. Thad Mullen Charles L. Strouss -5- The directors shall have power to adopt, amend and rescind bylaws, to fill vacancies occurring in the Board from any cause, and appoint from their own number an executive committee and vest such committee with all the powers granted the directors by these articles. ARTICLE VI (This Article deleted by amendment June 4, 1980) ARTICLE VII The private property of the stockholders, directors and officers of this corporation shall be forever exempt from its debts and obligations. ARTICLE VIII This corporation does hereby appoint MICHAEL P. PERIKLY, of Phoenix, Maricopa County, Arizona, who has been a bona fide resident of Phoenix, Maricopa County, Arizona, for at least three (3) years, its lawful agent in and for the State of Arizona, for and on behalf of this corporation to accept and acknowledge service of, and upon whom may be served all necessary process or processes in any action, suit or proceeding that may be brought against said corporation in any of the courts of the said State of Arizona, such service of process or notice, or the acceptance thereof by said agent endorsed thereon to have the same effect as if served upon the President and Secretary of said corporation. ARTICLE IX To the fullest extent that the law of the State of Arizona, as it now exists or as it may hereafter be amended, permits the elimination of or limitation on the liability of directors, no director of the corporation shall be liable for monetary damages for any action taken or for any failure to take any action. Any repeal or modification of this Article shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification. ARTICLE X The Corporation expressly elects not to be subject to the provisions of Arizona Revised Statutes, Title 10, Chapter 6, Article 2, or any substantially similar successor law. This Article X shall become effective at the later of January 23, 1989 or the filing with the Arizona corporation Commission of Articles of Amendment adopting this Article X. -6- ARTICLE XI The Corporation expressly elects not to be subject to the provisions of Arizona Revised Statutes, Title 10, Chapter 6, Article 3, or any substantially similar successor law. This Article XI shall become effective September 9, 1990 and shall not apply to any business combination of the corporation with an interested shareholder whose share acquisition date was on or before July 22, 1987. The foregoing Restated Articles of Incorporation correctly set forth without change all of the operative provisions of the Articles of Incorporation as heretofore amended and supersede the original Articles of Incorporation and all amendments thereto. The names and addresses of the persons who are serving as directors as of the effective date of these Restated articles of Incorporation are:
Name Address ---- ------- Frank J. Kush 113 E. Loma Vista Drive Tempe, AZ 85282 William S. Levine 2810 W. Camelbek Road Phoenix, AZ 85017 John R. Long c/o Ladbroke Racing Corporation Foster Plaza 9, 750 Holiday Dr. Pittsburgh, PA 15220 Dwight Patterson 1761 W. Kiowa Mesa, AZ 85202 Michael P. Perikly 1501 W. Bell Road Phoenix, AZ 85023 Robert L. Walker 1501 W. Bell Road Phoenix, AZ 85023 Max Wilson 1325 Villa Nueva Litchfield Park, AZ 85340
-7- IN WITNESS WHEREOF, the undersigned have executed this Restated Articles of Incorporation for and on behalf of Turf Paradise, Inc., this 24th day of November, 1993. TURF PARADISE, INC. By_____________________________ Robert Walker, President By_____________________________ Michael P. Perikly, Secretary -8- ARTICLES OF MERGER OF HP ACQUISITION, INC., WITH AND INTO TURF PARADISE, INC. These Articles of Merger are delivered to the Arizona Corporation Commission for filing pursuant to Section 10-074, Arizona Revised Statutes, by HP Acquisition, Inc., an Arizona corporation ("Merging Corporation"), and Turf Paradise, Inc., an Arizona corporation ("Surviving Corporation"). FIRST: The Plan of Merger attached hereto as Exhibit 1 and incorporated herein by this reference was approved by the shareholders of both the Merging Corporation and the Surviving Corporation. SECOND: As to each such corporation, the number of shares outstanding and entitled to vote on such Plan of Merger are as follows:
Number of Shares Name of Outstanding and Corporation Entitled to Vote Class ----------- ---------------- ----- Turf Paradise, Inc. 2,596,438 Common No Par Value HP Acquisition, Inc. 1,000 Common $1.00 Par Value
-1- THIRD: As to each such corporation, the total number of shares voted for and against such Plan of Merger are as follows:
Name of Voted Voted Corporation Class For Against ----------- ----- ----- ------- Turf Paradise, Inc. Common 1,872,781 6,699 No Par Value HP Acquisition, Inc. Common 1,000 -0- $1.00 Par Value
FOURTH: Pursuant to the Plan of Merger, the Restated Articles of Incorporation of the Surviving Corporation are hereby amended as set forth in Exhibit 2 hereto. -2- IN WITNESS WHEREOF, the undersigned have executed this instrument for and on behalf of said corporations this ____ day of August, 1994. SURVIVING CORPORATION: TURF PARADISE, INC. By:_____________________________ Robert L. Walker, President By:_____________________________ Michael P. Perikly, Secretary MERGING CORPORATION: HP ACQUISITION, INC. By:_____________________________ G. Michael Finnigan, Vice President By:_____________________________ G. Michael Finnigan, Assistant Secretary -3- EXHIBIT 1 --------- PLAN OF MERGER PLAN OF MERGER dated as of March 30, 1994 by and among Hollywood Park, Inc., a Delaware corporation ("PARENT"), HP Acquisition, Inc., an Arizona corporation and a wholly-owned subsidiary of Parent ("SUB"), and Turf Paradise, Inc., an Arizona corporation ("TURF"). In consideration of the mutual representations, warranties and covenants contained herein, the parties agree as follows: ARTICLE I DEFINITIONS Except as otherwise provided herein, the capitalized terms set forth below shall have the following meanings: 1.1 "AGCL" shall mean the Arizona General Corporation Law. 1.2 "CLOSING" shall mean the closing of the transactions contemplated by this Plan of Merger and the Merger Agreement held pursuant to Section 1.3 of the Merger Agreement. 1.3 "EFFECTIVE TIME" shall mean the time at which the Articles of Merger in connection with the Merger are filed with the Arizona Corporation Commission. 1.4 "EFFECTIVE DATE" shall mean the date on which the Effective Time shall occur. 1.5 "MERGER AGREEMENT" shall mean that certain Agreement of Merger dated March 30, 1994, by and among Parent, Sub and Turf. 1.6 "PARENT COMMON STOCK" shall mean the common stock, par value $.10 per share, of Parent. 1.7 "STOCKHOLDERS MEETING" shall mean the meeting of the stockholders of Turf held pursuant to Section 4.4 of the Merger Agreement. 1.8 "SUB COMMON STOCK" shall mean the common stock, $1.00 par value per share, of Sub. 1.9 "SURVIVING CORPORATION" shall mean Turf as the corporation surviving the Merger. 1.10 "TURF COMMON STOCK" shall mean the common stock, no par value per share, of Turf. -4- ARTICLE II TERMS OF MERGER 2.1 The Merger. Subject to the terms and conditions of this Plan of ---------- Merger and the Merger Agreement, Sub shall be merged with and into Turf and the separate corporate existence of Sub shall cease (the "MERGER"). The Merger shall become effective at the Effective Time. 2.2 Conversion of Sub Common Stock. Each of the one thousand (1000) ------------------------------ shares of Sub Common Stock issued and outstanding immediately prior to the Effective Time shall, by virtue of the Merger, and without any action on the part of the holder thereof, be converted into one (1) share of validly issued, fully paid and nonassessable shares of common stock of the Surviving Corporation. 2.3 Conversion of Turf Common Stock. At the Effective Time, by virtue of ------------------------------- the Merger, and without any action on the part of Parent, Sub, Turf or any holder of Turf Common Stock: Subject to Sections 2.4 and 4.2 hereof, all shares of Turf Common Stock shall be cancelled and extinguished and shall be converted into the right to receive that number of shares of validly issued, fully paid and nonassessable Parent Common Stock as have a Fair Market Value (as defined below) of $13.00 per share of Turf Common Stock. For purposes of this Section 2.3, the Fair Market Value of a share of Parent Common Stock shall mean the weighted average price of all trades on the NASDAQ National Market System (as reported by NASDAQ) for the twenty trading days ending on the date immediately preceding the date of the Closing. 2.4 Dissenters Rights. Subject to the second sentence of this Section ----------------- 2.4, notwithstanding anything to the contrary in section 2.3, any shares of Turf Common Stock held by a holder who has demanded and perfected his right for appraisal of such shares in accordance with AGCL Section 10-081 and who, as of the Effective Time, has not effectively withdrawn or lost such right to appraisal ("DISSENTING SHARES"), shall not be converted into or represent a right to receive Parent Common Stock pursuant to section 2.3 and payment for fractional shares pursuant to section 4.2, but the holder thereof shall only be entitled to such rights as are granted under AGCL Section 10-081. Notwithstanding the foregoing, if any holder of shares of Turf Common Stock who demands appraisal of such shares under AGCL Section 10-081 shall effectively withdraw or lose (through failure to perfect or otherwise) such holder's right to appraisal, then, as of the later of the Effective Time or the occurrence of such event, such holder's shares shall automatically be converted into and represent only the right to receive Parent Common Stock pursuant to section 2.3 and payment for fractional shares pursuant to section 4.2, without interest thereon, upon -5- surrender of the certificate or certificates representing such shares. 2.5 Articles of Incorporation. The Articles of Incorporation of the ------------------------- Surviving Corporation shall be amended and restated at and as of the Effective Time to read as did the Articles of Incorporation of Sub immediately before the Effective Time, a copy of which is attached hereto as Exhibit A (except that the name of the Surviving Corporation shall remain unchanged). 2.6 By-laws. The By-laws of the Surviving Corporation shall be amended ------- and restated at and as of the Effective Time to read as did the By-laws of the Sub immediately before the Effective Time (except that the name of the Surviving Corporation shall remain unchanged). 2.7 Directors and Officers. The directors and officers of Sub at the ---------------------- Effective Time shall be the directors and officers of the Surviving Corporation and shall hold office from the Effective Time until their respective successors are duly elected or appointed and qualified in the manner provided in the By- laws of the Surviving Corporation, or as otherwise provided by law. ARTICLE III EFFECT OF MERGER Following the Merger, Turf will be the Surviving Corporation and will operate under the name "Turf Paradise, Inc.", and the separate corporate existence of Sub shall cease. The Merger shall have the further effects set forth in AGCL Section 10-076. ARTICLE IV DELIVERY OF CONSIDERATION 4.1 Surrender of Certificates by Turf Stockholders. As soon as ---------------------------------------------- practicable after the Effective Time, Parent shall make available, and each holder of Turf Common Stock immediately before the Effective Time (a "HOLDER") shall be entitled to receive, upon surrender to the exchange agent selected by Parent (the "EXCHANGE AGENT") of certificates representing such Holder's total ownership of Turf Common Stock, certificates representing the number of shares of Parent Common Stock as is determined pursuant to Section 2.3, taking into account any fractional shares payable in cash in accordance with Section 4.2. Such certificates representing Parent Common Stock shall be deemed to have been issued on the Effective Date. Until surrendered in accordance with the provisions of this Section 4.1, a certificate that immediately prior to the Effective Time represented shares of Turf Common -6- Stock shall represent for all purposes only the right to receive Parent Common Stock. At any time after six months following the Effective Time, Parent may act as Exchange Agent for all purposes under this Plan of Merger and the Merger Agreement. 4.2 Fractional Shares. Notwithstanding anything to the contrary in ----------------- Section 2.3, no fractional share of Parent Common Stock shall be issued. In lieu of issuing fractional shares, each holder of Turf common Stock (a "HOLDER") who would otherwise have been entitled to a fractional share of Parent Common Stock pursuant to Section 2.3 shall be entitled to receive upon surrender to the Exchange Agent pursuant to Section 4.1 of certificates representing such Holder's total ownership of Turf Common Stock cash (without interest) in an amount equal to such Holder's proportionate interest in the net proceeds from the sale or sales in the open market by the Exchange Agent, on behalf of all such Holders, of the aggregate fractional shares of Parent Common Stock that would otherwise have been issued pursuant to Section 2.3. As soon as practicable after the Effective Date, the Exchange Agent shall determine the number of "EXCESS SHARES", which shall be the excess of (i) the number of shares of Parent Common Stock delivered to the Exchange Agent by Parent over (ii) the aggregate number of full shares of Parent Common Stock to be issued to Holders, and as soon as practicable shall sell the Excess Shares at the prevailing prices on the NASDAQ National Market System in one or more sales. Such sales shall be in round lots to the extent practicable. Parent shall pay all commissions, transfer taxes and other out-of-pocket transaction costs incurred in connection with such sales. Until distribution to Holders, the net proceeds of such sales shall be held by the Exchange Agent in trust for such Holders. 4.3 Dividends; Transfer Taxes. No dividends or other distributions that ------------------------- are declared or made with respect to Parent Common Stock to be issued pursuant to Section 2.3 will be paid until the certificates representing the Turf Common Stock converted into such Parent Common Stock are surrendered pursuant to Section 4.1. Upon such surrender, there shall be paid to the person in whose name the certificates representing such Parent Common Stock shall be issued any dividends or other distributions that shall have become payable with respect to such Parent Common Stock in respect of a record date that is later than the Effective Date. In no event shall Parent be obligated to pay any interest with respect to such dividends or other distributions. In the event that any certificates for any shares of Parent Common Stock are to be issued in a name other than that in which the certificates representing shares of Turf Common Stock surrendered in exchange therefor are registered, it shall be a condition of such exchange that the person requesting such exchange shall pay to the Exchange Agent any transfer or other taxes required by reason of the issuance of certificates for such shares of -7- Parent Common Stock in a name other than that of the registered holder of the certificate surrendered, or shall establish to the satisfaction of the Exchange Agent that such tax has been paid or is not applicable. Notwithstanding the foregoing, neither the Exchange Agent nor any party to this Agreement shall be liable to a holder of shares of Turf Common Stock for any shares of Parent Common Stock or dividends thereon delivered to a public official pursuant to any applicable escheat law. 4.4 Closing of Transfer Books. After the Effective Time, there shall be ------------------------- no transfers on the stock transfer books of the Surviving Corporation of the shares of Turf Common Stock issued and outstanding immediately prior to the Effective Time. If, after the Effective Time, certificates representing shares of Turf Common Stock are presented to the Surviving Corporation, they shall be cancelled and exchanged for shares of Parent Common Stock, as provided in Section 4.1. ARTICLE V MISCELLANEOUS 5.1 Conditions Precedent. The respective obligations of each party under -------------------- this Plan of Merger shall be subject to the satisfaction, prior to or on the date of the Closing, of the conditions set forth in Articles VI and VII of the Merger Agreement, each of which conditions may be waived by the appropriate party. 5.2 Termination. The Merger Agreement may be terminated pursuant to ----------- Section 8.1 thereof, and this Plan of Merger shall terminate upon the termination of the Merger Agreement in accordance with Section 8.1 thereof. In the event of any such termination, all obligations of the parties under the Merger Agreement and this Plan of Merger shall terminate without liability of any part, to any other party, except (a) that the obligations set forth in Sections 2.18, 3.5, 10.4, 10.9, 10.13 and 10.14 of the Merger Agreement shall survive any such termination, and (b) for liability for out-of-pocket expenses for any intentional material misrepresentation set forth in the Merger Agreement. 5.3 Cooperation. Each party hereto agrees to execute any and all further ----------- documents and writings and perform such other reasonable actions, whether before or after the Closing, that may be or become necessary, proper or advisable to effectuate and carry out such transactions and to obtain all governmental consents (which shall not include any obligation to make payments other than required filing fees). 5.4 Amendments. To the extent permitted by law, this Plan of Merger may ---------- be amended by a written agreement signed by all of the parties hereto; provided, however, that the -8- provisions of Articles II and IV of this Plan of Merger relating to the consideration to be paid for the shares of Turf Common Stock shall not be amended after the Stockholders Meeting so as to decrease the amount or change the form of such consideration without the approval of such stockholders. HOLLYWOOD PARK, INC. By:_____________________________ G. Michael Finnigan Executive Vice President, Chief Financial Officer and President-Gaming and Entertainment Division HP ACQUISITION, INC. By:_____________________________ G. Michael Finnigan Vice President, Treasurer and Assistant Secretary TURF PARADISE, INC. By:_____________________________ Robert L. Walker President -9- EXHIBIT A --------- ARTICLES OF INCORPORATION OF HP ACQUISITION, INC. -------------------- The undersigned, having associated ourselves together for the purpose of forming a corporation under and by virtue of the laws of the State of Arizona, do hereby adopt the following original Articles of Incorporation: I Name ---- The name of the corporation is HP Acquisition, Inc. (the "Corporation"). II Incorporators ------------- The names and addresses of the incorporators are as follows: Alvin G. Segel, Esq. 1800 Avenue of the Stars, Suite 900 Los Angeles, California 90067 Ian C. Wiener, Esq. 1800 Avenue of the Stars, Suite 900 Los Angeles, California 90067 -10- III Purpose and Initial Business ---------------------------- The purpose for which the Corporation is organized is the transaction of any or all lawful business for which corporations may be incorporated under the laws of the State of Arizona, as they may be amended from time to time. The Corporation initially intends to conduct the business of owning and operating a horse racetrack facility. IV Authorized Capital ------------------ The aggregate authorized capital stock of the Corporation shall be One Thousand (1,000) shares of Common Stock, $1.00 Par Value. The Board of Directors of the Corporation may, from time to time, cause the Corporation to purchase its own shares to the extent of the unreserved and unrestricted earned capital surplus of the Corporation; and may, from time to time, distribute on a pro rata basis to its shareholders out of the capital surplus of the Corporation a portion of its assets, in cash or property. The Corporation may issue rights and options to purchase shares of stock of the Corporation to directors, officers or employees of the Corporation or any affiliate thereof, and no shareholder approval or ratification of any such issuance of rights and options shall be required. -11- V Board of Directors ------------------ The initial Board of Directors shall consist of three (3) directors. The names and addresses of those persons to serve as directors until the first annual meeting of shareholders or until their successors are elected and qualify are: Gordon Michael Finnigan c/o Hollywood Park, Inc. 1050 South Prairie Avenue Inglewood, California 90301 Randall Dee Hubbard c/o Hollywood Park, Inc. 1050 South Prairie Avenue Inglewood, California 90301 Donald M. Robbins c/o Hollywood Park, Inc. 1050 South Prairie Avenue Inglewood, California 90301 VI Statutory Agent --------------- The name and address of the initial statutory agent of the Corporation is The Prentice Hall Corporation System, Inc., 7037 North 11th Street, Phoenix, Arizona 85020. VII Indemnification of Directors ---------------------------- A director of this Corporation shall not be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director except for liability to the extent provided by applicable law -12- (i) for any breach of the director's duty of loyalty to the Corporation or its shareholders, (ii) for acts or omissions which are not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for authorizing the unlawful payment of a dividend or other distribution on the Corporation's capital stock or the unlawful purchase of its capital stock, (iv) for any transaction from which the director derived an improper personal benefit, and (v) for a violation of Section 10-041 of the Arizona General Corporation Law as the same exists or hereafter may be amended. If the Arizona General Corporation Law hereafter is amended to authorize the further elimination or limitation of the liability of directors, then the liability of a director of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Arizona General Corporation Law. Any repeal or modification of this Article shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification. IN WITNESS WHEREOF, we hereunto affix our signatures this 22nd day of March, 1994. ________________________________ Alvin G. Segel ________________________________ Ian C. Wiener -13- EXHIBIT 2 --------- AMENDMENT TO THE RESTATED ARTICLES OF INCORPORATION OF TURF PARADISE, INC. Effective this 11th day of August, 1994, and pursuant to that certain Plan of Merger dated as of March 30, 1994 by and among Hollywood Park, Inc., a Delaware corporation, HP Acquisition, Inc., an Arizona corporation and Turf Paradise, Inc., an Arizona corporation ("TURF PARADISE"), the Restated Articles of Incorporation of Turf Paradise (the "RESTATED ARTICLES") are hereby amended as follows: 1. Article II of the Restated Articles is hereby amended and restated in its entirety as follows: ARTICLE II. The purpose for which the corporation is organized is the transaction of any or all lawful business for which corporations may be incorporated under the laws of the State of Arizona, as they may be amended from time to time. The corporation initially intends to conduct the business of owning and operating a horse racetrack facility. 2. Article III of the Restated Articles is hereby amended and restated in its entirety as follows: ARTICLE III. The aggregate authorized capital stock of the corporation shall be One Thousand (1,000) shares of Common Stock, $1.00 Par Value. The Board of Directors of the corporation may, from time to time, cause the corporation to purchase its own shares to the extent of the unreserved and unrestricted earned capital surplus of the corporation; and may, from time to time, distribute on a pro rata basis to its shareholders out of the capital surplus of the corporation a portion of its assets, in cash or property. The corporation may issue rights and options to purchase shares of stock of the corporation to directors, officers or employees of the corporation or any affiliate thereof, and -14- no shareholder approval or ratification of any such issuance of rights and options shall be required. 3. Article V of the Restated Articles is hereby amended and restated in its entirety as follows: ARTICLE V. The initial Board of Directors of the corporation consisted of three (3) directors. The names and addresses of the initial directors of the corporation were:
NAME ADDRESS ---- ------- Walter R. Cluer 216 W. Turney Avenue Phoenix, Arizona C. Thad Mullen 902 W. Campus Dr. Phoenix, Arizona Charles L. Strouss 742 W. Monte Vista Rd. Phoenix, Arizona
4. Article IX of the Restated Articles is hereby amended and restated in its entirety as follows: ARTICLE IX A director of this corporation shall not be personally liable to the corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability to the extent provided by applicable law (i) for any breach of the director's duty of loyalty to the corporation or its shareholders, (ii) or acts or omissions which are not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for authorizing the unlawful payment of a dividend or other distribution on the corporation's capital stock or the unlawful purchase of its capital stock, (iv) for any transaction from which the director derived an improper personal benefit, and (v) for a violation of Section 10-041 of the Arizona General Corporation Law as the same exists or hereafter may be amended. If the Arizona General Corporation Law hereafter is amended to authorize the further -15- elimination or limitation of the liability of directors, then the liability of a director of the corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amended Arizona General Corporation Law. Any repeal or modification of this Article shall be prospective only and shall not adversely affect any limitation on the personal liability of a director of the corporation existing at the time of such repeal or modification. 5. Article X of the Restated Articles is hereby deleted in its entirety. 6. Article XI of the Restated Articles is hereby deleted in its entirety. -16- EX-3.14 11 BY-LAWS OF TURF PARADISE, INC. EXHIBIT 3.14 BYLAWS OF TURF PARADISE, INC. (FORMERLY: HP ACQUISITION, INC.) ARTICLE I. Offices. ------- Section 1. Organization. Turf Paradise, Inc. (formerly, HP ------------ Acquisition, Inc.) (the "Corporation") is a corporation organized under the General Corporation Law of the State of Arizona. Section 2. Offices. The Corporation may maintain a principal ------- office and other offices, either within or without the State of Arizona, as determined by the Board of Directors or as the business of the Corporation may require from time to time, where all business of the Corporation may be transacted. Section 3. Known Place of Business. The known place of business ----------------------- of the Corporation required to be maintained in the State of Arizona may be the office of its statutory agent. The address of the known place of business may be changed from time to time by the Board of Directors. ARTICLE II. Shareholders ------------ Section 1. Annual Meetings. The annual meetings of the --------------- shareholders of the Corporation shall be held on such date, at such time and at such place, either within or without the State of Arizona, as shall be designated from time to time by the Board of Directors, for the purpose of electing a Board of Directors for the ensuing year and for the transacting of such other business properly coming before said meeting. If the election of directors shall not be held on the day designated for any annual meeting of the shareholders, or at any adjournment thereof, the Board of Directors shall cause a special meeting of the shareholders to be held as soon thereafter as conveniently possible for the purpose of electing a Board of Directors for the ensuing year and for the transacting of such other business properly coming before said meeting. Section 2. Special Meetings. Special meetings of the ---------------- shareholders, for any purpose or purposes, unless otherwise prescribed by statute, may be called by the President or by a majority of the Board of Directors, and shall be called by the President at the request in writing of the holders of not fewer than one-tenth of all the shares entitled to vote at the meeting. Such request shall state the purpose or purposes of the proposed meeting. Section 3. Place of Meetings. The Board of Directors may designate ----------------- any place, either within or without the State of Arizona, as the place of meeting for any annual meeting or for any special meeting of the shareholders. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Arizona, as the place for the holding of such a meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the known place of business of the Corporation in the State of Arizona. Section 4. Notice of Meetings. Written notice stating the place, ------------------ day and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall, unless otherwise prescribed by statute, be delivered not less than ten (10) nor more than fifty (50) days before the date of the meeting, either personally or by mail, by an officer of the Corporation at the direction of the person or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail, postage prepaid, addressed to the shareholder at his or her address as it appears on the stock transfer books of the Corporation. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder entitled to vote at the meeting. Section 5. Fixing Date for Determination of Shareholders of ------------------------------------------------ Record. In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of shares, or for the purpose of any other lawful action, the Board of Directors of the Corporation may fix, in advance, a record date, which shall not be more than seventy (70) nor less than ten (10) days before the date of such meeting, nor more than seventy (70) days nor less than ten (10) days prior to the date on which any other action is to be taken. A determination of the shareholders of record entitled to notice of or to vote at a meeting of shareholders -2- shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting and further provided that the adjournment or adjournments do not exceed thirty (30) days in the aggregate. Section 6. Voting Record. The officer or agent having charge of ------------- the stock transfer books for shares of the Corporation shall make a complete record of the shareholders entitled to vote at each meeting of shareholders or any adjournment thereof, arranged in alphabetical order, with the address of and the number of shares held by each. Such record shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholders during the whole time of the meeting for the purposes thereof. Section 7. Quorum. Unless otherwise provided by the Corporation's ------ Articles of Incorporation, a majority of the outstanding shares of the Corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of shareholders. All shares represented and entitled to vote on any single subject matter which may be brought before the meeting shall be counted for the purposes of a quorum. Only those shares entitled to vote on a particular subject matter shall be counted for the purposes of voting on that subject matter. Business may be conducted once a quorum is present and may continue until adjournment of the meeting notwithstanding the withdrawal or temporary absence of sufficient shares to reduce the number present to less than a quorum. Unless otherwise required by law, the affirmative vote of the majority of shares represented at the meeting and entitled to vote on a subject matter shall be the act of the shareholders; provided, however, that if the shares then represented are less than required to constitute a quorum, the affirmative vote must be such as would constitute a majority if a quorum were present and, provided further, that the affirmative vote of the majority of the shares then present is sufficient in all cases to adjourn the meeting. Section 8. Proxies. At all meetings of shareholders, a ------- shareholder may vote in person or by proxy executed in writing by the shareholder or by his or her duly authorized attorney-in-fact and delivered to the Corporation's Secretary or other authorized officer before or at the time of its exercise. No proxy shall be valid after eleven (11) months from the date of its execution, unless otherwise provided in the proxy. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the shares itself or an interest in the Corporation generally. A proxy is not revoked by the -3- death or incapacity of the maker unless, before the vote is counted or a quorum is determined, written notice of the death or incapacity is given to the Corporation. Section 9. Voting of Shares by Certain Holders. Shares of its own ----------------------------------- stock belonging to the Corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held by the Corporation, shall neither be entitled to vote nor counted for quorum purposes; provided, however, that nothing herein shall be construed as limiting the right of the Corporation to vote its own stock held by it in a fiduciary capacity. Shares standing in the name of another corporation may be voted by such officer, agent or proxy as the bylaws of such other corporation may prescribe, or, in the absence of such provision, as the Board of Directors of such other corporation may determine. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee, other than a trustee in bankruptcy, may be voted by him either in person or by proxy, but no such trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver, trustee in bankruptcy, or assignee for the benefit of creditors may be voted by such representative, either in person or by proxy. Shares held by or under the control of such a receiver or trustee may be voted by such receiver or trustee, either in person or by proxy, without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver or trustee was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. If shares stand in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety or tenants by community property or otherwise, or if two or more persons have the same fiduciary relationship with respect to the same shares, unless the Corporation is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one votes, his act binds, (b) if more than one votes, the act of the majority so voting binds all, and (c) if more than one votes, but the vote is -4- evenly split on any one particular matter, each fraction may vote the shares in question proportionally. Shares standing in the name of a married woman but not also standing in the name of her husband with such a designation of the marital relationship on the certificate, may be voted and all rights incident thereto may be exercised in the same manner as if she were unmarried. Section 10. Voting Rights. Each outstanding share entitled to vote ------------- or fraction thereof shall be entitled to one vote or corresponding fraction thereof on each matter submitted to a vote at a meeting of shareholders, except as may be otherwise provided by law or in the Articles of Incorporation. At each election for directors every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares owned by him for as many persons as there are directors to be elected and for whose election he has a right to vote, or to cumulate his votes by giving one candidate as many votes as the number of such directors multiplied by the number of his shares shall equal, or by distributing such votes on the same principle among any number of such candidates. Section 11. Presiding Officer and Order of Business. Meetings of --------------------------------------- shareholders shall be presided over by the President, or, if he is not present or there is none, by a Vice President, or, if he is not present or there is none, by a person chosen by the Board of Directors; if no such person is present or has been chosen, the shareholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting and who are present in person or represented by proxy shall choose any person present to act as chairman of the meeting. The Secretary of the Corporation, or, if he is not present or there is none, an Assistant Secretary, or, if he is not present or there is none, a person chosen by the Board of Directors, shall act as secretary at meetings of shareholders; if no such person is present or has been chosen, the shareholders owning a majority of the shares of capital stock of the Corporation issued and outstanding and entitled to vote at the meeting who are present in person or represented by proxy shall choose any person present to act as secretary of the meeting. Section 12. Action by Shareholders Without a Meeting. Any action ---------------------------------------- required or permitted to be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof. Such consent shall -5- have the same effect as the unanimous vote of the shareholders. ARTICLE III. Directors --------- Section 1. Powers of Directors. The business and affairs of the ------------------- Corporation shall be managed by its Board of Directors except as may be reserved by law or the Articles of Incorporation to the shareholders. Section 2. Number, Tenure and Qualifications. The number of --------------------------------- directors of the Corporation shall be three (3). The number of persons to serve on the Board of Directors of the Corporation shall be fixed by the shareholders at the annual meeting of shareholders or at any special meeting called for that purpose, except that the Board of Directors shall always consist of not less than one (1) person nor more than five (5) persons; provided, further, that no decrease in the number of persons to serve on the Board of Directors shall have the effect of shortening the term of any incumbent Director. The Board of Directors, by the vote of the majority of the directors then in office, may, between annual meetings of the shareholders, increase the membership of the Board by not more than two (2) persons and by like vote, appoint qualified persons to fill the vacancies created thereby. Each director shall hold office until the next succeeding annual meeting. Notwithstanding the foregoing, each director shall hold office until his successor is elected and qualified, or until his earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation. The directors need not be residents of the State of Arizona or shareholders of the Corporation. Section 3. Vacancies. Any vacancy occurring in the Board of --------- Directors, including a vacancy created by an increase in the number of directors, may be filled by the affirmative vote of the majority of the remaining directors, although less than a quorum, or by a sole remaining director, and any director so chosen shall hold office until the next election of directors when his successor is elected and qualified. When one or more directors shall resign from the Board of Directors, effective at a future time, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office until the next election of directors when his successor is elected and qualified. Section 4. Removal. At a meeting of shareholders called expressly ------- for that purpose and by a vote of the holders of a majority of the shares then entitled to vote at an election of the directors, any director or the -6- entire Board of Directors may be removed, with or without cause. If less than the entire Board of Directors is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors. Section 5. Quorum. A majority of the number of directors then ------ serving shall constitute a quorum for the transaction of business at any meeting of the Board of Directors, but if less than such majority is present at a meeting, the majority of the directors present may adjourn the meeting from time to time without further notice. Section 6. Manner of Acting. The act of the majority of the ---------------- directors present at a meeting at which a quorum is present shall be the act of the Board of Directors. Section 7. Regular and Special Meetings. Meetings of the Board of ---------------------------- Directors, regular or special, may be held either within or without the State of Arizona, and may be held by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, their participation in such a meeting to constitute presence in person. Regular meetings of the Board of Directors may be held with or without notice as otherwise prescribed for special meetings hereinafter. Said regular meetings shall be held immediately after, and at the same place as, the annual meeting of shareholders. Special meetings of the Board of Directors may be called by or at the request of the President or a majority of the Board of Directors. Section 8. Notice. Notice of any special meeting shall be ------ delivered at least twenty-four (24) hours previous thereto by personal delivery or by telephone or telecopier, or at least two (2) days previous thereto in writing by mail or by overnight courier, to each director at his address as it appears in the records of the Corporation. If mailed, such notice shall be deemed to be delivered two (2) business days after deposit in the United States mail, so addressed, postage prepaid. If sent by telecopier, such notice shall be deemed to be delivered on the day and at the time of transmission. Notices sent by any other means shall be deemed delivered when received. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting. -7- Section 9. Action Without a Meeting. Any action required or ------------------------ permitted to be taken by the Board of Directors at a meeting, may be taken without a meeting if all directors consent thereto in writing specifically setting forth such action taken. Such consent shall have the same effect as an unanimous vote. Section 10. Compensation. By resolution of the Board of Directors, ------------ each director may be paid his expenses, if any, of attending at each meeting of the Board of Directors, and may be paid a stated salary as director or a fixed sum for attendance at each meeting of the Board of Directors or both. No such payment shall preclude any director from serving the Corporation in any other capacity such as an officer or specifically designated agent and receiving compensation and reimbursement of reasonable expenses for such other services. Section 11. Presumption of Assent. A director of the Corporation --------------------- who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the Secretary of the Corporation within ten (10) days after the adjournment of the meeting, or at the time of the next meeting, whichever is sooner. Such right to dissent shall not apply to a director who voted in favor of such action. ARTICLE IV. Officers -------- Section 1. Number. The officers of the Corporation shall be a ------ President, one or more Vice-Presidents (the number thereof to be determined by the Board of Directors), a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. Such other officers, assistant officers and agents as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person, except the two offices of President and Secretary. Section 2. Election and Term of Office. The officers of the --------------------------- Corporation shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently possible. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his earlier death, resignation, or removal. Section 3. Removal. Any officer or agent may be removed by the ------- Board of Directors whenever in its judgment the best interests of the Corporation will be served thereby, but -8- such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 4. Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification, or any other reason, may be filled by the Board of Directors for the unexpired portion of the term. Section 5. The President. The President shall be the chief ------------- executive officer of the Corporation and, subject to the direction of the Board of Directors, shall have general charge of the business, affairs, and property of the Corporation and general supervision over its other officers and agents. In general, he shall perform all duties incident to the office of President and shall see that all orders and resolutions of the Board of Directors are carried into effect. Unless otherwise prescribed by the Board of Directors, the President shall have full power and authority to attend, act, and vote on behalf of the Corporation at any meeting of the security holders of other corporations in which the Corporation may hold securities. At any such meeting, the President shall possess and may exercise any and all rights and powers incident to the ownership of such securities that the Corporation might have possessed and exercised if it had been present. The President shall further possess the power to endorse such securities for transfer on behalf of the Corporation by signing the name of the Corporation in his capacity as President. The Board of Directors may from time to time confer like powers upon any other person or persons. Section 6. Vice-Presidents. In the absence of the President or in --------------- the event of his death, inability or refusal to act, the Vice-President (or in the event there be more than one Vice-President, the Vice-Presidents in the order designated at the time of their election, or in the absence of any designation, then in the order of their election) shall perform the duties and exercise the powers of the President and when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. Any Vice-President shall have such powers and perform such duties as may be delegated to him by the Board of Directors or assigned to him by the President. Section 7. Secretary. The Secretary shall (a) keep the minutes of --------- all meetings and proceedings of the Board of Directors and of the shareholders, (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law, (c) have charge of all the corporate books and records except for such financial books and records as are the responsibility of the Treasurer, (d) have charge of the seal of the Corporation, (e) see that the -9- seal of the Corporation is affixed to all documents the execution of which on behalf of the Corporation under its seal is duly authorized, (f) keep a register of the post office address of each shareholder which shall be furnished to the Corporation and to the Secretary by such shareholder, (g) sign with the President, or a Vice-President, certificates for shares of the Corporation the issuance of which has been duly authorized by the Board of Directors, (h) have general charge of the stock transfer books of the Corporation, and (i) in general perform all of the duties as, from time to time, may be assigned to him by the President or Board of Directors. Section 8. Assistant Secretary. The Assistant Secretary, if any, ------------------- shall, in the absence or disability of the Secretary, perform the duties and exercise the power of the Secretary and perform such other duties as may be assigned by the Secretary, the President or the Board of Directors of the Corporation. Section 9. Treasurer. The Treasurer shall (a) have charge and --------- custody of and be responsible for all funds and securities of the Corporation, and all financial books, records and accounts of the Corporation, (b) receive and give receipts for monies due and payable to the Corporation from any source whatsoever, and deposit all such monies in the name of the Corporation in such banks, trust companies or other depositories as shall be selected by the Board of Directors, and (c) in general perform all of the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. Section 10. Salaries. The compensation of all officers shall be -------- fixed by resolution of the Board of Directors, except that the Board of Directors may authorize the President and/or the Vice-President(s) to fix any compensation of any officer not exceeding a total amount or amounts specified by the Board of Directors. No officer shall be prevented from receiving such compensation by virtue of his also serving as a director of the Corporation. Section 11. Reimbursement by Officers. Any payments made to an ------------------------- officer of the Corporation such as a salary, commission, bonus, interest, or rent, or entertainment expense incurred by him, which shall be disallowed in whole or in part as a deductible expense by the Internal Revenue Service, shall be reimbursed by such officer of the Corporation to the full extent of such disallowance. It shall be the duty of the Directors, as a Board, to enforce payment of each amount disallowed. In lieu of payment by the officer, subject to the determination of the Directors, proportionate amounts may be withheld from his future compensation payments until the amount owed to the Corporation has been recovered. -10- ARTICLE V. Contracts, Loans, Checks and Deposits ------------------------------------- Section 1. Contracts. The Board of Directors may authorize any --------- officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Corporation, and such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the ----- Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. Section 3. Checks and Other Instruments. All checks drafts or ---------------------------- other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Corporation shall be signed by such officer or officers, agent or agents of the Corporation and in such manner as shall from time to time be determined by resolution of the Board of Directors. Section 4. Deposits. All funds of the Corporation not otherwise -------- employed shall be deposited to the credit of the Corporation in such banks, trust companies or other depositories as the Board of Directors may select. ARTICLE VI. Certificates for Shares and Their Transfer ------------------------------------------ Section 1. Certificates for Shares. Certificates representing the ----------------------- shares of the Corporation shall be in such form as shall be determined by the Board of Directors. Such certificates shall be signed by the President or a Vice-President and by the secretary or an assistant secretary of the Corporation, and may be sealed with the seal of the Corporation or a facsimile thereof. The signatures of such officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered by a registrar, other than the Corporation itself or an employee of the Corporation. No certificate shall be issued for any share until such share is fully paid. Each certificate representing shares shall state upon the face thereof (a) that the Corporation is organized under the laws of the State of Arizona, (b) the name of the person to whom issued, (c) the number, class and designation of the series, if any, which the certificate represents, and (d) the par value of each share represented by the certificate or a statement that the shares are without par value. Any restriction on the right to transfer shares and any reservation of lien on the shares shall be noted on the -11- face or the back of the certificate by providing (a) a statement of the terms of such restriction or reservation, (b) a summary of the terms of such restriction or reservation and a statement that the Corporation will mail to the shareholder a copy of such restrictions or reservations without charge within five (5) days after receipt of written notice therefor, (c) if the restriction or reservation is contained in the Articles of Incorporation or Bylaws or an instrument in writing to which the Corporation is a party, a statement to that effect and a statement that the Corporation will mail to the shareholder a copy of such restriction or reservation without charge within five (5) days after receipt of written request therefor, or (d) if each such restriction or reservation is contained in an instrument in writing to which the Corporation is not a party, a statement to that effect. Each certificate for shares shall be consecutively numbered or otherwise identified. Section 2. Transfer of Shares. Shares of the stock of the ------------------ Corporation shall be transferred on the stock transfer books of the Corporation only by the holder thereof, or by his or her duly authorized representative, after furnishing suitable evidence of authority upon surrender of the certificates of a like number of shares properly endorsed. Section 3. Lost, Stolen, Mutilated or Destroyed Certificates. If ------------------------------------------------- the owner of a security notifies the Corporation that the certificate has been lost, stolen, mutilated or destroyed and requests a replacement certificate, the Secretary shall direct that a new certificate be issued upon receipt of an affidavit executed by the owner stating that the certificate has been lost, stolen, mutilated or destroyed. In addition the Secretary may, in his discretion, require the owner to execute an indemnity agreement, to provide the Corporation with a sufficient indemnity bond, and/or to provide such other security and assurances as the Secretary deems appropriate to protect the Corporation against losses arising out of the issuance of the replacement certificate. ARTICLE VII. Dividends --------- The Board of Directors may, from time to time, declare and the Corporation may pay dividends on the outstanding shares in the manner and upon the terms and conditions provided by law. ARTICLE VIII. Corporate Seal -------------- The Board of Directors may provide a corporate seal which, in such event, shall be circular in form, shall have -12- inscribed thereon the name of the Corporation, the year of its incorporation, and the state of incorporation. The seal shall be in the custody of the Secretary. ARTICLE IX. Waiver of Notice ---------------- Whenever any notice is required to be given to any shareholder or director of the Corporation, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. Attendance of a person at a meeting shall constitute a waiver of notice of such meeting, except when the person attends such meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. ARTICLE X. Amendment of Bylaws ------------------- The power to alter, amend or repeal the Bylaws or adopt new Bylaws, subject to repeal or change by action of the shareholders, shall be vested in the Board of Directors. ARTICLE XI. Fiscal Year ----------- The fiscal year of the Corporation shall be determined from time to time by the Board of Directors. ARTICLE XII. Affiliated Transactions and Interested Directors ------------------------------------------------ Section 1. Affiliated Transactions. No contract or other ----------------------- transaction between the Corporation and one or more of its directors, or between the Corporation and any other corporation, firm, association or other entity in which one or more of its directors are directors or officers, or are financially interested, shall be void or voidable because of such relationship or interest or because such director or directors are present at the meeting of the Board of Directors or a committee thereof which authorizes, approves or ratifies such transaction or because his or their votes are counted for such purpose, if: a. The fact of such relationship or interest is disclosed or known to the Board of Directors or committee which authorizes, approves or ratifies the contract or transaction by a vote or consent sufficient for the purpose without counting the votes or consents of such interested directors; or -13- b. The fact of such relationship or interest is disclosed or known to the stockholders entitled to vote thereon, and they authorize, approve or ratify such contract or transaction by vote or written consent; or c. The contract or transaction is fair and reasonable to the Corporation at the time the contract or transaction is authorized, approved or ratified in the light of circumstances known to those entitled to vote thereon at that time. Any person seeking to establish that a contract or transaction described in this Article is void or voidable for any reason set forth in this Article shall first prove, by a preponderance of the evidence, that the provisions of subparagraphs (a), (b) and (c) of this Section 1 are not applicable. Section 2. Determining Quorum. Common or interested directors may ------------------ be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee thereof which authorizes, approves or ratifies the contract or transaction. ARTICLE XIII. Miscellaneous ------------- Section 1. Indemnification of Directors and Officers. The ----------------------------------------- directors and officers of the Corporation shall be indemnified to the fullest extent permissible under Arizona law. -14- EX-3.15 12 CERTIFICATE OF INCORPORATION OF HP YAKAMA, INC. EXHIBIT 3.15 Certificate of Incorporation of HP Yakama, Inc. -------------- a Delaware corporation FIRST: The name of the corporation is HP Yakama, Inc. ----- SECOND: The address of the corporation's registered office in the ------ State of Delaware is 30 Old Rudnick Lane, in the City of Dover, County of Kent. The name of the corporation's registered agent at such address is CorpAmerica, Inc. THIRD: The purpose of the corporation is to engage in any lawful act ----- or activity for which corporations may be organized under the Delaware General Corporation Law. FOURTH: The total number of shares of stock which the corporation is ------ authorized to issue is three thousand (3,000) shares of common stock, having a par value of one cent ($0.01) per share. FIFTH: The business and affairs of the corporation shall be managed ----- by or under the direction of the board of directors, and the directors need not be elected by ballot unless required by the bylaws of the corporation. SIXTH: In furtherance and not in limitation of the powers conferred ----- by the laws of the State of Delaware, the board of directors is expressly authorized to make, amend and repeal the bylaws. SEVENTH: 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 Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of this provision shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or modification. -1- EIGHTH: The corporation reserves the right to amend and repeal any ------ provision contained in this Certificate of Incorporation in the manner from time to time prescribed by the laws of the State of Delaware and all rights herein conferred upon stockholders are granted subject to this reservation. NINTH: The incorporator is S. A. Morgan, whose mailing address is ----- 1800 Avenue of the Stars, Suite 900, Los Angeles, California 90067. I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a corporation under the laws of the State of Delaware do make, file and record this Certificate of Incorporation, and, accordingly, have hereto set my hand this 20th day of May, 1997. /s/ S. A. Morgan ______________________________________ S. A. Morgan, Incorporator -2- EX-3.16 13 BY-LAWS OF HP YAKAMA, INC. EXHIBIT 3.16 .............................................................. HP Yakama, Inc. BYLAWS .............................................................. TABLE OF CONTENTS -----------------
Page ---- ARTICLE I OFFICES....................................................... 1 Section 1. Registered Office............................. 1 Section 2. Other Offices................................. 1 ARTICLE II MEETINGS OF STOCKHOLDERS..................................... 1 Section 1. Place of Meetings............................. 1 Section 2. Annual Meetings............................... 1 Section 3. Special Meetings.............................. 1 Section 4. Notice of Meetings............................ 2 Section 5. Quorum; Adjournment........................... 2 Section 6. Proxies and Voting............................ 2 Section 7. Stock List.................................... 3 Section 8. Actions by Stockholders....................... 3 ARTICLE III BOARD OF DIRECTORS......................................... 3 Section 1. Duties and Powers............................. 3 Section 2. Number and Term of Office..................... 3 Section 3. Vacancies..................................... 4 Section 4. Meetings...................................... 4 Section 5. Quorum........................................ 4 Section 6. Actions of Board Without a Meeting............ 4 Section 7. Meetings by Means of Conference Telephone..... 4
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Page ---- Section 8. Committees..................................... 5 Section 9. Compensation................................... 5 Section 10. Removal........................................ 5 ARTICLE IV OFFICERS...................................................... 5 Section 1. General........................................ 5 Section 2. Election; Term of Office....................... 6 Section 3. Chairman of the Board.......................... 6 Section 4. President...................................... 6 Section 5. Vice President................................. 6 Section 6. Secretary...................................... 6 Section 7. Assistant Secretaries.......................... 7 Section 8. Treasurer...................................... 7 Section 9. Assistant Treasurers........................... 7 Section 10. Other Officers................................. 7 ARTICLE V STOCK......................................................... 8 Section 1. Form of Certificates........................... 8 Section 2. Signatures..................................... 8 Section 3. Lost Certificates.............................. 8 Section 4. Transfers...................................... 8 Section 5. Record Date.................................... 8 Section 6. Beneficial Owners.............................. 9 Section 7. Voting Securities Owned by the Corporation..... 9
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Page ---- ARTICLE VI NOTICES...................................................... 9 Section 1. Notices....................................... 9 Section 2. Waiver of Notice.............................. 9 ARTICLE VII GENERAL PROVISIONS.......................................... 10 Section 1. Dividends..................................... 10 Section 2. Disbursements................................. 10 Section 3. Corporation Seal.............................. 10 ARTICLE VIII DIRECTORS' LIABILITY AND INDEMNIFICATION................... 10 Section 1. Directors' Liability.......................... 10 Section 2. Right to Indemnification...................... 11 Section 3. Right of Claimant to Bring Suit............... 11 Section 4. Non-Exclusivity of Rights..................... 12 Section 5. Insurance and Trust Fund...................... 12 Section 6. Indemnification of Employees and Agents of the Corporation.................................. 12 Section 7. Amendment..................................... 12 ARTICLE IX AMENDMENTS................................................... 12
-iii- Bylaws of HP Yakama, Inc. --------------- (hereinafter called the "Corporation") ARTICLE I OFFICES ------- Section 1. Registered Office. The registered office of the Corporation ---------- ----------------- shall be in the City of Dover, County of Kent, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such ---------- ------------- other places both within and without the State of Delaware as the Board of Directors may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS ------------------------ Section 1. Place of Meetings. Meetings of the stockholders for the ---------- ----------------- election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be ---------- --------------- held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings. Special meetings of the stockholders may be ---------- ---------------- called by the Board of Directors, the Chairman of the Board, the President, or by the holders of shares entitled to cast not less than 10% of the votes at the meeting. Upon request in writing to the Chairman of the Board, the President, any Vice President or the Secretary by any person (other than the board) entitled to call a special meeting of stockholders, the officer forthwith shall cause notice to be given to the stockholders entitled to vote that a meeting will be held at a time requested by the person or persons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice. -1- Section 4. Notice of Meetings. Written notice of the place, date, and ---------- ------------------ time of all meetings of the stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation. Section 5. Quorum; Adjournment. At any meeting of the stockholders, the ---------- ------------------- holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in person or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law or the Certificate of Incorporation. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time without notice other than announcement at the meeting, until a quorum shall be present or represented. When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meeting if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity herewith. At any adjourned meeting, any business may be transacted which might have been transacted at the original meeting. Section 6. Proxies and Voting. At any meeting of the stockholders, every ---------- ------------------ stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting. Each stockholder shall have one vote for every share of stock entitled to vote which is registered in his name on the record date for the meeting, except as otherwise provided herein or required by law or the Certificate of Incorporation. All voting, including on the election of directors but excepting where otherwise provided herein or required by law or the Certificate of Incorporation, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or such stockholder's proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or the Certificate of Incorporation, all other matters shall be determined by a majority of the votes cast. -2- Section 7. Stock List. A complete list of stockholders entitled to vote ---------- ---------- at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares registered in such stockholder's name, shall be open to the examination of any such 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 stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Section 8. Actions by Stockholders. Unless otherwise provided in the ---------- ----------------------- Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III BOARD OF DIRECTORS ------------------ Section 1. Duties and Powers. The business of the Corporation shall be ---------- ----------------- managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. Section 2. Number and Term of Office. The Board of Directors shall ---------- ------------------------- consist of one (1) or more members. The number of directors shall be fixed and may be changed from time to time by resolution duly adopted by the Board of Directors or the stockholders, except as otherwise provided by law or the Certificate of Incorporation. Except as provided in Section 3 of this Article, directors shall be elected by the holders of record of a plurality of the votes cast at Annual Meetings of Stockholders, and each director so elected shall hold office until the next Annual Meeting and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation. Directors need not be stockholders. -3- Section 3. Vacancies. Vacancies and newly created directorships resulting ---------- --------- from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director or by the stockholders entitled to vote at any Annual or Special Meeting held in accordance with Article II, and the directors so chosen shall hold office until the next Annual or Special Meeting duly called for that purpose and until their successors are duly elected and qualified, or until their earlier resignation or removal. Section 4. Meetings. The Board of Directors of the Corporation may hold ---------- -------- meetings, both regular and special, either within or without the State of Delaware. The first meeting of each newly-elected Board of Directors shall be held immediately following the Annual Meeting of Stockholders and no notice of such meeting shall be necessary to be given the newly-elected directors in order legally to constitute the meeting, provided a quorum shall be present. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or a majority of the directors then in office. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by telephone or telegram on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances. Meetings may be held at any time without notice if all the directors are present or if all those not present waive such notice in accordance with Section 2 of Article VI of these Bylaws. Section 5. Quorum. Except as may be otherwise specifically provided by ---------- ------ law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the directors then in office 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. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 6. Actions of Board Without a Meeting. Unless otherwise provided ---------- ---------------------------------- by the Certificate of Incorporation or these Bylaws, 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 of Directors or 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 of Directors or committee. Section 7. Meetings by Means of Conference Telephone. Unless otherwise ---------- ----------------------------------------- provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all -4- persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting. Section 8. Committees. The Board of Directors may, by resolution passed ---------- ---------- by a majority of the directors then in office, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any committee, to the extent allowed by law and provided in the Bylaw or resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall keep regular minutes and report to the Board of Directors when required. Section 9. Compensation. Unless otherwise restricted by the Certificate ---------- ------------ of Incorporation or these Bylaws, 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 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. Section 10. Removal. Unless otherwise restricted by the Certificate of ----------- ------- Incorporation or Bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV OFFICERS -------- Section 1. General. The officers of the Corporation shall be appointed by ---------- ------- the Board of Directors and shall consist of a Chairman of the Board or a President, or both, a Secretary and a Treasurer (or a position with the duties and responsibilities of a Treasurer). The Board of Directors may also appoint one or more vice presidents, assistant secretaries or assistant treasurers, and such other officers as the Board of Directors, in its discretion, shall deem necessary or appropriate from time to time. Any -5- number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide. Section 2. Election; Term of Office. The Board of Directors at its first ---------- ------------------------ meeting held after each Annual Meeting of Stockholders shall elect a Chairman of the Board or a President, or both, a Secretary and a Treasurer (or a position with the duties and responsibilities of a Treasurer), and may also elect at that meeting or any other meeting, such other officers and agents as it shall deem necessary or appropriate. Each officer of the Corporation shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors together with the powers and duties customarily exercised by such officer; and each officer of the Corporation shall hold office until such officer's successor is elected and qualified or until such officer's earlier resignation or removal. Any officer may resign at any time upon written notice to the Corporation. The Board of Directors may at any time, with or without cause, by the affirmative vote of a majority of directors then in office, remove any officer. Section 3. Chairman of the Board. The Chairman of the Board, if there ---------- --------------------- shall be such an officer, shall be the chief executive officer of the Corporation. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors and shall have such other duties and powers as may be prescribed by the Board of Directors from time to time. Section 4. President. The President shall be the chief operating officer ---------- --------- of the Corporation, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall have and exercise such further powers and duties as may be specifically delegated to or vested in the President from time to time by these Bylaws or the Board of Directors. In the absence of the Chairman of the Board or in the event of his inability or refusal to act, or if the Board has not designated a Chairman, the President shall perform the duties of the Chairman of the Board, and when so acting, shall have all of the powers and be subject to all of the restrictions upon the Chairman of the Board. Section 5. Vice President. In the absence of the President or in the ---------- -------------- event of his inability or refusal to act, the Vice President (or in the event there be more than one vice president, the vice presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The vice presidents shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. Section 6. Secretary. The Secretary shall attend all meetings of the ---------- --------- Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be -6- 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 President. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. 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 or her signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 7. Assistant Secretaries. Except as may be otherwise provided in ---------- --------------------- these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, or the Secretary, and shall have the authority to perform all functions of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 8. Treasurer. The Treasurer shall be the Chief Financial Officer, ---------- --------- shall have the custody of the corporate funds and securities, shall keep complete and accurate accounts of all receipts and disbursements of the Corporation, and shall deposit all monies and other valuable effects of the Corporation in its name and to its credit in such banks and other depositories as may be designated from time to time by the Board of Directors. The Treasurer shall disburse the funds of the Corporation, taking proper vouchers and receipts for such disbursements, and shall render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall, when and if required by the Board of Directors, give and file with the Corporation a bond, in such form and amount and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of his or her duties as Treasurer. The Treasurer shall have such other powers and perform such other duties as the Board of Directors or the President shall from time to time prescribe. Section 9. Assistant Treasurers. Except as may be otherwise provided in ---------- -------------------- these Bylaws, Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, or the Treasurer, and shall have the authority to perform all functions of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. Section 10. Other Officers. Such other officers as the Board of Directors ----------- -------------- may choose shall perform such duties and have such powers as from time to time may be -7- assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers. ARTICLE V STOCK ----- Section 1. Form of Certificates. Every holder of stock in the Corporation ---------- -------------------- shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board or the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. Section 2. Signatures. Any or all the signatures on the certificate may ---------- ---------- be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new ---------- ----------------- certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner's legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers. Stock of the Corporation shall be transferable in ---------- --------- the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person's attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. Section 5. Record Date. In order that the Corporation may determine the ---------- ----------- stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more -8- than sixty (60) days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjourn ment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 6. Beneficial Owners. The Corporation shall be entitled to ---------- ----------------- recognize the exclusive right of a person registered on its books as the owner of shares to receive divi dends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of 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 other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. Section 7. Voting Securities Owned by the Corporation. Powers of ---------- ------------------------------------------ attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board, the President, any Vice President or the Secretary and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE VI NOTICES ------- Section 1. Notices. Whenever written notice is required by law, the ---------- ------- Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person's address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by telegram, telex or cable and such notice shall be deemed to be given at the time of receipt thereof if given personally or at the time of transmission thereof if given by telegram, telex or cable. Section 2. Waiver of Notice. Whenever any notice is required by law, the ---------- ---------------- Certificate of Incorporation or these Bylaws to be given to any director, member or a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice. -9- ARTICLE VII GENERAL PROVISIONS ------------------ Section 1. Dividends. Dividends upon the capital stock of the ---------- --------- Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting or by any Committee of the Board of Directors having such authority at any meeting thereof, and may be paid in cash, in property, in shares of the capital stock or in any combination thereof. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. Section 2. Disbursements. All notes, checks, drafts and orders for the ---------- ------------- payment of money issued by the Corporation shall be signed in the name of the Corporation by such officers or such other persons as the Board of Directors may from time to time designate. Section 3. Corporation Seal. The corporate seal, if the Corporation shall ---------- ---------------- have a corporate seal, shall have inscribed thereon the name of the Corporation, the year of its organization and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII DIRECTORS' LIABILITY AND INDEMNIFICATION ---------------------------------------- Section 1. Directors' Liability. 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 Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. If the Delaware General Corporation Law is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Corporation shall be eliminated or limited to the fullest extent permitted by the Delaware General Corporation Law, as so amended. Any repeal or modification of this provision shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification. This Section 1 is also contained in Article SEVENTH of the Corporation's Cer tificate of Incorporation, and accordingly, may be altered, amended or repealed only to the extent and at the time such Certificate Article is altered, amended or repealed. -10- Section 2. 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 (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 Delaware General Corporation Law (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 or otherwise. Section 3. Right of Claimant to Bring Suit. If a claim under Section 2 of ---------- ------------------------------- 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 Delaware General Corporation Law (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 Delaware General Corporation Law (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. -11- Section 4. 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 Delaware General Corporation Law 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 5. 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. Section 6. 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 Article VIII or otherwise with respect to the indemnification and advancement of expenses of directors and officers of the Corporation. Section 7. Amendment. Any repeal or modification of this Article VIII ---------- --------- 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 IX AMENDMENTS ---------- Except as otherwise specifically stated within an Article to be altered, amended or repealed, these Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any meeting of the Board of Directors or of the stockholders, provided notice of the proposed change was given in the notice of the meeting. -12- The undersigned, as the Incorporator of HP Yakama, Inc. hereby adopts the foregoing Bylaws as the Bylaws of said corporation. Dated as of May 20, 1997. ________________________________ S. A. Morgan, Incorporator The undersigned, constituting the Board of Directors of HP Yakama, Inc. hereby adopt the foregoing Bylaws as the Bylaws of said corporation. Dated as of May 20, 1997. ________________________________ R. D. Hubbard, Director ________________________________ G. Michael Finnigan, Director ________________________________ Bruce Rimbo, Director THIS IS TO CERTIFY: That I am the duly elected, qualified and acting Secretary of HP Yakama, Inc. and that the foregoing Bylaws were adopted as the Bylaws of said corporation as of the 20th day of May, 1997, by the Board of Directors of said corporation. Dated as of May 20, 1997. ________________________________ Bruce Rimbo, Secretary -13- EX-3.17 14 CERTIFICATE OF INCORPORATION OF BOOMTOWN, INC. EXHIBIT 3.17 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF BOOMTOWN, INC. ARTICLE FIRST ------------- The name of the Corporation is Boomtown, Inc. ARTICLE SECOND -------------- The address of the Corporation's registered office in the State of Delaware is 30 Old Rudnick Lane, in the City of Dover, County of Kent. The name of its registered agent at such address is CorpAmerica, Inc. ARTICLE THIRD ------------- 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. ARTICLE FOURTH -------------- 4.1. AUTHORIZED SHARES. The Corporation is authorized to issue one class ----------------- of shares to be designated Common Stock. The total number of shares of Common Stock the Corporation shall have authority to issue is Eleven Million (11,000,000), with par value of $.01 per share. 4.2. COMMON STOCK ------------ 1. Voting Rights. Except as otherwise required by law or expressly ------------- provided herein, each share of Common Stock shall entitle the holder thereof to one vote on each matter submitted to a vote of the stockholders of the Corporation. 2. Dividend Rights. Subject to provisions of law, the holders of --------------- Common Stock shall be entitled to receive dividends at such times and in such amounts as may be determined by the Board of Directors of the Corporation. 3. Liquidation Rights. In the event of any liquidation, dissolution ------------------ or winding up of the Corporation, whether voluntary or involuntary, after payment or provision for payment of the debts and other liabilities of the Corporation, the holders of Common Stock shall be entitled to share ratably in the remaining assets of the Corporation. ARTICLE FIFTH ------------- The Corporation is to have perpetual existence. ARTICLE SIXTH ------------- In furtherance and not in limitation of the powers conferred by statute, the Board of Directors of the Corporation is expressly authorized to make the Bylaws of the Corporation and, to the extent permitted therein, to alter or repeal such Bylaws. ARTICLE SEVENTH --------------- Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. Election of directors need not be by written ballot unless the Bylaws of the Corporation so provide. ARTICLE EIGHTH -------------- To the fullest extent permitted by Delaware General Corporation Law as the same exists or may hereafter be amended, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. This ARTICLE EIGHTH shall not be amended, -------------- repealed or otherwise modified for a period of six years from the effective date of the merger of HP Acquisition, Inc., a Delaware corporation, with and into the Corporation, in any manner that would adversely affect any rights of indemnification of persons covered hereby on such effective date. Any repeal or modification of this ARTICLE EIGHTH shall not adversely affect any right or -------------- protection of a director of the Corporation existing at the time of such repeal or modification. ARTICLE NINTH ------------- Except as expressly provided herein, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation in the manner now or hereafter prescribed herein and by the laws of the State of Delaware, and all rights conferred upon stockholders are granted subject to this reservation. -2- State of Delaware Office of the Secretary of State PAGE 1 ___________________________ 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 "BOOMTOWN, INC.", FILED IN THIS OFFICE ON THE FIRST DAY OF JULY, A.D. 1997, AT 9 O'CLOCK A.M. ___________________________________ Edward J. Freel, Secretary of State 2129753 8100 AUTHENTICATION: 8585976 971252630 DATE: 07-31-97 CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF BOOMTOWN, INC. -------------- a Delaware corporation Boomtown, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows: 1. That Section 4.1 of ARTICLE FOURTH of the Amended and Restated -------------- Certificate of Incorporation of this corporation is amended to read in full as follows: "The Corporation is authorized to issue one class of shares to be designated Common Stock. The total number of shares of Common Stock the Corporation shall have authority to issue is Three Thousand (3,000), with par value of $.01 per share. Upon effectiveness of this amendment to the Amended and Restated Certificate of Incorporation, each Nine Hundred Fifty Thousand (950,000) shares of Common Stock issued and outstanding immediately prior thereto, shall be automatically combined into one (1) share of Common Stock. No fractional shares shall be issued to the sole stockholder in connection with such reverse stock split, but in lieu thereof the total amount paid to the sole stockholder for fractional shares, if any, shall be an aggregate of $10 in cash." 2. That the foregoing amendment has been duly adopted in accordance with the provisions of Section 242 of the Delaware General Corporation Law, by approval of the Board of Directors of the corporation and by the affirmative vote of the holders of at least a majority of the outstanding stock of the corporation entitled to vote. IN WITNESS WHEREOF, Boomtown, Inc. has caused this Certificate of Amendment of Amended and Restated Certificate of Incorporation to be duly executed by its authorized officer this day of July, 1997. Boomtown, Inc. By:________________________ Timothy J. Parrott Chairman of the Board and Chief Executive Officer EX-3.18 15 BY-LAWS OF BOOMTOWN EXHIBIT 3.18 .............................................................. BOOMTOWN, INC. BYLAWS EFFECTIVE JUNE 30, 1997 .............................................................. TABLE OF CONTENTS -----------------
Page ---- ARTICLE I OFFICES....................................................... 1 Section 1. Registered Office................................ 1 Section 2. Other Offices.................................... 1 ARTICLE II MEETINGS OF STOCKHOLDERS..................................... 1 Section 1. Place of Meetings................................ 1 Section 2. Annual Meetings.................................. 1 Section 3. Special Meetings................................. 1 Section 4. Notice of Meetings............................... 2 Section 5. Quorum; Adjournment.............................. 2 Section 6. Proxies and Voting............................... 2 Section 7. Stock List....................................... 3 Section 8. Actions by Stockholders.......................... 3 ARTICLE III BOARD OF DIRECTORS.......................................... 3 Section 1. Duties and Powers................................ 3 Section 2. Number and Term of Office........................ 4 Section 3. Vacancies........................................ 4 Section 4. Meetings......................................... 4 Section 5. Quorum........................................... 5 Section 6. Actions of Board Without a Meeting............... 5 Section 7. Meetings by Means of Conference Telephone........ 5 Section 8. Committees....................................... 5 Section 9. Compensation..................................... 6 Section 10. Removal......................................... 6
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Page ---- ARTICLE IV OFFICERS...................................................... 6 Section 1. General........................................... 6 Section 2. Election; Term of Office.......................... 6 Section 3. Chairman of the Board............................. 7 Section 4. President......................................... 7 Section 5. Vice President.................................... 7 Section 6. Secretary......................................... 7 Section 7. Assistant Secretaries............................. 8 Section 8. Treasurer......................................... 8 Section 9. Assistant Treasurers.............................. 8 Section 10. Other Officers................................... 8 ARTICLE V STOCK.......................................................... 9 Section 1. Form of Certificates.............................. 9 Section 2. Signatures........................................ 9 Section 3. Lost Certificates................................. 9 Section 4. Transfers......................................... 9 Section 5. Record Date....................................... 9 Section 6. Beneficial Owners................................. 10 Section 7. Voting Securities Owned by the Corporation........ 10 ARTICLE VI NOTICES....................................................... 10 Section 1. Notices........................................... 10 Section 2. Waiver of Notice.................................. 11 ARTICLE VII GENERAL PROVISIONS........................................... 11 Section 1. Dividends......................................... 11 Section 2. Disbursements..................................... 11 Section 3. Corporation Seal.................................. 11
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Page ---- ARTICLE VIII DIRECTORS' LIABILITY AND INDEMNIFICATION.................................................. 11 Section 1. Directors' Liability............................. 11 Section 2. Nature of Indemnity.............................. 12 Section 3. Procedure for Indemnification of Directors and Officers....................................... 12 Section 4. Article Not Exclusive............................ 13 Section 5. Insurance........................................ 13 Section 6. Expenses......................................... 13 Section 7. Employees and Agents............................. 14 Section 8. Contract Rights.................................. 14 Section 9. Merger or Consolidation.......................... 14 Section 10. Amendments...................................... 14 ARTICLE IX AMENDMENTS................................................... 15
BYLAWS OF BOOMTOWN, INC. -------------- (hereinafter called the "Corporation") ARTICLE I OFFICES ------- Section 1. Registered Office. The registered office of the Corporation ---------- ----------------- shall be in the City of Dover, County of Kent, State of Delaware. Section 2. Other Offices. The Corporation may also have offices at such ---------- ------------- other places both within and without the State of Delaware as the Board of Directors may from time to time determine. ARTICLE II MEETINGS OF STOCKHOLDERS ------------------------ Section 1. Place of Meetings. Meetings of the stock holders for the ---------- ----------------- election of directors or for any other purpose shall be held at such time and place, either within or without the State of Delaware, as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual Meetings. The Annual Meetings of Stockholders shall be ---------- --------------- held on such date and at such time as shall be designated from time to time by the Board of Direc tors and stated in the notice of the meeting, at which meet ings the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. Section 3. Special Meetings. Special meetings of the stockholders may be ---------- ---------------- called by the Board of Directors, the Chairman of the Board, the President, or by the holders of shares entitled to cast not less than 10% of the votes at the meeting. Upon request in writing to the Chairman of the Board, the President, any Vice President or the Secretary by any person (other than the board) entitled to call a special meeting of stockholders, the officer forthwith shall cause notice to be given to the stockholders entitled to vote that a meeting will be held at a time requested by the person or per sons calling the meeting, not less than thirty-five (35) nor more than sixty (60) days after the receipt of the request. If the notice is not given within 20 days after receipt of the request, the persons entitled to call the meeting may give the notice. -1- Section 4. Notice of Meetings. Written notice of the place, date, and ---------- ------------------ time of all meetings of the stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date on which the meeting is to be held, to each stockholder entitled to vote at such meeting, except as otherwise provided herein or as required from time to time by the Delaware General Corporation Law or the Certificate of Incorporation. Section 5. Quorum; Adjournment. At any meeting of the stockholders, the ---------- ------------------- holders of a majority of all of the shares of the stock entitled to vote at the meeting, present in per son or by proxy, shall constitute a quorum for all purposes, unless or except to the extent that the presence of a larger number may be required by law or the Certificate of Incorpora tion. If a quorum shall fail to attend any meeting, the chairman of the meeting or the holders of a majority of the shares of stock entitled to vote who are present, in person or by proxy, may adjourn the meeting to another place, date, or time without notice other than announcement at the meeting, until a quorum shall be present or represented. When a meeting is adjourned to another place, date or time, written notice need not be given of the adjourned meet ing if the place, date and time thereof are announced at the meeting at which the adjournment is taken; provided, however, that if the date of any adjourned meeting is more than thirty (30) days after the date for which the meeting was originally noticed, or if a new record date is fixed for the adjourned meeting, written notice of the place, date, and time of the adjourned meeting shall be given in conformity here with. At any adjourned meeting, any business may be trans acted which might have been transacted at the original meeting. Section 6. Proxies and Voting. At any meeting of the stockholders, every ---------- ------------------ stockholder entitled to vote may vote in person or by proxy authorized by an instrument in writing filed in accordance with the procedure established for the meeting. Each stockholder shall have one vote for every share of stock entitled to vote which is registered in his name on the record date for the meeting, except as otherwise provided herein or required by law or the Certificate of Incorporation. All voting, including on the election of directors but excepting where otherwise provided herein or required by law or the Certificate of Incorporation, may be by a voice vote; provided, however, that upon demand therefor by a stockholder entitled to vote or such stockholder's proxy, a stock vote shall be taken. Every stock vote shall be taken by ballots, each of which shall state the name of the stockholder or proxy voting and such other information as may be required under the -2- procedure established for the meeting. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting. All elections shall be determined by a plurality of the votes cast, and except as otherwise required by law or the Certificate of Incorporation, all other matters shall be determined by a majority of the votes cast. Section 7. Stock List. A complete list of stockholders entitled to vote ---------- ---------- at any meeting of stockholders, arranged in alphabetical order for each class of stock and showing the address of each such stockholder and the number of shares reg istered in such stockholder's name, shall be open to the exam ination of any such 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 stock list shall also be kept at the place of the meeting during the whole time thereof and shall be open to the examination of any such stockholder who is present. This list shall presumptively determine the identity of the stockholders entitled to vote at the meeting and the number of shares held by each of them. Section 8. Actions by Stockholders. Unless otherwise provided in the ---------- ----------------------- Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and with out a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writ ing. ARTICLE III BOARD OF DIRECTORS ------------------ Section 1. Duties and Powers. The business of the Cor poration shall be ---------- ----------------- managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation or by these -3- Bylaws directed or required to be exercised or done by the stockholders. Section 2. Number and Term of Office. The Board of Directors shall ---------- ------------------------- consist of one (1) or more members. The num ber of directors shall be fixed and may be changed from time to time by resolution duly adopted by the Board of Directors or the shareholders, except as otherwise provided by law or the Certificate of Incorporation. Until otherwise resolved by the Board of Directors, the number of directors shall be three (3). Except as provided in Section 3 of this Article, directors shall be elected by the holders of record of a plurality of the votes cast at Annual Meetings of Stockholders, and each director so elected shall hold office until the next Annual Meeting and until his or her successor is duly elected and qualified, or until his or her earlier resignation or removal. Any director may resign at any time upon written notice to the Corporation. Directors need not be stockholders. Section 3. Vacancies. Vacancies and newly created directorships resulting ---------- --------- from any increase in the authorized number of directors may be filled by a majority of the direc tors then in office, although less than a quorum, or by a sole remaining director or by the stockholders entitled to vote at any Annual or Special Meeting held in accordance with Article II, and the directors so chosen shall hold office until the next Annual or Special Meeting duly called for that purpose and until their successors are duly elected and qualified, or until their earlier resignation or removal. Section 4. Meetings. The Board of Directors of the Cor poration may hold ---------- -------- meetings, both regular and special, either within or without the State of Delaware. The first meeting of each newly-elected Board of Directors shall be held immedi ately following the Annual Meeting of Stockholders and no notice of such meeting shall be necessary to be given the newly-elected directors in order legally to constitute the meeting, provided a quorum shall be present. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman of the Board, the President or a majority of the directors then in office. Notice thereof stating the place, date and hour of the meeting shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, by tel ephone or telegram on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circum stances. Meetings may be held at any time without notice if all the directors are present or if all those not present waive such notice in accordance with Section 2 of Article VI of these Bylaws. -4- Section 5. Quorum. Except as may be otherwise specifi cally provided by ---------- ------ law, the Certificate of Incorporation or these Bylaws, at all meetings of the Board of Directors, a majority of the directors then in office shall constitute a quorum for the transaction of business and the act of a major ity of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meet ing from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 6. Actions of Board Without a Meeting. Unless otherwise provided ---------- ---------------------------------- by the Certificate of Incorporation or these Bylaws, 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 of Directors or 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 of Directors or committee. Section 7. Meetings by Means of Conference Telephone. Unless otherwise ---------- ----------------------------------------- provided by the Certificate of Incorporation or these Bylaws, members of the Board of Directors of the Cor poration, or any committee designated by the Board of Direc tors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or simi lar communications equipment by means of which all persons participating in the meeting can hear each other, and partici pation in a meeting pursuant to this Section 7 shall consti tute presence in person at such meeting. Section 8. Committees. The Board of Directors may, by resolution passed ---------- ---------- by a majority of the directors then in office, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any committee, to the extent allowed by law and provided in the Bylaw or resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the man agement of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it. Each committee shall keep regu- -5- lar minutes and report to the Board of Directors when required. Section 9. Compensation. Unless otherwise restricted by the Certificate ---------- ------------ of Incorporation or these Bylaws, 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 director. No such payment shall preclude any director from serving the Corpora tion in any other capacity and receiving compensation there for. Members of special or standing committees may be allowed like compensation for attending committee meetings. Section 10. Removal. Unless otherwise restricted by the Certificate of ----------- ------- Incorporation or Bylaws, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares entitled to vote at an election of directors. ARTICLE IV OFFICERS -------- Section 1. General. The officers of the Corporation shall be appointed by ---------- ------- the Board of Directors and shall consist of a Chairman of the Board or a President, or both, a Secre tary and a Treasurer (or a position with the duties and responsibilities of a Treasurer). The Board of Directors may also appoint one or more vice presidents, assistant secretaries or assistant treasurers, and such other officers as the Board of Directors, in its discretion, shall deem necessary or appropriate from time to time. Any number of offices may be held by the same person, unless the Certificate of Incorporation or these Bylaws otherwise provide. Section 2. Election; Term of Office. The Board of Directors at its first ---------- ------------------------ meeting held after each Annual Meeting of Stockholders shall elect a Chairman of the Board or a Pres ident, or both, a Secretary and a Treasurer (or a position with the duties and responsibilities of a Treasurer), and may also elect at that meeting or any other meeting, such other officers and agents as it shall deem necessary or appropriate. Each officer of the Corporation shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors together with the powers and duties customarily exercised by such officer; and each officer of the Corporation shall hold office until such officer's successor is elected and qualified or until such officer's earlier res ignation or removal. Any officer may resign at any time upon written notice to the Corporation. The Board of Directors may at any time, with or without cause, by the affirmative vote of a majority of directors then in office, remove any officer. -6- Section 3. Chairman of the Board. The Chairman of the Board, if there ---------- --------------------- shall be such an officer, shall be the chief executive officer of the Corporation. The Chairman of the Board shall preside at all meetings of the stockholders and the Board of Directors and shall have such other duties and powers as may be prescribed by the Board of Directors from time to time. Section 4. President. The President shall be the chief operating officer ---------- --------- of the Corporation, shall have general and active management of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. The President shall have and exer cise such further powers and duties as may be specifically delegated to or vested in the President from time to time by these Bylaws or the Board of Directors. In the absence of the Chairman of the Board or in the event of his inability or refusal to act, or if the Board has not designated a Chairman, the President shall perform the duties of the Chairman of the Board, and when so acting, shall have all of the powers and be subject to all of the restrictions upon the Chairman of the Board. Section 5. Vice President. In the absence of the Presi dent or in the ---------- -------------- event of his inability or refusal to act, the Vice President (or in the event there be more than one vice president, the vice presidents in the order designated by the directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the Pres ident, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The vice presidents shall perform such other duties and have such other powers as the Board of Directors or the President may from time to time prescribe. Section 6. Secretary. The Secretary shall attend all meetings of the ---------- --------- Board of Directors and all meetings of stock holders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary 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 President. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meet ings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corpora tion and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such -7- Assistant Secretary. The Board of Directors may give general authority to any other officer to affix the seal of the Corpo ration and to attest the affixing by his or her signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by law to be kept or filed are properly kept or filed, as the case may be. Section 7. Assistant Secretaries. Except as may be oth erwise provided in ---------- --------------------- these Bylaws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, or the Secretary, and shall have the authority to perform all functions of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary. Section 8. Treasurer. The Treasurer shall be the Chief Financial Officer, ---------- --------- shall have the custody of the corporate funds and securities, shall keep complete and accurate accounts of all receipts and disbursements of the Corporation, and shall deposit all monies and other valuable effects of the Corporation in its name and to its credit in such banks and other depositories as may be designated from time to time by the Board of Directors. The Treasurer shall disburse the funds of the Corporation, taking proper vouchers and receipts for such disbursements, and shall render to the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his or her transac tions as Treasurer and of the financial condition of the Cor poration. The Treasurer shall, when and if required by the Board of Directors, give and file with the Corporation a bond, in such form and amount and with such surety or sureties as shall be satisfactory to the Board of Directors, for the faithful performance of his or her duties as Treasurer. The Treasurer shall have such other powers and perform such other duties as the Board of Directors or the President shall from time to time prescribe. Section 9. Assistant Treasurers. Except as may be oth erwise provided in ---------- -------------------- these Bylaws, Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, or the Treasurer, and shall have the authority to perform all functions of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. Section 10. Other Officers. Such other officers as the Board of Directors ----------- -------------- may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may dele gate to any other officer of the Corporation the power to -8- choose such other officers and to prescribe their respective duties and powers. ARTICLE V STOCK ----- Section 1. Form of Certificates. Every holder of stock in the Corporation ---------- -------------------- shall be entitled to have a certificate signed, in the name of the Corporation (i) by the Chairman of the Board or the President or a Vice President and (ii) by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares owned by such holder in the Corporation. Section 2. Signatures. Any or all the signatures on the certificate may ---------- ---------- be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certifi cate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent or registrar at the date of issue. Section 3. Lost Certificates. The Board of Directors may direct a new ---------- ----------------- certificate to be issued in place of any cer tificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affida vit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or such owner's legal representative, to adver tise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. Section 4. Transfers. Stock of the Corporation shall be transferable in ---------- --------- the manner prescribed by law and in these Bylaws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by such person's attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be cancelled before a new certificate shall be issued. Section 5. Record Date. In order that the Corporation may determine the ---------- ----------- stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or -9- exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty (60) days nor less than ten (10) days before the date of such meeting, nor more than sixty (60) days prior to any other action. A determina tion of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjourn ment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. Section 6. Beneficial Owners. The Corporation shall be entitled to ---------- ----------------- recognize the exclusive right of a person regis tered on its books as the owner of shares to receive divi dends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of 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 other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law. Section 7. Voting Securities Owned by the Corporation. Powers of ---------- ------------------------------------------ attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the Chairman of the Board, the Presi dent, any Vice President or the Secretary and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon any other person or persons. ARTICLE VI NOTICES ------- Section 1. Notices. Whenever written notice is required by law, the ---------- ------- Certificate of Incorporation or these Bylaws, to be given to any director, member of a committee or stock holder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at such person's address as it appears on the records of the Corpora tion, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be depos ited in the United States mail. Written notice may also be given personally or by telegram, telex or cable and such notice shall be deemed to be given at the time of receipt thereof if given personally or at the time of transmission thereof if given by telegram, telex or cable. -10- Section 2. Waiver of Notice. Whenever any notice is required by law, the ---------- ---------------- Certificate of Incorporation or these Bylaws to be given to any director, member or a committee or stockholder, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice. ARTICLE VII GENERAL PROVISIONS ------------------ Section 1. Dividends. Dividends upon the capital stock of the ---------- --------- Corporation, subject to the provisions of the Certifi cate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting or by any Commit tee of the Board of Directors having such authority at any meeting thereof, and may be paid in cash, in property, in shares of the capital stock or in any combination thereof. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve. Section 2. Disbursements. All notes, checks, drafts and orders for the ---------- ------------- payment of money issued by the Corporation shall be signed in the name of the Corporation by such offi cers or such other persons as the Board of Directors may from time to time designate. Section 3. Corporation Seal. The corporate seal, if the Corporation shall ---------- ---------------- have a corporate seal, shall have inscribed thereon the name of the Corporation, the year of its organiza tion and the words "Corporate Seal, Delaware". The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise. ARTICLE VIII DIRECTORS' LIABILITY AND INDEMNIFICATION ---------------------------------------- Section 1. Directors' Liability. No director of the Corporation shall be ---------- -------------------- personally liable to the Corporation or its stockholders for monetary damages for any breach of fidu ciary 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 stock holders, (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 General Corporation Law of the State of Delaware, or (iv) for any transaction from -11- which such director derived an improper personal benefit. No amendment to or repeal of this Article shall apply to or have any effect on the liability or alleged liability of any direc tor of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. If the Delaware General Corporation Law is amended hereafter to further eliminate or limit the personal liability of directors, the liability of a director of the Corporation shall be limited or eliminated to the fullest extent permitted by the Delaware General Corporation Law, as amended. Section 2. Nature of Indemnity. Each person who was or is made a party or ---------- ------------------- is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter 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 at the request of the corporation as a director, officer, employee, fiduciary, or agent of another corporation or of a partnership, joint venture, trust or other enterprise, shall be indemnified and held harmless by the corporation to the fullest extent which it is empowered to do so by the General Corporation Law of the State of Delaware, as the same exists or may hereafter be amended against all expense, liability and loss (including attorneys' fees actually and reasonably incurred by such person in connection with such proceeding) and such indemnification shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in Section 3 hereof, the corporation may indemnify any such person seeking indemnification in connection with a proceeding initiated by such person only if such proceeding was authorized by the board of directors of the corporation. The right to indemnification conferred in this Article VIII shall be a contract right and, subject to Sections 3 and 6 hereof, shall include the right to be paid by the corporation the expenses incurred in defending any such proceeding in advance of its final disposition. The corporation may, by action of its board of directors, provide indemnification to employees and agents of the corporation which the same scope and effect as the foregoing indemnification of directors and officers. Section 3. Procedure for Indemnification of Directors and Officers. Any ---------- ------------------------------------------------------- indemnification of a director or officer of the corporation under Section 2 of this Article VIII or advance of expenses under Section 6 of this Article VIII shall be made promptly, and in any event within 30 days, upon the written request of the director or officer. If a determination by the corporation that the director or officer in entitled to indemnification pursuant to this Article VIII is required, and the corporation fails to respond within sixty days to a written request for indemnity, the corporation shall be deemed to have approved the request. If the corporation denies a written request for indemnification or advancing of -12- expenses, in whole or in part, or if payment in full pursuant to such request in not made within 30 days, the right to indemnification or advances as granted by this Article VIII shall be enforceable by the director or officer in any court of competent jurisdiction. Such person's costs and expenses incurred in connection with successfully establishing his or her right to indemnification, in whole or in part, in any such action shall also be indemnified by the corporation. 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, has been tendered to the corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the corporation to indemnify the claimant for the amount claimed, but the burden of such defense shall be on the corporation. Neither the failure of the corporation (including its board of directors, independent legal counsel, or its stockholders) 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 General Corporation Law of the State of Delaware, nor an actual determination by the corporation (including its board of directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. Section 4. Article Not Exclusive. The rights to indemnification and the ---------- --------------------- payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article VIII shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the certificate of incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. Section 5. Insurance. The corporation may purchase and maintain insurance ---------- --------- on its own behalf and on behalf of any person who is or was a director, officer, employee, fiduciary, or agent of the corporation or was 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 or her and incurred by him or her in any such capacity, whether or not the corporation would have the power to indemnify such person against such liability under this Article VIII. Section 6. Expenses. Expenses incurred by any person described in Section ---------- -------- 2 of this Article VIII in defending a proceeding shall be paid by the corporation in advance of such proceeding's final disposition unless otherwise determined by -13- the board of directors in the specific case upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be determined that he or she is not entitled to be indemnified by the corporation. Such expenses incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. Section 7. Employees and Agents. Persons who are not covered by the ---------- -------------------- foregoing provisions of this Article VIII and who are or were employees or agents of the corporation, or who are or were serving at the request of the corporation an employees or agents of another corporation, partnership, joint venture, trust or other enterprise, may be indemnified to the extent authorized at any time or from time to time by the board of directors. Section 8. Contract Rights. The provisions of this Article VIII shall be ---------- --------------- deemed to be a contract right between the corporation and each director or officer who serves in any such capacity at any time while this Article VIII and the relevant provisions of the General Corporation Law of the State of Delaware or other applicable law are in effect, and any repeal or modification of this Article VIII or any such law shall not affect any rights or obligations then existing with respect to any state of facts or proceedings then existing. Section 9. Merger or Consolidation. For purposes of this Article VIII, ---------- ----------------------- references to "the corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Article VIII with respect to the resulting or surviving corporation as he or she would have with respect to such constituent corporation if its separate existence had continued. Section 10. Amendments. This Article VIII shall not be amended, repealed ----------- ---------- or otherwise modified, for a period of six years from the effective date of the merger of HP Acquisition, Inc., a Delaware corporation, with and into Boomtown, Inc., a Delaware corporation, in any manner that would adversely affect any rights of indemnification of persons covered hereby on such effective date. -14- ARTICLE IX AMENDMENTS ---------- Except as otherwise specifically stated within an Article to be altered, amended or repealed, these Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any meeting of the Board of Directors or of the stockholders, provided notice of the proposed change was given in the notice of the meeting. -15- EX-3.19 16 CERTIFICATE OF AMENDED & RESTATED ARTICLES OF INCO EXHIBIT 3.19 FILING FEE: $75.OO BY: MCDONALD, CABANO, WILSON P.O. BOX 2670 RENO, NEVADA 89505 CERTIFICATE OF AMENDED ---------------------- AND RESTATED ARTICLES --------------------- OF INCORPORATION FOR -------------------- BOOMTOWN, INC. -------------- a Nevada Corporation -------------------- RICHARD N. SCOTT and ROBERT H. MOORE certify that: 1. They are the president and secretary, respectively, of BOOMTOWN, INC., a Nevada Corporation (the "Corporation"). 2. Capital has been contributed to the Corporation. 3. Pursuant to Nevada Revised Statutes (S)(S)(S) 78.385, 78.390, 78.395 and 78.403, the amended and restated articles of incorporation of the Corporation set forth immediately below have been duly approved by the required vote of shareholders of the Corporation and are set forth as follows: FIRST: The name of the corporation is BOOMTOWN, INC., a Nevada ----- corporation. SECOND: The address and location of the principal office of the ------ Corporation in the State of Nevada is Interstate 80 and Garson Road, Verdi, Washoe County, Nevada. (Amended July 10, 1987) THIRD: The purposes for which the Corporation is organized are as ----- follows: (a) to conduct gaming in the State of Nevada in accordance with the laws of the State of Nevada and the United States of America; and (b) to engage in any lawful activity. (Amended December 31, 1969) FOURTH: The aggregate number of shares that the Corporation shall have ------ authority to issue is Three Hundred Thousand (300,000) shares of common stock with a par value of One Dollar ($1.00) per share (herein referred to as "Common Stock"). Any and all shares of stock in this Corporation shall be paid in as the Board of Directors may designate and as provided by law, in cash, real or personal property, services, leases, options to purchase, or any other valuable right or thing for the uses or purposes of the Corporation, and all shares of stock when issued in exchange therefor, shall thereupon and thereby become and be fully paid the same as though paid for in cash and shall be nonassessable forever, and shall not be subject to pay the debt of the Corporation. The judgment of the Directors as to the value of any property, right or thing, acquired in purchase or exchange will be conclusive. The Corporation shall not issue any stock or securities except in accordance with the provisions of the Nevada Gaming Control Act and the regulations thereunder. The issuance of any stock or securities in violation thereof shall be ineffective and such stock or securities shall be deemed not to be issued and outstanding until (1) the Corporation shall cease to be subject to the jurisdiction of the Nevada Gaming Commission, or (2) the Nevada Gaming Commission shall, by affirmative action, validate said issuance or waive any defect in issuance. No stock or securities issued by the Corporation and no interest, claim or charge therein or thereto shall be -2- transferred in any manner whatsoever except in accordance with the provisions of the Nevada Gaming Control Act and the regulations thereunder. Any transfer in violation thereof shall be ineffective until (1) the Corporation shall cease to be subject to the jurisdiction of the Nevada Gaming Commission, or (2) the Nevada Gaming Commission shall, by affirmative action, validate said transfer or waive any defect in said transfer. If the Commission at any time determines that a holder of stock or other securities of this Corporation is unsuitable to hold such securities, then until such securities are owned by persons found by the Commission to be suitable to own them, (a) the Corporation shall not be required or permitted to pay any dividend or interest with regard to the securities, (b) the holder of such securities shall not be entitled to vote on any matter as the holder of the securities, and such securities shall not for any purposes be included in the securities of the Corporation entitled to vote, and (c) the Corporation shall not pay any remuneration in any form to the holder of the securities. (Amended July 10, 1987) FIFTH: Members of the Governing Board shall be known as "Directors" and ----- the number thereof shall be not less than three (3) nor more than ten (10), the exact number to be fixed by the By-Laws of the Corporation, provided that the number so fixed by the By-Laws may be increased or decreased from time to time. -3- The names and addresses of the present Board of Directors who are to serve as Directors until the successors have been elected are as follows: ROBERT A. CASHELL 4150 Basque Lane Reno, Nevada NANCY P. CASHELL 4150 Basque Lane Reno, Nevada ROBERT H. MOORE P.O. Box 1848 Reno, Nevada RICHARD N. SCOTT 1190 Williams Avenue Reno, Nevada FRANK GIANOPULUS 1525 Webster Way Reno, Nevada JAMES MIDDAUGH P.O. Box 251 Verdi, Nevada LARRY TILLER 8505 Lone Tree Lane Reno, Nevada (Amended July 10, 1987) SIXTH: The names and post office addresses of each of ----- the incorporators are as follows: ROBERT A. CASHELL 4150 Basque Lane Reno, Nevada ROBERT H. MOORE P.O. Box 1848 Reno, Nevada RICHARD R. KEARNEY 1200 Grand View Avenue Reno, Nevada ROBERT L. McDONALD 60 Court Street Reno, Nevada DONALD L. CARANO 60 Court Street Reno, Nevada SEVENTH: The Corporation is to have perpetual existence. (Amended July ------- 10, 1987) -4- EIGHTH: In furtherance and not in limitation of the rights, powers, ------ privileges and discretionary authority granted or conferred by the Private Corporations Law of the State of Nevada or other statutes or laws of the State of Nevada, the Board of Directors is expressly authorized: A. To make, amend, alter or repeal the Bylaws of the Corporation; B. To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation; C. To set apart out of any funds of the Corporation available for dividends, a reserve or reserves for any proper purpose and to reduce any such reserve in the manner in which it was created; D. To adopt from time to time Bylaw provisions with respect to indemnification of directors, officers, employees, agents and other persons as it shall deem expedient and in the best interests of the Corporation and to the fullest extent permitted by the Private Corporations Law of the State of Nevada; and E. To fix and determine designations, preferences, privileges, rights and powers and relative, participating, optional or other special rights, qualifications, limitations or restrictions on the capital stock of the Corporation as provided by Nevada Revised Statutes (S) 78.195, unless otherwise provided herein. (Amended July 10, 1987) NINTH: A resolution in writing, signed by all of the members of the ----- Board of Directors, shall be and constitute action by the Board of Directors to the effect therein expressed, with the same force and effect as though such resolution had been passed at a duly convened meeting, and it shall be the duty of the secretary to record every such resolution in the minute book under its proper date. (Amended July 10, 1987) TENTH: Subject to the provisions of the Private Corporations Law of the ----- State of Nevada, no director, -5- officer, or stockholder of the Corporation shall be liable individually or personally to the Corporation for damages resulting from a breach of fiduciary duty as a director or officer except for (i) acts or omissions which involve intentional misconduct, fraud, or a knowing violation of law; or (ii) the payment of dividends in violation of Nevada Revised Statutes (S) 78.300. Neither the amendment or repeal of this Article TENTH, nor the adoption of any provision of the Articles of Incorporation or Bylaws or of any statute inconsistent with this Article TENTH, shall eliminate or reduce the effect of this Article TENTH in respect of any acts or omissions occurring prior to such amendment, repeal or adoption of an inconsistent provision. (Amended July 10, 1987) ELEVENTH: The initial resident agent of the Corporation in the State of -------- Nevada is: Robert H. Moore Interstate 80 and Garson Road Verdi, Nevada 89439 (Amended July 10, 1987) IN WITNESS WHEREOF, we have hereunto set our hands and executed these Amended Articles of Incorporation this ___ day of _______________, ____. _____________________________ Richard N. Scott, President _____________________________ Robert H. Moore, Secretary -6- STATE OF NEVADA ) ) SS. COUNTY OF WASHOE ) On this ____ day of _______________, 19___, personally appeared before the undersigned, a Notary Public in and for the County of Washoe, State of Nevada, Richard N. Scott and Robert H. Moore, known to me to be the persons described in and who executed the foregoing instrument freely and voluntarily and for the uses and purposes mentioned. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year in this certificate first above written. _____________________________ NOTARY PUBLIC -7- INVOICE #29025 DF EXPEDITE #E028 CT CORPORATION SYSTEM ATTN: BARBARA CANNIZZO 49 STEVENSON ST. STE. 900 SAN FRANCISCO, CA 94105 CERTIFICATE OF AMENDMENT OF ARTICLES OF INCORPORATION OF BOOMTOWN, INC. Richard N. Scott and Leo W. Sumrall certify that: 1. They are the President and Secretary respectively, of BOOMTOWN, INC., a Nevada Corporation (the "Corporation"). 2. Pursuant to Nevada Revised Statutes SS 78.388 and 78,390, the amendment to the Articles of Incorporation of the Corporation set forth immediately below has been duly approved by the written consent of the sole stockholder of the Corporation and is as follows: Article FIRST is amended to read in its entirety as follows: "FIRST: The name of the Corporation is Boomtown Hotel and Casino, Inc." ----- IN WITNESS WHEREOF, we have hereunto set our hands and executed this Certificate. Dated: ________________ --------------------------- Richard N. Scott, President --------------------------- Leo W. Sumrall, Secretary STATE OF NEVADA ) ) SS. COUNTY OF SANTA CLARA ) On ______________, 19__, personally appeared before me, a Notary Public, Richard N. Scott and Leo W. Sumrall, who acknowledged that they executed the above instrument. --------------------------- NOTARY PUBLIC ARTICLES OF MERGER OF BOOMTOWN WATER COMPANY, INC. INTO BOOMTOWN HOTEL & CASINO, INC. FIRST: Boomtown Hotel & Casino, Inc. (hereinafter referred to as the "Parent Corporation"), a corporation of the State of Nevada, owns all of the outstanding shares of each class of Boomtown Water Company, Inc. (hereinafter referred to as the "Subsidiary Corporation") a corporation of the State of Nevada. SECOND: A plan of merger was adopted by the Board of Directors of the Parent Corporation whereby the Subsidiary Corporation is to be merged into the Parent Corporation. THIRD: Approval of the stockholders of either the Parent or Subsidiary Corporation was not required. FOURTH: The complete executed plan of merger is on file at the place of business of the Parent Corporation located at the intersection of Interstate 80 and Boomtown Garson Road, Verdi, Nevada 89439, and a copy of the plan will be furnished by the Parent Corporation, on request and without cost, to any stockholder or any corporation which is a party to this merger. FIFTH: The Articles of Incorporation of the Parent Corporation in effect immediately prior to the filing of these Articles of Merger shall continue in full force and effect as the Articles of Incorporation of the Parent Corporation until duly amended in accordance with the provisions thereof and applicable law. BOOMTOWN HOTEL & CASINO, INC. By: ------------------------------------- Richard N. Scott, President By: ------------------------------------ Leo W. Sumrall, Assistant Secretary State of Nevada ) ) ss. County of Washoe ) On ___________________________ , personally appeared before me, a Notary Public _________________________________________ who acknowledged that they (Names of persons appearing and signing document) executed the above instrument. __________________________________ Signature of Notary ARTICLES OF MERGER MERGING BOOMTOWN WATER COMPANY, INC. 2244-86 (NV) INTO BOOMTOWN HOTEL & CASINO, INC. 697-67 SURVIVOR (NV) FILED BY: MCDONALD, CARANO, WILSON ETAL P.O. BOX 2670 RENO, NV 89505 RETURN VIA: RENO/CARSON FILE NO: 697-67 SURVIVOR FILE DATE: 11/5/93 FILING FEE: $75.OO TS REC. #C97209 Exp. #51038 -3- EX-3.20 17 REVISED AND RESTATED BY-LAWS OF BOOMTOWN HOTEL EXHIBIT 3.20 REVISED AND RESTATED BY-LAWS OF BOOMTOWN HOTEL & CASINO, INC., a Nevada Corporation (Formerly Boomtown, Inc.) REVISED AND RESTATED BY-LAWS OF BOOMTOWN, INC., a Nevada Corporation Interstate 80 and Garson Road, Verdi, Nevada OFFICES 1. The principal office shall be in the County of Washoe, State of Nevada. 2. The corporation may also have an office or offices at such other place or places, within or without the State of Nevada, as the Board of Directors may from time to time designate or the business of the corporation require. STOCKHOLDERS 3. The annual meeting of the stockholders of the corporation, commencing with the year 1970, shall be held at the principal office of the corporation in the State of Nevada, or at such other place within or without the State of Nevada as may be determined by the Board of Directors and as shall be designated in the notice of said meeting, on the 1st day of May of each year (or if said day be a legal holiday, then on the next succeeding day not a legal holiday), for the purpose of electing directors and for the transaction of such other business as may be properly brought before the meeting. If the election of directors shall not be held on the day designated herein for any annual meeting, or at any adjournment thereof, the Board of Directors shall cause the election to be held at a special meeting of the stockholders as soon thereafter as conveniently may be. At such meeting the stockholders may elect the directors and transact other business with the same force and effect as at an annual meeting duly called and held. 4. Special meetings of the stockholders shall be held at the.principal office of the corporation in the State of Nevada, or at such other place within or without the State of Nevada, as may be designated in the notice of said meeting, upon call of the Board of Directors or of the President, or any Vice President, or the Secretary at the request in writing of stockholders owning at least 30% of the issued and outstanding capital stock of the corporation entitled to vote thereat. 5. Notice of the purpose or purposes and of the time and place within or without the State of Nevada of every meeting of stockholders shall be in writing and signed by the Chairman of the Board, or the President, or the Executive Vice -2- President or a Vice President, or the Secretary, or an Assistant Secretary and a copy thereof shall be served either personally, or by mail, or by any other lawful means, not less than ten days before the meeting, upon each stockholder of record entitled to vote at such meeting. If mailed, such notice shall be directed to each stockholder at his address as it appears on the stock book unless he shall have filed with the Secretary of the corporation a written request that notices intended for him to be mailed to some other address, in which case it shall be mailed or transmitted to the address designed in such request. Such further notice shall be given as may be required by law. Except as otherwise expressly provided by statute, no publication of any notice of a meeting of stockholders shall be required. Notice of any meeting of stockholders shall not be required to be given to any stockholder who shall attend such meeting in person or by proxy, or who shall, in person or by attorney thereunto authorized, waive such notice in writing or by telegraph, cable, radio, or wireless either before or after such meeting. Except where otherwise required by law, notice of any adjourned meeting of the stockholders of the corporation shall not be required to be given. 6. At any meeting of the stockholders, each stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing, subscribed by such stockholder and bearing a date not more than six months prior to said meeting unless said instrument provides for a longer period. Each stockholder having the right to vote shall have one vote for each share of stock having voting power, registered in his name on the books of the corporation. 7. Whenever the vote of stockholders at a meeting thereof is required or permitted to be taken in connection with any corporate action by any provision of the General Corporation Law of the State of Nevada, or of the Articles of Incorporation, or of these By-Laws, the meeting and vote of stockholders may be dispensed with, if all stockholders who would have been entitled to vote upon the action, if such meeting were held, shall consent in writing to such corporate action being taken. DIRECTORS 8. The number of directors which shall constitute the whole Board shall at all times be no fewer than three (3) nor more than ten (10). 9. The directors shall be elected at the annual meeting of the stockholders, except as provided in Section 11 hereof, and each director shall be elected to serve until his successor shall be elected and shall qualify, Directors need not be stockholders. -3- 10. The directors may hold their meeting within or without the State of Nevada and may keep all books and records of the corporation at places which may be designated by the Board from time to time, except for those books and records which the laws of the State of Nevada require to be kept in Nevada. 11. If any vacancy or vacancies shall occur in the Board of Directors caused by reason of death, resignation, retirement, disqualification or removal from office of any director or directors, or caused in any other manner, or any new directorship is created by any increase in the authorized number of directors, a majority of the directors then in office, although less than a quorum, may choose a successor or successors, or fill the newly created directorship, and the directors so chosen shall hold until the next annual election of directors and until their successors shall be duly elected and shall be qualified, unless sooner displaced. 12. The annual meeting of the Board of Directors for the election of officers shall be held on the same day as the annual meeting of the stockholders, immediately after the adjournment of such annual meeting of the stockholders or as soon thereafter as may be possible and convenient. 13. The property and business of the corporation shall be managed and controlled by its Board of Directors and such officers, agents and employees as said Board of Directors may elect, employ and authorize. The Board of Directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute and the Articles of Incorporation or by these By- Laws directed or required to be exercised or done by the stockholders. COMMITTEES OF DIRECTORS 14. The Board of Directors may, by resolution or resolutions, 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, shall have and may exercise the powers of the Board of Directors in the management of the business affairs of the corporation, and may have power to authorize the seal of the corporation to be affixed to all papers which may require it. Such committees or committee shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. COMPENSATION OF DIRECTORS 15. Directors as such, shall not receive any stated salary for their services, but, by resolutions of the Board a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the -4- Board; provided, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. MEETINGS OF THE BOARD 16. Regular meetings of the Board may he held without notice at such time and place either within or without the State of Nevada as shall from time to time be determined by the Board. 17. Special meetings of the Board, to be held at any convenient place, may be called by the Chairman of the Board on five days' notice to each director, either personally, or by mail, or by telegram, or by telephone; special meeting shall be called by the Chairman of the Board or Secretary in like manner and on like notice on the written request of two directors. Notice of any meeting may be waived by any director in the manner provided by Section 20 hereof. If all directors shall be present at any meeting, neither notice of written waiver of notice of the time and place of such meeting, shall be necessary to its validity. Unless otherwise expressly indicated in the notice thereof, any and all business may be transacted at a special meeting of the Board of Directors. 18. At all meetings of the Board a majority of the directors shall be necessary and sufficient to 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 Articles of Incorporation or by these By-laws. If a quorum shall not be present at any meeting of directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement of the meeting, until a quorum shall be present. NOTICES 19. Whenever, under the provisions of the statutes, or the Articles of Incorporation, or these By-Laws, notice is required to be given to any director or stockholder, it shall not be construed to mean personal notice, but such notice may be given in writing, by mail, by depositing same in the post office, or in a letter box, in a postpaid, sealed envelope, addressed to such director or stockholder at such address as appears on the books of the corporation, or, in default of other address, to such director or stockholder in the General Post Office in the City of Reno, Nevada, and such notice shall be deemed to be given at the time that the same shall be thus mailed. -5- 20. Whenever any notice is required to be given under the provisions of the statutes or of the Articles of Incorporation, or of these By-Laws, a waiver thereof, in writing signed by the person or persons entitled to said notice, whether before or after the time stated therein shall be deemed equivalent thereto. OFFICERS 21. The officers of the corporation shall be chosen by the directors and shall be a Chairman of the Board, a President, an Executive Vice President, and a Secretary/Treasurer. The Board of Directors may also choose additional vice presidents, and one or more assistant secretaries and assistant treasurers. Two or more offices may be held by the same person, except that where the offices of President and Secretary are held by the same person, such person shall not hold any other office. 22. The Board of Directors at its first meeting after each annual meeting of the stockholders shall choose a Chairman of the Board, a President and an Executive Vice President from its members and one or more Vice Presidents, a Secretary and a Treasurer. 23. The Board 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. 24. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the whole Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy shall be filled by the Board of Directors. CHAIRMAN OF THE BOARD 25. The Chairman of the Board shall be the chief executive officer of the corporation; he shall preside at all meetings of the stockholders and directors, shall be ex-officio a member of all standing committees, shall have general and active management of the business of the corporation, and shall see that all orders and resolutions of the Board are carried into effect. PRESIDENT 26. The President shall execute bonds, mortgages and other contracts, requiring a seal, under the seal of the corporation, except where required or permitted by law to be otherwise signed and executed and except where the signing and -6- execution thereof shall be expressly delegated by the Board of Directors to some other officer or agent of the corporation. VICE PRESIDENT 27. The Vice Presidents in the order of their seniority shall, in the absence or disability of the President, perform the duties and exercise the powers of the President, and shall perform such other duties as the Board of Directors shall prescribe. THE SECRETARY AND ASSISTANT SECRETARIES 28. The Secretary shall attend all sessions of the Board and all meetings of the stockholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the standing committees 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 President, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation, and, when authorized by the Board, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the Treasurer or an Assistant Secretary. 29. The Assistant Secretaries in order of their seniority shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties as the Board of Directors shall prescribe. THE TREASURER AND ASSISTANT TREASURERS 30. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of 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. 31. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. 32. If required, by the Board of Directors, he shall give the corporation, a bond (which shall be renewed every six years), in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration to the -7- corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. 33. The assistant Treasurers in the order of their seniority shall, in the absence or liability of the Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties as the Board of Directors shall prescribe. CERTIFICATE OF STOCK 34. A stock book shall be kept for each class of stock of this corporation. All certificates of stock shall be numbered and shall be entered in the stock book as they are issued. They shall exhibit the holder's name, the number of shares, and the rights, preference and limitations of the stock and shall be signed by the Chairman of the Board, President or a Vice President, and the Secretary or an Assistant Secretary, or by the Treasurer, or an Assistant Treasurer, and shall bear the impress of the corporate seal. TRANSFERS OF STOCK 35. Any certificate of stock may be transferred, sold, assigned, or pledged by an endorsement in writing to that effect on the back of such certificate, which endorsement must be guaranteed by a State or National Bank or trust Company, and such transfer, sale, assignment, or pledge shall be completed by the delivery of such certificate by the transferrer to the transferee. Until notice of such transfer has been given to the Secretary of the company, and the certificate of stock so transferred has been surrendered for cancellation, and a new certificate of stock has been issued in lieu of that surrendered, this company may and shall regard and treat the transferrer as still being the owner of the stock evidenced by such certificate. CLOSING OF TRANSFER BOOKS 36. The Board of Directors shall have power to close the stock transfer books of the corporation for a period not exceeding fifty days preceding the date of any meeting of stockholders or the date for payment of any dividend or the date of the allotment of rights or the date when any change or conversion or exchange of capital stock shall go into effect or for a period of not exceeding fifty days in connection with obtaining the consent of stockholders for any purpose; provided, however, that in lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date, not exceeding fifty days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the allotment of rights, or the date -8- when any change or conversion or exchange of capital stock, or to give such consent, and in such case such stockholders and only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting and any adjournment thereof, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights, or to give such consent, as the case may be notwithstanding any transfer of any stock on the books of the corporation after any such record date as aforesaid. 37. All surrendered certificates of stock shall be marked "Cancelled" by the Secretary, with the date of cancellation, and shall be immediately placed in the stock certificate book attached to the memorandum stub of their issue. LOST CERTIFICATE 38. The Board of Directors may 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 or destroyed, upon the making of an affidavit of that fact by the person claiming the certificates of stock to be lost or destroyed. When authorizing such issue of a new certificate or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or give the corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost or destroyed. FINANCES 39. The funds of the company shall be deposited in the name of the company in such bank or banks as the Board of Directors shall designate from time to time. Funds so deposited shall be drawn only upon checks or vouchers signed by such officer or officers of the company, or other proper persons as may be designated from time to time by the Chairman of the Board. 40. No notes, bonds or other interest bearing obligations of the company shall be issued unless and until the issuance thereof has been authorized by the Chairman of the Board, and such notes, bonds or other interest bearing obligations when so authorized shall be signed by the Chairman of the Board or President or a Vice President, and attested by the Secretary or an Assistant Secretary. MISCELLANEOUS -9- 41. The corporation may rely upon and act in accordance with any agreement of the stockholders that may be made among themselves, and filed with the Secretary, provided such agreement is not contrary to the statutes, the Articles of Incorporation or these By-Laws. 42. All provisions of the statutes of the State of Nevada and of the Articles of Incorporation of the company regulating and conduct of its affairs are incorporated by reference as a part of these By-Laws, and should any provision of the By-Laws be inconsistent with said statutes or Articles of Incorporation, such provision of the By-Laws shall be of no force and effect, but shall be absolutely void. AMENDMENTS 43. The Directors may alter, amend or modify these By-Laws, or repeal any part thereof by a majority vote. A certified copy of such altered, amended or modified provision or statement of the repeal of any provision, or of any addition to the By-Laws shall be sent by the Secretary to each stockholder within thirty days after such action by the Board of Directors. 44. The seal impressed immediately below shall be the official seal of the corporation. KNOW ALL MEN BY THESE PRESENTS: That we, the undersigned, being the directors of this corporation named in the Articles of Incorporation, do hereby assent to the foregoing By-Laws and adopt the same as the By-Laws of this corporation. IN WITNESS WHEREOF, we have hereunto subscribed our names this 10th day of July, 1987, and by these presents certify that the foregoing By-Laws do constitute the By-Laws of this corporation. -10- EX-3.21 18 ARTICLES OF INCORPORATION OF BAYVIEW YACHT CLUB EXHIBIT 3.21 ARTICLES OF INCORPORATION (Attach conformed copy.) X PROFIT NONPROFIT - - (Mark Appropriate Box) The undersigned persons, pursuant to Section 79-4-2.02 (if a profit corporation) or Section 79-11-137 (if a nonprofit corporation) of the Mississippi Code of 1972, hereby execute the following document and set forth: 1. The name of the corporation is: BAYVIEW YACHT CLUB, INC. 2. Domicile address is: 676 BAYVIEW DRIVE BILOXI, MS 39530 3. The period of duration is: 99 YEARS 4. (a) The number (and classes, if any) of shares the corporation is authorized to issue is (are) (THIS IS FOR PROFIT ONLY):
Class(es) No. of Shares Authorized --------- ------------------------ COMMON 1,000
4. (b) If more than one (1) class of shares is authorized, the preferences, limitations and relative rights of each class are as follows: N/A 5. The street address of its initial registered office is 185 REYNOIR STREET BILOXI, MS 39530 and the name of its initial registered agent at such address is: GERALD BLESSEY 6. The name and complete address of each incorporator is as follows (PLEASE TYPE OR PRINT): ERIC F. SKRMETTA, 3536 LOWERLINE ST., NEW ORLEANS, LA 70125 GERALD BLESSEY, 185 REYNOIR STREET, BILOXI, MS 39530 7. Other provisions: N/A __________________________ __________________________ INCORPORATORS (SIGNATURES) EX-3.22 19 BY-LAWS OF BAYVIEW YACHT CLUB, INC. EXHIBIT 3.22 BYLAWS OF BAYVIEW YACHT CLUB, INC. ARTICLE I. PRINCIPAL OFFICE The principal office of the corporation in the State of Mississippi shall be located in the City of Biloxi, County of Harrison. The corporation may have such other offices, either within or without the State of Mississippi, as the board of directors may designate or as the business of the corporation may require from time to time. ARTICLE II. SHAREHOLDERS Section 1. Annual Meeting. The annual meeting of the shareholders shall -------------- be held on the first Tuesday in the month of April, in each year at the hour of 10:00 o'clock, a.m., or such other time and date as may be determined by the directors, for the purpose of electing directors and for the transaction of such other business as may properly come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Mississippi, such meeting shall be held on the next succeeding business day. If the election of directors shall not be held on the day designated herein for any annual meeting of the shareholders, or at any adjournment thereof, the board of directors shall cause the election to be held at a special meeting of the shareholders as soon thereafter as conveniently may be. Section 2. Special Meetings. The corporation shall hold a special meeting ---------------- of shareholders (1) on call of its board of directors or the president; or (2) unless the articles of incorporation provide otherwise, if the holders of at least ten percent (10%) of all the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date and deliver to the corporation's secretary one or more written demands for the meeting describing the purpose or purposes for which it is to be held. If not otherwise fixed under applicable law, the record date for determining shareholders entitled to demand a special meeting shall be the date the first shareholder signs the demand. Section 3. Place of Meeting. The board of directors may designate any ---------------- place, either within or without the State of Mississippi, for any annual meeting or for any special meeting of shareholders. A valid waiver of notice signed by all shareholders entitled to notice may designate any place, either within or without the State of Mississippi, as the place for any annual meeting or for any special meeting of shareholders. Unless the notice of the meeting states otherwise, shareholders' meetings shall be held at the corporation's principal office. Section 4. Notice of Meeting. The corporation shall notify shareholders ----------------- of the date, time and place of each annual and special shareholders' meeting no fewer than ten (10) nor more than sixty (60) days before the meeting date. Unless applicable law or the articles of incorporation require otherwise, the corporation shall give notice only to shareholders entitled to vote at the meeting. Unless applicable law or the articles of incorporation require otherwise, notice of an annual meeting need not include a description of the purpose or purposes for which the meeting is called. Notice of a special meeting must include a description of the purpose or purposes for which the meeting shall be called. Only business within the purpose or purposes described in the meeting notice may be conducted at a special shareholders' meeting. Unless these bylaws require otherwise, if an annual or special shareholders' meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if the new date, time or place is announced at the meeting before adjournment. If a new record date for the adjourned meeting is or must be fixed under applicable law or Article II, Section 5 of these bylaws, however, notice of the adjourned meeting must be given under this section to persons who are shareholders as of the new record date. Section 5. Closing of Transfer Books or Fixing of Record Date. The board -------------------------------------------------- of directors of the corporation may fix the record date for one or more voting groups in order to determine shareholders entitled to notice of a shareholders' meeting, to demand a special meeting, to vote or to take any other action. A record date may not be more than seventy (70) days before the meeting or action requiring a determination of shareholders. If not otherwise fixed by law, the record date for determining shareholders entitled to notice of and to vote at an annual or special shareholders' meeting shall be the day before the first notice is delivered to shareholders. If the board of directors does not fix the record date for determining shareholders entitled to a distribution (other than one involving a purchase, redemption or other acquisition of the corporation's shares), it shall be the date the board of directors authorizes the distribution. A determination of shareholders entitled to notice of or to vote at a shareholders' meeting shall be effective for any adjournment of the meeting unless the board of directors fixes a new record date, which it must do if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting. -2- Section 6. Voting Lists. After fixing a record date for a meeting, the ------------ corporation shall prepare an alphabetical list of the names of all its shareholders who are entitled to notice of a shareholders' meeting. The list must be arranged by voting group (and within each voting group by class or series of shares) and show the address of and number of shares held by each shareholder. The shareholders' list must be available for inspection by any shareholder beginning two (2) business days after notice of the meeting is given for which the list was prepared and continuing through the meeting, at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder, his agent or attorney shall be entitled on written demand to inspect and, subject to the requirements of applicable law, to copy the list during regular business hours and at his expense, during the period it shall be available for inspection. The corporation shall make the shareholders' list available at the meeting, and any shareholder, his agent or attorney shall be entitled to inspect the list at any time during the meeting or any adjournment. Section 7. Quorum. Shares entitled to vote as a separate voting group may ------ take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. Unless the articles of incorporation or applicable law impose other quorum requirements, a majority of the votes entitled to be cast on the matter by a voting group, represented in person or by proxy, shall constitute a quorum of that voting group for action on that matter. If less than a majority of the outstanding shares are represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice except as may be required by Article II, Section 4 of these bylaws or by applicable law. 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 noticed. Once a share is represented for any purpose at a meeting, it shall be deemed present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting. Section 8. Proxies. A shareholder may appoint a proxy to vote or ------- otherwise act for him by signing an appointment form, either personally or by his attorney-in-fact. An appointment of a proxy shall be effective when received by the secretary or other officer or agent authorized to tabulate votes of the corporation. An appointment shall be valid for eleven (11) months unless a longer period is expressly provided in the appointment form. An appointment of a proxy shall be revocable by the shareholder unless the appointment form conspicuously states that it is irrevocable and the -3- appointment shall be coupled with an interest. Appointments coupled with an interest include the appointment of (1) a pledgee; (2) a person who purchased or agreed to purchase the shares; (3) a creditor of the corporation who extended it credit under terms requiring the appointment; (4) an employee of the corporation whose employment contract requires the appointment; or (5) a party to a voting agreement created under applicable law. The death or incapacity of the shareholder appointing a proxy does not affect the right of the corporation to accept the proxy's authority unless notice of the death or incapacity shall be received by the secretary or other officer or agent authorized to tabulate votes before the proxy exercises his authority under the appointment. An appointment made irrevocable because it is coupled with an interest shall be revoked when the interest with which it is coupled is extinguished. A transferee for value of shares subject to an irrevocable appointment may revoke the appointment if he did not know of its existence when he acquired the shares and the existence of the irrevocable appointment was not noted conspicuously on the certificate representing the shares or on the information statement for shares without certificates. Subject to applicable law and to any express limitation on the proxy's authority appearing on the face of the appointment form, the corporation shall be entitled to accept the proxy's vote or other action as that of the shareholder making the appointment. Section 9. Voting of Shares. Except as provided below or unless the ---------------- articles of incorporation provide otherwise, and subject to the provisions of Section 12 of this Article II, each outstanding share, regardless of class, shall be entitled to one (1) vote on each matter voted on at a shareholders' meeting. If a quorum exists, action on a matter (other than the election of directors) by a voting group shall be approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation or applicable law require a greater number of affirmative votes. Unless otherwise provided in the articles of incorporation, directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election at a meeting at which a quorum is present. Section 10. Voting of Shares by Certain Holders. Shares standing in the ----------------------------------- name of another corporation may be voted by such officer, agent or proxy as the bylaws of such corporation may prescribe, or, in the absence of such provision, as the board of directors of such corporation may determine. Absent special circumstances, shares of this corporation shall not be entitled to vote if they are owned, directly or indirectly, by a second corporation, domestic or foreign, and -4- this corporation owns, directly or indirectly, a majority of the shares of the second corporation entitled to vote for the directors of the second corporation. This does not limit the power of this corporation to vote any shares, including its own shares, held by it in a fiduciary capacity. Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name. Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority so to do be contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Section 11. Informal Action by Shareholders. Action required or permitted ------------------------------- by applicable law to be taken at a shareholders' meeting may be taken without a meeting if the action is taken by all the shareholders entitled to vote on the action. The action must be evidenced by one or more written consents describing the action taken, signed by all the shareholders entitled to vote on the action, and delivered to the corporation for inclusion in the minutes or filing with the corporate records. If not otherwise determined under applicable law, the record date for determining shareholders entitled to take action without a meeting shall be the date the first shareholder signs such consent. A consent signed under this section has the effect of a meeting vote and may be described as such in any document. If applicable law requires that notice of proposed action be given to nonvoting shareholders and the action is to be taken by unanimous consent of the voting shareholders, the corporation must give its nonvoting shareholders written notice of the proposed action at least ten (10) days before the action is taken. The notice must contain or be accompanied by the same material that, under applicable law, would have been required to be sent to nonvoting shareholders in a notice of meeting at which the proposed action would have been submitted to the shareholders for action. Section 12. Cumulative Voting. Shareholders shall have the right to ----------------- cumulate their votes for directors unless the articles of incorporation provide otherwise, and the shareholders shall be entitled to multiply the number of votes -5- they are entitled to cast by the number of directors for whom they are entitled to vote and cast the product for a single candidate or distribute the product among two (2) or more candidates. Section 13. Shares Held by Nominees. The corporation may establish a ----------------------- procedure by which the beneficial owner of shares that are registered in the name of a nominee shall be recognized by the corporation as the shareholder. The extent of this recognition may be determined in the procedure. The procedure may set forth: (1) the types of nominees to which it applies; (2) the rights or privileges that the corporation recognizes in a beneficial owner; (3) the manner in which the procedure shall be selected by the nominee; (4) the information that must be provided when the procedure is selected; (5) the period for which selection of the procedure shall be effective; and (6) other aspects of the rights and duties created. Section 14. Corporation's Acceptance of Votes. If the name signed on a --------------------------------- vote, consent, waiver or proxy appointment corresponds to the name of the shareholder, the corporation, if acting in good faith, shall be entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of its shareholder, the corporation, if acting in good faith, shall nevertheless be entitled to accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if: (1) the shareholder is an entity and the name signed purports to be that of an officer or agent of the entity; (2) the name signed purports to be that of an administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment; (3) the name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation has been presented with respect to the vote, consent, waiver or proxy appointment; (4) the name signed purports to be that of a pledgee, beneficial owner or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder has been presented with respect to the vote, consent, waiver or proxy appointment; (5) two (2) or more persons are the shareholders as co-tenants or fiduciaries and the name signed purports to be the name of at least one (1) of the co-owners and the person signing appears to be acting on behalf of all the co-owners. -6- The corporation shall be entitled to reject a vote, consent, waiver or proxy appointment if the secretary or other officer or agent authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. ARTICLE III. BOARD OF DIRECTORS Section 1. General Powers. All corporate powers shall be exercised by or -------------- under the authority of, and the business and affairs of the corporation managed under the direction of, its board of directors, subject to any limitation set forth in the articles of incorporation. Section 2. Number, Election, Tenure and Qualifications. The number of ------------------------------------------- directors of the corporation shall be the number established by the shareholders from time to time. Directors are elected at the first annual shareholders' meeting and at each annual meeting thereafter unless their terms are staggered in the articles of incorporation. The terms of the initial directors of the corporation expire at the first shareholders' meeting at which directors shall be elected. The terms of all other directors expire at the next annual shareholders' meeting following their election unless their terms shall be staggered in the articles of incorporation. A decrease in the number of directors does not shorten an incumbent director's term. The term of a director elected to fill a vacancy expires at the next shareholders' meeting at which directors shall be elected. Despite the expiration of a director's term, he continues to serve until his successor shall be elected and qualifies or until there shall be a decrease in the number of directors. A director need not be a resident of this state or a shareholder of the corporation. Section 3. Resignation of Directors; Removal of Directors by Shareholders. -------------------------------------------------------------- (a) A director may resign at any time by delivering written notice to the board of directors, to its chairman or to the corporation. A resignation shall be effective when the notice is delivered unless the notice specifies a later effective date. (b) The shareholders may remove one or more directors with or without cause unless the articles of incorporation provide that directors may be removed only for cause. If a director is elected by a voting group of shareholders, only the shareholders of that voting group may participate in the vote to remove him. If cumulative voting is authorized, a director may not be removed if the number of votes sufficient to elect him under cumulative voting is voted against his removal. If cumulative voting is not authorized, a director may be removed only if the number of votes cast to remove him -7- exceeds the number of votes cast not to remove him. A director may be removed by the shareholders only at a meeting called for the purpose of removing him and the meeting notice must state that the purpose, or one (1) of the purposes, of the meeting shall be removal of the director. Section 4. Regular Meetings. Unless the articles of incorporation or ---------------- these bylaws provide otherwise, 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 shareholders. Section 5. Special Meetings. Special meetings of the board of directors ---------------- may be called by or at the request of the president or any director. Unless the articles of incorporation or these bylaws provide for a longer or shorter period, special meetings of the board of directors must be preceded by at least two (2) days, notice of the date, time and place of the meeting. If no place for the meeting has been designated in the notice, the meeting shall be held at the principal office of the corporation. The notice need not describe the purpose of the special meeting unless required by the articles of incorporation or these bylaws. Section 6. Place of Meetings. The board of directors may hold regular or ----------------- special meetings in or out of this state. Section 7. Quorum. Unless the articles of incorporation or these bylaws ------ require a greater number, a quorum of the board of directors consists of a majority of the number of directors fixed by Article III, Section 2, or a majority of the number of directors prescribed, or if no number is prescribed, the number in office immediately before the meeting begins, if the corporation has a variable-range size board. If less than such number necessary for a quorum shall be present at a meeting, a majority of the directors present may adjourn the meeting from time to time without further notice. Section 8. Manner of Acting. If a quorum is present when a vote is taken, ---------------- the affirmative vote of a majority of directors present is the act of the board of directors unless the articles of incorporation or bylaws require the vote of a greater number of directors. Section 9. Action Without a Meeting. Unless the articles of incorporation ------------------------ or bylaws provide otherwise, action required or permitted to be taken at a board of directors' meeting may be taken without a meeting if the action is taken by all members of the board. The action must be evidenced by one or more written consents describing the action taken, signed by each director, and included in the minutes or filed with the corporate records reflecting the action taken. Action taken under this section shall be effective when the -8- last director signs the consent, unless the consent specifies a different effective date. Such a consent has the effect of a meeting vote and may be described as such in any document. Section 10. Vacancies. Unless the articles of incorporation provide --------- otherwise, if a vacancy occurs on the board of directors, including a vacancy resulting from an increase in the number of directors, (i) the shareholders may fill the vacancy, (ii) the board of directors may fill the vacancy, or (iii) if the directors remaining in office constitute fewer than a quorum of the board, they may fill the vacancy by the affirmative vote of a majority of all the directors remaining in office. If the vacant office was held by a director elected by a voting group of shareholders, only the holders of shares of that voting group shall be entitled to fill the vacancy if it is filled by the shareholders. A vacancy that will occur at a specific later date (by reason of a resignation effective at a later date or otherwise) may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs. Section 11. Compensation. Unless the articles of incorporation or these ------------ bylaws provide otherwise, the board of directors may fix the compensation of directors. By resolution of the board of directors, each director may be paid his expenses, if any, of attendance at each meeting of the board of directors, and may be paid a stated salary as a director or a fixed sum for attendance at each meeting of the board of directors or both. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Section 12. Executive and Other Committees. Unless the articles of ------------------------------ incorporation or bylaws provide otherwise, the board of directors may create an executive committee and one or more other committees and appoint members of the board of directors to serve on them. Each committee must have two (2) or more members, who serve at the pleasure of the board of directors. The creation of a committee and appointment of members to it must be approved by the greater of (1) a majority of all the directors in office when the action is taken or (2) the number of directors required by the articles of incorporation or bylaws to take action. To the extent specified by the board of directors or in the articles of incorporation or bylaws, each committee may exercise the authority of the board of directors. A committee may not, however, authorize distributions; approve or propose to shareholders action required by applicable law to be approved by shareholders; fill vacancies on the board of directors or on any of its committees; amend articles of incorporation pursuant to applicable law authorizing amendment by the board of directors; adopt, amend, or repeal bylaws; approve a plan of merger not requiring shareholder approval; authorize or approve the reacquisition of shares, except according to a -9- formula or method prescribed by the board of directors; or authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the board of directors may authorize a committee (or a senior executive officer of the corporation) to do so within limits specifically prescribed by the board of directors. Provisions of these bylaws governing meetings, action without meetings, notice and waiver of notice, and quorum and voting requirements of the board of directors, apply to committees and their members as well. Section 13. Participation by Telephonic or Other Means. Unless the ------------------------------------------ articles of incorporation or these bylaws provide otherwise, the board of directors may permit any or all directors to participate in a regular or special meeting by, or conduct the meeting through the use of, any means of communication by which all directors participating may simultaneously hear each other during the meeting. A director participating in a meeting by this means shall be deemed to be present in person at the meeting. ARTICLE IV. OFFICERS Section 1. Number. The officers of the corporation shall be a chairman of ------ the board, a president, a vice president, a secretary and a treasurer, each of whom shall be elected by the board of directors. Such other officers, assistant officers and agents as may be deemed necessary may be elected or appointed by the board of directors. Any two or more offices may be held by the same person. Section 2. Election and Term of Officers. The officers of the corporation ----------------------------- to be elected by the board of directors shall be elected annually by the board of directors at the regular meeting of the board of directors immediately following the annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Each officer shall continue to serve until his successor is elected and qualifies or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Section 3. Resignation or Removal of Officers and Agents. --------------------------------------------- (a) An officer or agent may resign at any time by delivering written notice to the board of directors, to its chairman or to the corporation. A resignation shall be effective when the notice is delivered unless the notice specifies a later effective date. -10- (b) Any officer or agent may be removed by the board of directors whenever in its judgment, the best interests of the corporation will be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Section 4. Vacancies. A vacancy in any office because of death, --------- resignation, removal, disqualification or otherwise, may be filled by the board of directors for the unexpired portion of the term. Section 5. Chairman of the Board. The chairman of the board must be a --------------------- member of the board of directors at the time of election to such office. When present he shall preside at all meetings of the shareholders and of the board of directors. He may sign, with the president and secretary or any other proper officer of the corporation thereunto authorized by the board of directors, any deeds, mortgages, bonds, contracts or other instruments which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of chairman of the board and such other duties as may be prescribed by the board of directors from time to time. Section 6. President. The president shall be the principal executive --------- officer of the corporation and, subject to the control of the chairman and the board of directors, shall have general supervision and control of the business and affairs of the corporation. In the absence of the chairman of the board of directors, he shall, when present, preside at all meetings of the shareholders and of the board of directors. He may sign, with the secretary or any other proper officer of the corporation thereunto authorized by the board of directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts, or other instruments which the board of directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the board of directors or by these bylaws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time. Section 7. Vice President. In the absence of the president or in the -------------- event of his death, inability or refusal to act, the vice president shall perform the duties of the president, and when so acting, shall have all the powers of and be subject to all the restrictions upon the president. -11- The vice president shall perform such other duties as from time to time may be assigned to him by the president or by the board of directors. Section 8. Secretary. The secretary shall (a) prepare and keep the --------- minutes of the directors' and shareholders' meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these bylaws or as required by law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) authenticate records of the corporation; (e) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (f) sign with the president, certificates for shares of the corporation, the issuance of which shall have been authorized by resolutions of the board of directors; (g) have general charge of the stock transfer books of the corporation; (h) in general perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him by the president or by the board of directors. Section 9. Treasurer. The treasurer shall: (a) have charge and custody --------- of and be responsible for all funds and securities of the corporation; (b) receive and give receipts for monies due and payable to the corporation from any source whatsoever, and deposit all such monies in the name of the corporation in such banks, trust companies or other depositories as shall be selected in accordance with these bylaws; and (c) in general perform all of the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president or by the board of directors. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors shall determine. Section 10. Compensation. The board of directors may fix the compensation ------------ of the officers. No such payment shall preclude any officer from serving the corporation in any other capacity and receiving compensation therefor. ARTICLE V. CONTRACTS, LOANS, CHECKS AND DEPOSITS Section 1. Contracts. The board of directors may authorize any officer or --------- officers, agent or agents; to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. Section 2. Loans. No loans shall be contracted on behalf of the ----- corporation and no evidences of indebtedness -12- shall be issued in its name unless authorized by a resolution of the board of directors. Such authority may be general or confined to specific instances. Section 3. Checks, Drafts, Etc. All checks, drafts or other orders for ------------------- the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by resolution of the board of directors. Section 4. Deposits. All funds of the corporation not otherwise employed -------- shall be deposited from time to time to the credit of the corporation in such banks, companies or other depositories as the board of directors may select. ARTICLE VI. CERTIFICATES FOR SHARES AND THEIR TRANSFER Section 1. Certificates for Shares. Shares shall be represented by ----------------------- certificates. Certificates representing shares of the corporation shall be in such form as shall be determined by the board of directors. At a minimum, each share certificate must state on its face (1) the name of the corporation and that the corporation is organized under the law of the State of Mississippi; (2) the name of the person to whom issued; and (3) the number and class of shares and the designation of the series, if any, the certificate represents. If the corporation is authorized to issue different classes of shares or different series within a class, the designations, relative rights, preferences and limitations applicable to each class and the variations in rights, preferences and limitations determined for each series (and the authority of the board of directors to determine variations for future series) must be summarized on the front or back of each certificate or the corporation must furnish the shareholder this information on request in writing and without charge. Each share certificate must be signed (either manually or in facsimile) by the president or a vice president and by the secretary or an assistant secretary or by such other officers designated in the bylaws or by the board of directors so to do, and may be sealed with the corporate seal. If the person who signed (either manually or in facsimile) a share certificate no longer holds office when the certificate is issued, the certificate is nevertheless valid. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former -13- certificate for a like number of shares shall have been surrendered and cancelled, except that in the case of a lost, destroyed, or mutilated certificate a new one may be issued therefor upon such terms and indemnity to the corporation as the board of directors may prescribe. Section 2. Transfer of Shares. Transfer of shares of the corporation ------------------ shall be made only on the stock transfer books of the corporation by the holder of record thereof or by his legal representative, who shall furnish proper evidence of authority to transfer, or by his attorney thereunto authorized by power of attorney duly executed and filed with the secretary of the corporation, and on surrender for cancellation of the certificate for such shares. ARTICLE VII. INDEMNIFICATION Section 1. Right of Indemnity. The corporation may indemnify its officers ------------------ and directors to the fullest extent permitted under applicable law. Section 2. Right of Corporation to Insure. The corporation may purchase ------------------------------ and maintain insurance on behalf of an individual who is or was a director, officer, employee or agent of the corporation or who, while a director, officer, employee or agent of the corporation, is or was serving at the request of the corporation as a director, officer, partner, trustee, employee or agent of another foreign or domestic corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against liability asserted against or incurred by him in that capacity or arising from his status as a director, officer, employee or agent, whether or not the corporation would have power to indemnify him against such liability under applicable law. ARTICLE VIII. NOTICE Notice shall be in writing unless oral notice is reasonable under the circumstances. Notice may be communicated in person; by telephone, telegraph, teletype or other form of wire or wireless communication; or by mail or private carrier. If these forms of personal notice shall be impracticable, notice may be communicated by a newspaper of general circulation in the area where published; or by radio, television or other form of public broadcast communication. Written notice to shareholders, if in a comprehensible form, shall be effective when mailed, if mailed postpaid and correctly addressed to the shareholder's address shown in the corporation's current record of shareholders. -14- Except as provided above with respect to notice to shareholders, written notice, if in a comprehensible form, shall be effective at the earliest of the following: (1) When received; (2) Five (5) days after its deposit in the United States mail, as evidenced by the postmark, if mailed postpaid and correctly addressed; (3) On the date shown on the return receipt, if sent by registered or certified mail, return receipt requested, and the receipt is signed by or on behalf of the addressee. Oral notice shall be effective when communicated if communicated in a comprehensible manner. If applicable law prescribes notice requirements for particular circumstances, those requirements govern. If the articles of incorporation or these bylaws prescribe notice requirements, not inconsistent with this section or other provisions of applicable law, those requirements govern. ARTICLE IX. WAIVER OF NOTICE; ASSENT TO ACTIONS Unless otherwise provided by law, a shareholder or director of the corporation may waive any notice required by applicable law, the articles of incorporation or these bylaws, before or after the date and time stated in the notice. Except as provided below, the waiver must be in writing, be signed by the shareholder or director entitled to the notice, and delivered to the corporation for inclusion in the minutes or filing with the corporate records. A director's attendance at or participation in a meeting waives any required notice to him of the meeting unless the director at the beginning of the meeting (or promptly upon his arrival) objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. A shareholder's attendance at a meeting (i) waives objection to lack of notice or defective notice of the meeting unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting, and (ii) waives objection to consideration of a particular matter at the meeting that is not within the purpose or purposes described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. A director who is present at a meeting of the board of directors or a committee of the board of directors when corporate action is taken shall be deemed to have assented to the action taken unless: (1) he objects at the beginning of the meeting (or promptly upon his arrival) to holding it or -15- transacting business at the meeting; (2) his dissent or abstention from the action taken shall be entered in the minutes of the meeting; or (3) he delivers written notice of his dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting. The right of dissent or abstention shall not be available to a director who votes in favor of the action taken. ARTICLE X. EMERGENCY BYLAWS The emergency bylaws provided in this article shall be operative during any emergency in the conduct of the business of the corporation, notwithstanding any different provision in the preceding articles of the bylaws or in the articles of incorporation of the corporation or in the Mississippi Business Corporation Act. An emergency exists if a quorum of the corporation's directors cannot readily be assembled because of some catastrophic event. To the extent not inconsistent with the provisions of this article, the bylaws provided in the preceding articles shall remain in effect during such emergency and upon its termination the emergency bylaws shall cease to be operative. During any such emergency: (a) A meeting of the board of directors may be called by any officer or director of the corporation. Notice of the meeting shall be given by the officer or director calling the meeting only to those directors whom it is practicable to reach and may be given in any practicable manner, including by publication and radio. (b) One or more officers of the corporation present at a meeting of the board of directors may be deemed to be directors for the meeting, in order of rank and within the same rank in order of seniority, as necessary to achieve a quorum. (c) The board of directors, either in anticipation of or during any such emergency, may modify lines of succession to accommodate the incapacity of any director, officer, employee or agent. (d) The board of directors, either in anticipation of or during any such emergency, may relocate the principal offices or regional offices, or authorize the officers to do so. Corporate action taken in good faith during an emergency under this section to further the ordinary business affairs of the corporation binds the corporation and may not be used to impose liability on a corporate director, officer, employee or agent. -16- These emergency bylaws shall be subject to repeal or change by further action of the board of directors or by action of the shareholders, but no such repeal or change shall modify the provisions of the next preceding paragraph with regard to action taken prior to the time of such repeal or change. Any amendment of these emergency bylaws may make any further or different provision that may be practical and necessary for the circumstances of the emergency. ARTICLE XI. FISCAL YEAR The fiscal year of the corporation shall begin on January 1 and end on December 31 in each year. ARTICLE XII. DISTRIBUTIONS The board of directors may authorize and the corporation may make distributions to its shareholders, subject to restriction by the articles of incorporation and applicable law. ARTICLE XIII. CORPORATE SEAL The board of directors shall provide a corporate seal which shall be circular in form and shall have inscribed thereon the name of the corporation and the state of incorporation and the words "Corporate Seal". ARTICLE XIV. AMENDMENTS Unless the articles of incorporation, applicable law or a resolution of the shareholders reserves this power exclusively to the shareholders in whole or part, the corporation's board of directors may amend or repeal these bylaws and adopt new bylaws at any regular or special meeting of the board of directors. ACCEPTED THIS 23rd day of March, 1993. By:___________________________________________ Title: Secretary -17- TABLE OF CONTENTS -----------------
Page ---- ARTICLE I PRINCIPAL OFFICE.................................................................. 1 ARTICLE II SHAREHOLDERS...................................................................... 1 Section 1 Annual Meeting....................................................... 1 Section 2 Special Meetings..................................................... 1 Section 3 Place of Meeting..................................................... 1 Section 4 Notice of Meeting.................................................... 2 Section 5 Closing of Transfer Books or Fixing of Record Date................... 2 Section 6 Voting Lists......................................................... 3 Section 7 Quorum............................................................... 3 Section 8 Proxies.............................................................. 3 Section 9 Voting of Shares..................................................... 4 Section 10 Voting of Shares by Certain Holders.................................. 4 Section 11 Informal Action by Shareholders...................................... 5 Section 12 Cumulative Voting.................................................... 5 Section 13 Shares Held by Nominees.............................................. 6 Section 14 Corporation's Acceptance of Votes.................................... 6 ARTICLE III BOARD OF DIRECTORS................................................................ 7 Section 1 General Powers....................................................... 7 Section 2 Number, Election, Tenure and Qualifications.......................... 7 Section 3 Resignation of Directors; removal of Directors by Shareholders....... 7 Section 4 Regular Meetings..................................................... 8 Section 5 Special Meetings..................................................... 8 Section 6 Place of Meetings.................................................... 8 Section 7 Quorum............................................................... 8 Section 8 Manner of Acting..................................................... 8 Section 9 Action Without a Meeting............................................. 8 Section 10 Vacancies............................................................ 9 Section 11 Compensation......................................................... 9 Section 12 Executive and Other Committees....................................... 9 Section 13 Participation by Telephonic or Other Means........................... 10 ARTICLE IV OFFICERS.......................................................................... 10 Section 1 Number............................................................... 10 Section 2 Election and Term of Officers........................................ 10 Section 3 Resignation or Removal of Officers and Agents........................ 10 Section 4 Vacancies............................................................ 11 Section 5 Chairman of the Board................................................ 11 Section 6 President............................................................ 11 Section 7 Vice President....................................................... 11 Section 8 Secretary............................................................ 12
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Page ---- Section 9 Treasurer............................................................. 12 Section 10 Compensation.......................................................... 12 ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS.............................................. 12 Section 1 Contracts............................................................. 12 Section 2 Loans................................................................. 12 Section 3 Checks, Drafts, Etc................................................... 13 Section 4 Deposits.............................................................. 13 ARTICLE VI CERTIFICATES FOR SHARES AND THEIR TRANSFER......................................... 13 Section 1 Certificates for Shares............................................... 13 Section 2 Transfer of Shares.................................................... 14 ARTICLE VII INDEMNIFICATION.................................................................... 14 Section 1 Right of Indemnity.................................................... 14 Section 2 Right of Corporation to Insure........................................ 14 ARTICLE VIII NOTICE............................................................................. 14 ARTICLE IX WAIVER OF NOTICE; ASSENT TO ACTIONS................................................ 15 ARTICLE X EMERGENCY BYLAWS................................................................... 16 ARTICLE XI FISCAL YEAR........................................................................ 17 ARTICLE XII DISTRIBUTIONS...................................................................... 17 ARTICLE XIII CORPORATE SEAL..................................................................... 17 ARTICLE XIV AMENDMENTS......................................................................... 17 ii
EX-3.23 20 CERTIFICATE OF MISSISSIPPI LIMITED PARTNERSHIP EXHIBIT 3.23 CERTIFICATE OF MISSISSIPPI LIMITED PARTNERSHIP (Attach duplicate original) The undersigned general partners, pursuant to Section 79-14-201 of the Mississippi Code of 1972, as amended, hereby executes the following certificate of Limited Partnership and set forth: 1. The name of the Limited Partnership is: Mississippi-I Gaming, L.P., Federal Tax ID: Applied for 2. The name, street and mailing address of each General Partner is as follows: Bayview Yacht Club, Inc., Interstate 80, Garson Road Exit, P.O. Box 399, Verdi, Nevada 89439-0399 3. The street and mailing address of the registered office is 633 North State Street, Jackson, Mississippi 39202, and the registered agent at such address is Thomas B. Shepherd 4. The latest date upon which the Limited Partnership is to dissolve is April 30, 2092 5. Other matters the general partners determine to include are: None By: Bayview Yacht Club, Inc. ------------------------------------------------------ Printed Name/ Robert List, Vice President General Partner STATE OF MISSISSIPPI COUNTY OF __________ I, _________________________, a notary public do hereby certify that on this ____ day of April, 1993, personally appeared before me Robert List, who, being by me first duly sworn, declared that he is the Vice President of Bayview Yacht Club, Inc. the General Partner of Mississippi-I Gaming, L.P., that he executed the foregoing document on behalf of the General Partner of this Limited Partnership, and that the statements therein contained are true. ________________________________ Notary Public Notary Seal EX-3.25 21 ARTICLES OF INCORPORATION EXHIBIT 3.25 UNITED STATES OF AMERICA STATE OF LOUISIANA FOX MCKEITHEN SECRETARY OF STATE As Secretary of State, of the State of Louisiana, I do hereby Certify that the annexed and following is a True and Correct copy of the Articles of Incorporation, Initial Report, Amendments and 1996 Annual Report of LOUISIANA GAMING ENTERPRISES, INC. A LOUISIANA corporation domiciled at HARVEY, As shown by comparison with documents filed and recorded in this Office. In testimony whereof, I have hereunto set my hand and caused the Seal of my Office to be affixed at the City of Baton Rouge on, April 29, 1997 /s/ Fox McKeithen CBU Secretary of State ARTICLES OF INCORPORATION *UNITED STATES OF AMERICA * OF *STATE OF LOUISIANA * LOUISIANA GAMING ENTERPRISES, INC. *PARISH OF JEFFERSON ****************************************************************************** BE IT KNOWN that on the 22nd day of October, 1991, before me, William L. Von Hoene, Notary Public duly commissioned and qualified in and for the State and parish aforesaid, personally appeared the subscribers hereto, of full age of majority, who declared to me, Notary, in the presence of the undersigned competent witnesses, that availing themselves of the provisions of the Louisiana Business Corporation Law (Louisiana R.S. 12:1 et seq), they do hereby form, ------ organize and constitute themselves, as well as all such other persons who may hereafter join or become associated with them or their successors; into a business corporation under and in accordance with the following Articles of Incorporation: ARTICLE I The name of the Corporation is LOUISIANA GAMING ENTERPRISES, INC. ARTICLE II The Corporation's purpose is to engage in any lawful activity for which corporations may be formed under the Louisiana Business Corporation Law. ARTICLE III The Corporation has authority to issue 100 shares of common stock without par value. -2- ARTICLE IV The Incorporators' names and post office addresses are: Name Address ---- ------- Eric F. Skrmetta 501 Destrehan Avenue Harvey, Louisiana 70058 ARTICLE V Shareholders shall have preemptive rights. ARTICLE VI The business affairs of the corporation shall be managed by the Board of Directors. The number of directors shall be such number, not less than three nor more than five, as may be designated in the by-laws and if not designated, as may from time to time be elected by the shareholders, except that when all of the outstanding shares are held of record by fewer than three shareholders, then there need be only as many directors as there are shareholders, but this shall not prevent a greater number of directors as aforesaid. Any director absent from a meeting of the Board of Directors, or any committee thereof, may be represented by any other director who may cast the absent director's vote according to his or her written instructions, general or special. ARTICLE VII Special meetings of shareholders may be called by the president or by a majority of the Board of Directors. ARTICLE VIII Without any necessity of action by the shareholders, previously authorized but unissued shares of stock of the -3- corporation may be issued from time to time by the Board of Directors, and any and all shares so issued and paid for, shall be deemed full paid stock and not liable to any further assessment or call, and the holder of such shares shall not be liable for any further payment thereon. ARTICLE IX In the election of directors, each shareholder of record shall have the right to multiply the number of votes to which he or she is entitled by the number of directors to be elected, and to cast all such votes for one candidate, or distribute them among any two or more candidates. ARTICLE X Whenever the affirmative vote of shareholders is required to authorize or constitute corporate action, the consent in writing to such action signed only by shareholders holding that proportion of the total voting power on the question which is required by law or by these Articles of Incorporation, whichever requirement is higher, shall be sufficient for the purpose, without necessity for a meeting of shareholders. ARTICLE XI Cash, property or share dividends, shares issuable to shareholders in connection with a reclassification of stock, and the redemption price of redeemed shares, which are not claimed by the shareholders entitled thereto within one year after the dividend or redemption price became payable or the shares became issuable, despite reasonable efforts by the -4- corporation to pay the dividend or redemption price or deliver the certificates for the shares to such shareholders within such time, shall, at the expiration of such time, revert in full ownership to the corporation, and the corporation's obligation to pay such dividend or redemption price or issue such shares, as the case may be, shall thereupon cease; provided that the board of directors may, at any time, for any reason satisfactory to it, but need not, authorize (a) payment of the amount of any cash or property dividend or redemption price or (b) issuance of any shares, ownership of which has reverted to the corporation pursuant to this article, to the entity who or which would be entitled thereto had such reversion not occurred. THUS DONE AND PASSED IN MULTIPLE ORIGINALS in Harvey, State of Louisiana, on the day, month and year hereinabove set forth in the presence of the undersigned competent witnesses and me, Notary, after due reading of the whole. WITNESSES: /s/ ------------------- /s/ ------------------- /s/ Eric F. Skrmetta -------------------- Eric F. Skrmetta /s/ William L. Von Hoene -------------------------------------------------- William L. Von Hoene, NOTARY PUBLIC -5- INITIAL REPORT OF LOUISIANA GAMING ENTERPRISES, INC. ARTICLE I The Corporation's registered office is located at and its municipal address is 501 Destrehan Avenue, Harvey, Louisiana 70058. ARTICLE II Its registered agent is Eric F. Skrmetta; his address is 501 Destrehan Avenue, Harvey, Louisiana 70058. ARTICLE III The first directors are: Eric F. Skrmetta 501 Destrehan Avenue Harvey, Louisiana 70058 /s/ Eric F. Skrmetta -------------------- Eric F. Skrmetta -6- AFFIDAVIT OF ACCEPTANCE OF APPOINTMENT -------------------------------------- BY DESIGNATED REGISTERED AGENT ------------------------------ Corporations Department Office of the Secretary of State State of Louisiana STATE OF LOUISIANA PARISH OF JEFFERSON On the 22nd day of October, 1991, before me, a Notary Public in and for the State and Parish aforesaid, personally came and appeared Eric F. Skrmetta, whose post office address is 501 Destrehan, Harvey, Louisiana 70058, who is to me known to be the person, and who, being duly sworn, acknowledged to me that he does hereby accept appointment as the Registered Agent of LOUISIANA GAMING ENTERPRISES, INC., which is a Corporation authorized to transact business in the State of Louisiana pursuant to the provisions of the Title 12, Chapter 1, 2, and 3. /s/ Eric F. Skrmetta -------------------- Eric F. Skrmetta REGISTERED AGENT Subscribed and sworn to before me on the day, month, and year first above set forth /s/ William L. Von Hoene - ----------------------------------- William L. Von Hoene, Notary Public -7-
W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE AND/OR CHANGE OF REGISTERED AGENT Secretary of State (R.S. 12.104 & 12.236) -------------------------------------------------------------------------------- Domestic Corporation Return to: Corporations Division (Business or Non-Profit) P.O. Box 94125 Enclose $20.00 filing fee Baton Rouge, LA 70804-3125 Make remittance payable to Phone (504) 925-4704 Secretary of State Do not send cash - -------------------------------------------------------------------------------------------------------------- Corporation Name LOUISIANA GAMING ENTERPRISES, INC. ---------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- CHANGE OF LOCATION OF REGISTERED OFFICE [Eligible] - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- --------------------------------- JASON A. RABALAIS, VICE PRESIDENT & GENERAL MANAGER CHANGE OF REGISTERED AGENT(S) Notice is hereby given that the Board of Directors of the above named corporation has authorized the change of the corporation's registered agent(s). The name(s) and address(es) of the new registered agent(s) are as follows MR.JASON A. RABALAIS, 4132 PETERS ROAD, HARVEY, LOUISIANA 70058 - -------------------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------------------- --------------------------------- President, Vice President or Secretary JASON A. RABALAIS, VICE PRESIDENT & GENERAL MANAGER AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE [Eligible] - ------------------------------------------------------------------------------------------------------------ - ----------------- . JASON A. RABALAIS ------------------------ ------------------------ Registered Agent(s) Sworn to and subscribed before me this __________ day of __________, 19__ ------------------------ Notary
-8- UNANIMOUS WRITTEN CONSENT ------------------------- OF THE SHAREHOLDERS OF ---------------------- LOUISIANA GAMING ENTERPRISES, INC. ---------------------------------- Pursuant to La R.S. 12:76 and in lieu of a meeting of Shareholders of Louisiana Gaming Enterprises, Inc. (the "Corporation") for such purposes, the undersigned being all of the Shareholders of this Corporation, do hereby take and authorize by unanimous written consent each and all of the following actions for election of Directors as hereinafter set forth: RESOLVED, that the following named individuals are hereby elected as Directors of the Corporation effective immediately and shall serve until their respective successors are chosen and qualified: Robert F. List Timothy J. Parrot There being no further business to be taken by the undersigned Shareholders pursuant to this Unanimous Written Consent, each of the Shareholders has signed this Unanimous Written Consent as of the date indicated below, and this Unanimous Written Consent shall be filed with or otherwise entered on the minutes and other appropriate records of this Corporation. ____________________________, 1996. Boomtown, Inc. Sole Shareholder By:___________________________ Timothy J. Parrot Authorized Representative CERTIFICATE I, Secretary of Louisiana Gaming Enterprises, Inc. (the "Corporation"), hereby certify that the subscribers to the foregoing consent are the registered holders of all of the outstanding shares of the Corporation having voting powers on the matters set forth therein, on this ____ day of _________, 1996. ____________________________________ Robert F. List Secretary -9- UNANIMOUS WRITTEN CONSENT ------------------------- OF THE BOARD OF DIRECTORS ------------------------- LOUISIANA GAMING ENTERPRISES, INC. ---------------------------------- Pursuant to La R.S. 12:81C(9), and in lieu of a meeting of the Board of Directors for such purposes, the undersigned, being all of the Directors of Louisiana Gaming Enterprises, Inc. (the "Corporation") do hereby take and authorize by unanimous written consent each and all of the following actions for appointment of officers as hereinafter set forth: RESOLVED, that the following persons are nominated and elected as officers of the corporation effective immediately to serve until their respective successors are chosen and qualfied: Chairman of the Board - Timothy J. Parrot Chief Executive Officer - Timothy J. Parrot President - Phil Bryan Secretary/Treasurer - Robert F. List IN WITNESS WHEREOF, this Unanimous Written Consent has been executed by each Director of the Corporation on the date written below. /s/ Timothy J. Parrot September 2, 1996 ------------------------------ ------------------------ Timothy J. Parrot /s/ Robert F. List September 2, 1996 ------------------------------ ------------------------ Robert F. List CERTIFICATE I, Secretary of Louisiana Gaming Enterprises, Inc. (the "Corporation"), certify that the subscribers to the foregoing consent constitute all of the members of the Board of Directors of the Corporation having voting power on the matters set forth therein, on the 2nd day of Sept., 1996. ----- ------ /s/ --------------------------- Robert F. List Secretary -10- EX-3.26 22 AMENDED AND RESTATED PARTNERSHIP AGREEMENT EXHIBIT 3.26 AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE REGULATORY AUTHORITY HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS AGREEMENT OF LIMITED PARTNERSHIP OR THE LIMITED PARTNERSHIP INTERESTS PROVIDED FOR HEREIN. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL. THE LIMITED PARTNERSHIP INTERESTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), IN RELIANCE UPON THE EXEMPTIONS SET FORTH IN SECTION 4(2) THEREOF AND IN RULE 506 OF REGULATION D PROMULGATED THEREUNDER; THE ISSUER IS UNDER NO OBLIGATION TO REGISTER THE LIMITED PARTNERSHIP INTERESTS UNDER THE 1933 ACT. A LIMITED PARTNERSHIP INTEREST MAY NOT BE SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION UNDER THE 1933 ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE GENERAL PARTNER THAT SUCH REGISTRATION IS NOT REQUIRED. ADDITIONAL RESTRICTIONS ON THE TRANSFER OF LIMITED PARTNERSHIP INTERESTS ARE CONTAINED IN SECTION 6 OF THIS AGREEMENT. BASED UPON THE FOREGOING, A PURCHASER OF A LIMITED PARTNERSHIP INTEREST MUST BE PREPARED TO BEAR THE ECONOMIC RISK OF INVESTMENT THEREIN FOR AN INDEFINITE PERIOD OF TIME. AMENDED AND RESTATED PARTNERSHIP AGREEMENT OF LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM THIS AMENDED AND RESTATED PARTNERSHIP AGREEMENT (this "Agreement") of Louisiana-I Gaming, a Louisiana Partnership in Commendam (the "Partnership"), is entered into as of ___________, 1993 by and among Louisiana Gaming Enterprises, Inc., a Louisiana corporation (the "General Partner"), Boomtown, Inc., a Delaware corporation ("Boomtown") as a limited partner, Eric Skrmetta ("Skrmetta"), as a limited partner and those other persons who have executed this Agreement as limited partners (collectively with Boomtown, the partners in commendam or "Limited Partners"). The General Partner and the Limited Partners are referred to collectively as the "Partners" and each individually as a "Partner." WITNESSETH: ----------- WHEREAS, the original Partnership Agreement of Louisiana-I Gaming, a Louisiana Partnership in Commendam, was entered into on April 20, 1993; and WHEREAS, the parties hereto desire to amend and restate in their entirety the Partnership Agreement of Louisiana-I Gaming, a Louisiana Partnership in Commendam, to set forth their understandings with respect to the business affairs of the Partnership and to provide for the admission of Eric Skrmetta as a limited partner; NOW, THEREFORE, in consideration of the mutual promises made herein, the parties intending to be legally bound, hereby agree that the Partnership Agreement is hereby amended and restated in its entirety to read as follows: SECTION 1 --------- DEFINITIONS ----------- As used in this Agreement: Act shall mean the Louisiana Partnership Law, Louisiana Civil Code Articles --- 2801-2848. Additional Capital Contribution shall mean any contribution to the capital ------------------------------- of the Partnership (including the initial capital contribution of a person admitted as an additional Limited Partner pursuant to Section 3.3) made on a date subsequent to the date of this Agreement. Each Additional Capital Contribution shall be deemed to be made as of the close of business on the date thereof. Authorized Transferee shall have the meaning set forth in Section --------------------- 6.1(a)(iv). Bankruptcy shall mean, with respect to a Partner, the commencement of any ---------- bankruptcy or insolvency case or proceeding against such Partner which shall continue and remain unstayed and in effect for a period of 60 consecutive days, or the filing by such Partner of a petition, answer or consent seeking relief under any applicable Federal or state bankruptcy, insolvency or similar law. Capital Account shall mean, for each Partner, a separate account that is: --------------- (a) increased by (i) the amount of such Partner's Capital Contribution and (ii) allocations of Profits to such Partner pursuant to Section 4.2; (b) decreased by (i) the amount of cash distributed to such Partner by the Partnership, (ii) the fair market value of any other property distributed to such Partner by the Partnership (determined as of the date of distribution, without regard to Section 7701(g) of the Code, and net of liabilities secured by such property that the Partner assumes or to which the Partner's ownership of the property is subject), and (iii) allocations of Losses to such Partner pursuant to Section 4.2; and (c) otherwise adjusted so as to conform to the requirements of Sections 704(b) and (c) of the Code and the regulations issued thereunder. Capital Contribution shall mean, for any Partner, the net amount of cash -------------------- and the fair market value, without regard to Section 7701(g) of the Code, of any other property (determined as of the date of contribution and net of liabilities secured by such property that the Partnership assumes or to which the Partnership's ownership of the property is subject) contributed by such Partner to the capital of the Partnership. A Partner's Capital Contribution shall include such Partner's Additional Capital Contributions. Code shall mean the Internal Revenue Code of 1986, as amended. ---- Dissolution of a Partner which is not a natural person shall mean that such ----------- Partner has terminated its existence (whether as a partnership, corporation or other legal entity) and dissolved; provided, however, that a change in the -------- ------- membership of a Partner that is a partnership shall not constitute a "Dissolution" of such Partner, so long as the business of the Partner is continued in partnership form, regardless of whether such Partner is deemed technically dissolved for partnership or tax law purposes. Distributable Income shall have the meaning set forth in Section 4.1(a). -------------------- -2- Fiscal Year shall mean the period from January 1 through December 31 of ----------- each year (unless otherwise required by law). Indemnified Person shall have the meaning set forth in section 8.2. ------------------ Liquidating Partner shall mean the General Partner unless another person is ------------------- selected pursuant to Section 7.2. Majority-In-Interest of the Limited Partners shall mean a group of Limited -------------------------------------------- Partners whose aggregate Percentage Interests are in excess of 50 percent of the total Percentage Interests of all of the Limited Partners. Minimum Gain of the Partnership shall, as provided in Treasury Regulation ------------ Section 1.704-2, mean the total amount of gain the Partnership would realize for Federal income tax purposes if it disposed of all assets subject to nonrecourse liability for no consideration other than full satisfaction thereof. Nonrecourse Deduction shall mean an item of loss, expense or deduction --------------------- (other than a Partner Nonrecourse Deduction) attributable to a nonrecourse liability of the Partnership within the meaning of Treasury Regulation Section 1.704-2(b). Partner Nonrecourse Deduction shall mean an item of loss, expense or ----------------------------- deduction attributable to a nonrecourse liability of the Partnership for which a Partner bears the economic risk of loss within the meaning of Treasury Regulation Section 1.704-2(i). Percentage Interest shall have the meaning set forth in Section 3.7. ------------------- Profits and Losses of the Partnership shall mean items of income and gain ------------------ (including items not subject to Federal income tax) and items of loss, expense and deduction (including items not deductible, depreciable, amortizable or otherwise excludable from income for Federal income tax purposes), respectively, as determined under Federal income tax principles. Project shall mean the proposed gaming facility which is described with ------- particularity on Schedule B attached hereto. Required License shall have the meaning set forth in Section 2.7. ---------------- Substitute Partner shall have the meaning set forth in Section 6.1(a). ------------------ Transfer shall have the meaning set forth in Section 6.1. -------- Transferring Partner shill have the meaning set forth in Section 6.1(a)(i). -------------------- Unreturned Capital Contribution shall mean, with respect to each Partner, ------------------------------- the amount of such Partner's Capital Contribution reduced by the amount distributed to such -3- Partner pursuant to Section 4.1(a)(i). For purposes of the preceding sentence, the "amount distributed" with regard to any distribution of property in kind shall be equal to the fair market value of such property, without regard to Section 7701(g) of the Code, determined as of the date of distribution and net of liabilities secured by the property that the distributee Partner assumes or to which the distributee Partner's ownership of the property is subject. SECTION 2 --------- FORMATION OF LIMITED PARTNERSHIP -------------------------------- 2.1 Formation, Name and Principal Office. The Partners hereby enter into ------------------------------------ and form the Partnership for the limited purpose and scope set forth in this Agreement. Except as otherwise provided herein, the Partnership shall be a partnership in commendam governed by the Act. The name of the Partnership shall be "Louisiana-I Gaming, a Louisiana Partnership in Commendam." The principal ad registered office of the Partnership shall be c/o Smith, Martin & Schneider, 700 Camp Street, New Orleans, Louisiana 70130 or, upon written notice to the Limited Partners, at such other place as may be designated by the General Partner. 2.2 Purpose and Scope of the Partnership. The purpose of the Partnership ------------------------------------ shall be to: (i) lease or otherwise acquire property; (ii) develop one or more of the following on the property, to the extent allowed by and in conformance with applicable law: (a) a riverboat gaming vessel; (b) a dockside gaming vessel; or (c) a land-based casino; (iii) develop any facilities that are related to, necessary for the operation of, or compatible with and enhance the gaming operation to be conducted on the property, including parking areas, entertainment and lodging facilities, food and beverage service, passenger ticketing facilities, docking facilities, storage and maintenance facilities (including fueling facilities for any riverboat vessel); (iv) engage in any other lawful activities determined by the General Partner to be necessary or advisable in furtherance of the foregoing. 2.3 Names and Addresses of the Partners. The name and address of each ----------------------------------- Partner shall be set forth on Schedule A. 2.4 Term of the Partnership. The Partnership commenced on April 20, 1993 ----------------------- and shall continue for a period of 99 years thereafter, unless earlier dissolved and terminated pursuant to Section 7. -4- 2.5 Required Documents. ------------------ (a) Partnership Documents. The General Partner shall cause to be --------------------- filed, recorded or amended, as necessary, a certificate of limited partnership or partnership in commendam and any other documents required to be filed, recorded or amended in connection with the formation or operation of the Partnership pursuant to the laws of the State of Louisiana or any other jurisdiction in which the Partnership's business is conducted. (b) Other Documents. The Limited Partners shall execute and --------------- acknowledge as requested by the General Partner such documents as may be necessary or desirable to (i) comply with legal requirements applicable to the formation of the Partnership or the operation of the Partnership's business, or (ii) otherwise give effect to the terms of this Agreement. (c) Special Power of Attorney. Each Limited Partner hereby grants to ------------------------- the General Partner a special power of attorney irrevocably appointing the General Partner as the Limited Partner's attorney-in-fact with power and authority to execute and acknowledge, in the Limited Partner's name and on its behalf, any document described in Section 2.5(b). Such special power of attorney is coupled with an interest. 2.6 Title to Property. Title to all Partnership property shall be held in ----------------- the name of the Partnership. 2.7 Required Licenses. Each Partner shall use its reasonable efforts to ----------------- obtain and continue to hold all governmental licenses, permits and similar authorizations that are necessary or advisable in connection with the business of the Partnership, as determined by the General Partner in its reasonable discretion ("Required Licenses"). SECTION 3 --------- CAPITALIZATION OF THE PARTNERSHIP --------------------------------- 3.1 Initial Capital Contribution. Each Partner shall make a contribution ---------------------------- to the capital of the Partnership. The initial capital contribution of the General Partner shall be $250,000 payable not later than the date on which the Partnership commences to conduct gaming operations. The initial capital contribution of Boomtown shall be $4,750,000 payable not later than the date on which the Partnership commences to conduct gaming operations. Skrmetta's initial Capital Contribution shall be $1,000 payable upon execution of this Agreement. Each other Limited Partner's initial capital contribution shall be in such amount as shall be agreed to by the General Partner and shall be set forth on Schedule A. -5- 3.2 Additional Capital Contributions. -------------------------------- (a) General. Except as otherwise specifically provided in this ------- Section 3.2, no Partner shall be permitted or required to make an Additional Capital Contribution. (b) Mandatory Additional Contributions by the General Partner. The --------------------------------------------------------- General Partner shall make any capital contribution required in connection with the dissolution of the Partnership pursuant to Section 7.3(e). In addition, the General Partner shall make any capital contributions necessary for it to maintain, at all times during the term of the Partnership, a positive Capital Account balance at least equal to the lesser of (i) one percent of the aggregate positive Capital Account balances of the Partners or (ii) $500,000. (c) Other Additional Contributions. Prior to completion of the ------------------------------ Project, any Partner may contribute additional capital to the Partnership upon the consent of the General Partner. Once the Project has been completed, if the General Partner determines in its sole discretion that the Partnership needs additional capital for any purpose, the General Partner may offer to the Partners the opportunity to make Additional Capital Contributions; provided, -------- that Skrmetta shall be entitled to make his pro rata share of any Additional Capital Contributions (i.e., that portion which would preclude a change to Skrmetta's Percentage Interest under section 3.7), using the proceeds of a loan from the Partnership to Skrmetta, which loan shall be repaid solely out of amounts otherwise distributable by the Partnership to Skrmetta, under this Agreement. 3.3 Admission of Additional Limited Partners. Subject to its authority to ---------------------------------------- approve Transfers of limited partnership interests under Section 6, the General Partner may admit additional persons as Limited Partners only with the consent of all the Limited Partners and only in compliance with applicable gaming laws. 3.4 Withdrawal and Return of Capital. Except as provided in Sections 4.1, -------------------------------- 6.2 and 7.3, (i) no Partner may withdraw any portion of its Capital Contribution without the prior consent of the General Partner and a Majority-In-Interest of the Limited Partners and (ii) no Partner shall be entitled to a return of such Partner's Capital Contribution. 3.5 Loans to the Partnership. If the General Partner determines that the ------------------------ Partnership needs additional capital for any purpose, the General Partner may offer to the Partners, pro rata in proportion to their respective Percentage Interests, the opportunity to lend a specified amount of cash to the Partnership at a rate of interest equal to the prime rate of interest quoted from time to time by the Bank of America N.T.S.A. San Francisco main branch plus two percent (but not to exceed the maximum rate permitted under applicable law). If any Partner declines to lend its pro rata share of such amount to the Partnership, the other Partners may elect to lend to the Partnership all or a portion of the amount necessary to cover the resulting shortfall (in such -6- proportions as the General Partner may determine in its sole discretion). Notwithstanding the foregoing, the General Partner shall not raise capital through Partner loans to the Partnership without first offering the Partners an opportunity to contribute the needed capital through Additional Capital Contributions pursuant to Section 3.2(c). 3.6 Limitation of Liability. Except as otherwise required by the Act or ----------------------- in connection with a claim against a Limited Partner for recovery of distributions received by such Limited Partner in violation of this Agreement, the liability of each Limited Partner for Partnership Losses shall not exceed the value of such Limited Partner's interest in the Partnership. Any cash or property that a Limited Partner is obligated to return to the Partnership shall be returned immediately upon demand therefor by the General Partner. A Limited Partner obligated to return property may, at its option, return cash equal to the fair market value of the property (determined by the General Partner in its reasonable discretion as of the date of such return). If, as a result of a Limited Partner receiving a distribution of cash or property that it is required to return, Losses which otherwise would have been allocated to the Limited Partner were allocated to the General Partner (and such allocation has not been reversed pursuant to Section 4.2(D)(iv)), tho Capital Accounts of the Partners shall be adjusted to reflect the allocation of such Losses to the Limited Partner. 3.7 Percentage Interest. ------------------- (a) Upon execution of this Agreement by the Partners, the percentage interests ("Percentage Interests") of the Partners shall be as follows: General Partner 5% Boomtown 87.5% Skrmetta 7.5% Except as specifically provided in (b) below, the Percentage Interests of the Partners shall not subsequently be adjusted. (b) If, after completion of the Project, there is an Additional Capital Contribution, the Percentage Interests of the Partners shall immediately thereafter be adjusted so that the Percentage Interest of each Partner is equal to the ratio that (A) the sum of such Partner's share of the Additional Capital Contributions made on such date and the fair market value of such Partner's interest in the Partnership (determined as of the time immediately prior to such Additional Capital Contributions) bears to (B) the sum of all Additional Capital Contributions made on such date and the aggregate fair market value of the Partners' interests in Partnership (determined as of the time immediately prior to such Additional capital Contributions). 3.8 Interest on Capital. No Partner shall be entitled to interest on such ------------------- Partner's Capital Contribution. -7- SECTION 4 --------- DISTRIBUTIONS, PROFITS AND LOSSES --------------------------------- 4.1 Distributions. ------------- (a) Except as otherwise required pursuant to Section 4.1(b) or (c) or applicable law, the Partnership shall make distributions of cash or property from time to time at the discretion of the General Partner; provided, however, -------- ------- that, subject to the foregoing limitations, the Partnership shall make quarterly distributions of Distributable Income as follows: (i) Within 45 days after the end of each of the first three quarters of each Fiscal Year, 75 percent of the Partnership's Distributable Income for such quarter shall be distributed to the Partners in proportion to their respective Percentage Interests; and (ii) Within 60 days after the end of the final quarter of each Fiscal Year, 100 percent of any previously undistributed Distributable Income for such Fiscal Year shall be distributed to the Partners in proportion to their respective Percentage Interests. For purposes of this Section 4.1(a), "Distributable Income" for any period shall mean: (i) the sum of the Partnership's (A) net income, (B) depreciation and amortization charges, and (C) provision for income taxes or similar governmental fees; reduced by (ii) the sum of the Partnership's (A) capital expenditures in the normal course of operation, (B) scheduled principal repayments on indebtedness, and (C) income taxes or similar governmental fees actually paid (all of the foregoing items in this sentence to be determined with regard to amounts accrued or incurred in accordance with generally accepted accounting principles consistently applied); and further reduced by (iii) 50 percent of the aggregate deficit in Distributable Income, if any, for all prior periods (provided, however, that the reduction ----------------- required under this clause (iii) shall not be applied for purposes of determining the historic Distributable Income for any prior period). (b) Notwithstanding Section 4.1(a), cash or property of the Partnership available for distribution upon the dissolution of the Partnership (including cash or property received upon the sale or other disposition of assets in anticipation of or in connection with such dissolution) shall be distributed in accordance with the provision of Section 7.3. -8- (c) No distribution shall be made to a Limited Partner pursuant to Section 4.1(a) if and to the extent that, upon a hypothetical liquidation of the Partnership in accordance with the provisions of Section 7.3 immediately subsequent to such distribution, the Limited Partner would have a deficit Capital Account balance. 4.2 Allocations of Partnership Profits and Losses. --------------------------------------------- (a) Except as otherwise provided in this Section 4.2, Profits and Losses of the Partnership shall be allocated among the Partners as follows: (i) Profits of the Partnership shall be allocated: (A) First, to the Partners in proportion to their respective negative Capital Account balances until no Partner has a negative Capital Account balance; (B) Next, to the Partners in proportion to their respective Unreturned Capital Contributions until the Capital Account balance of each Partner is not less than such Partner's Unreturned Capital Contribution; and (C) Finally, to the Partners in proportion to their respective Percentage Interests. (ii) Next, Losses of the Partnership shall be allocated: (A) First, to the Partners in proportion to the amounts by which the Capital Account balance of each Partner exceeds such Partner's Unreturned Capital Contribution until the Capital Account balance of each Partner does not exceed such Partner's Unreturned Capital Contribution; (B) Next, to the Partners in proportion to their respective Unreturned Capital Contributions until the Capital Account balance of each Partner does not exceed zero; and (C) Finally, to the Partners in proportion to their respective Percentage Interests. (iii) Notwithstanding the foregoing provisions of this Section 4.2(a): (A) Nonrecourse Deductions shall be allocated among the Partners in proportion to their respective Percentage Interests; (B) In accordance with the provisions of Treasury Regulation Section 1.704-2(i), each item of Partner Nonrecourse Deduction shall be -9- allocated among the Partners in proportion to the economic risk of loss that the Partners bear with respect to the nonrecourse liability of the Partnership to which such item of Partner Nonrecourse Deduction is attributable; and (C) Solely for purposes of determining the amounts to be allocated among the Partners under Section 4.2(a)(i) and (ii), the Capital Account balances of the Partners shall not reflect any reduction thereof caused by (1) the allocation to the Partners' Capital Accounts of Nonrecourse Deductions or Partner Nonrecourse Deductions under this Section 4.2(a)(iii), or (2) any distributions that, notwithstanding the provisions of Section 4.5, are allocable to increases in the Partnership's Minimum Gain under Treasury Regulation Section 1.704-2(h) (except to the extent that such Nonrecourse Deductions, Partner Nonrecourse Deductions or distributions have been offset by operation of the minimum gain chargeback provisions of Section 4.2(b)(iii)). (b) Allocation Adjustments Required to Comply With Section 704(b) of ---------------------------------------------------------------- the Code. - -------- (i) Limitations on Allocation of Losses. Notwithstanding the ----------------------------------- provisions of Section 4.2(a)(ii), there shall be no allocation of Losses to any Limited Partner which would create or increase a deficit balance in such Limited Partner's Capital Account unless such allocation would be treated as valid under Section 704(b) of the Code. Any Losses that cannot be allocated to a Limited Partner pursuant to the preceding sentence shall be reallocated to the General Partner. (ii) Qualified Income Offset. Notwithstanding the provisions of ----------------------- section 4.2(a)(i), if in any Fiscal Year a Limited Partner receives (or is reasonably expected to receive) a distribution, or an allocation or adjustment to such Limited Partner's Capital Account, that creates or increases (or is reasonably expected to create or increase) a deficit balance in such Limited Partner's Capital Account, there shall be allocated to the Limited Partner such items of Partnership income or gain as are necessary to satisfy the requirements of a "qualified income offset" within the meaning of Treasury Regulation Section 1.704-1(b). (iii) Minimum Gain Chargeback. Notwithstanding the provisions of ----------------------- Section 4.2(a), this Section 4.2(b)(iii) hereby incorporates by reference the "minimum gain chargeback" provisions of Treasury Regulation Section 1.704-2. In general, upon a reduction of the Partnership's Minimum Gain, the preceding sentence shall require that items of income and gain be allocated among the Partners in a manner that reverses prior allocations of Nonrecourse and Partner Nonrecourse Deductions as well as reductions in the Partners' Capital Account balances resulting from distributions that, notwithstanding Section 4.5, are allocable to increases in the Partnership's Minimum Gain. Subject to the provisions of Section 704 of the Code and the regulations thereunder, if the General Partner determines at any time that operation of such "minimum gain chargeback" provisions likely will not achieve such a reversal by the -10- conclusion of the liquidation of the Partnership, the General Partner shall adjust the allocation provisions of this Section 4.2 as necessary to accomplish that result. (iv) Allocations Subsequent to Certain Allocation Adjustments. -------------------------------------------------------- Any allocations of items of Profits or Losses pursuant to Section 4.2(b)(i) or (ii) shall be taken into account in computing subsequent allocations pursuant to Section 4.2(a) so that the net amount of any items so allocated and all other items allocated to each Partner pursuant to Section 4.2(a) shall, to the extent possible, be equal to the net amount that would have been allocated to each Partner pursuant to the provisions of Section 4.2(a) without application of Section 4.2(b)(i) or (ii). (c) Book - Tax Accounting Disparities. If Partnership property is --------------------------------- reflected in the Capital Accounts of the Partners at a book value that differs from the adjusted tax basis of such property (whether because such property was contributed to the Partnership by a Partner or because of a revaluation of the Partners' Capital Accounts under Treasury Regulation Section 1.704-1(b)), allocations of depreciation, amortization, income, gain or loss with respect to such property shall be made among the Partners in a manner which takes such difference into account in accordance with Code Section 704(c) and Treasury Regulation Section 1.704-1(b). (d) Minimum Allocation to General Partner. Notwithstanding anything ------------------------------------- in this Agreement to the contrary, but subject to the provisions of Section 4.2(b)(ii) and (iii), the General Partner shall be allocated pro rata at least one percent of each item of Partnership income, gain, loss, expense or deduction. (e) Special Allocations in Connection with Certain Transactions. ----------------------------------------------------------- Subject to the provisions of Section 4.2(b), if the Partnership is entitled to a tax deduction in connection with the acquisition or receipt by the General Partner of an interest in the Partnership, then the deduction shall be allocated entirely to such Partner. Any amount that such Partner is required to include in income for Federal income tax purposes in connection with the acquisition or receipt of such interest shall be treated as a contribution to the capital of the Partnership by such Partner. (f) Allocation in Event of Transfer. If an interest in the ------------------------------- Partnership is Transferred in accordance with Section 6, there shall be allocated to the Transferring Partner during the Fiscal Year of Transfer the product of (i) the Partnership's Profits or Losses allocable to such Transferred interest for such Fiscal Year and (ii) a fraction, the numerator of which is the number of days such Partner held the Transferred interest during such Fiscal Year and the denominator of which is the total number of days in such Fiscal Year. All remaining Partnership Profits and Losses allocable to such Transferred interest for such Fiscal Year shall be allocated to the Substitute Partner acquiring such interest. Such allocations shall be made without regard to the date, amount or recipient of any distributions which may have been made with respect to such Transferred interest. As of the date of such Transfer, the Substitute Partner shall succeed to the Capital Account and Capital Contribution of the Transferring Partner to the extent attributable to the Transferred interest. -11- (g) Adjustment to Capital Accounts for Distributions of Property. If ------------------------------------------------------------ property distributed in kind is reelected in the Capital Accounts of the Partners at a book value that differs from the fair market value of such property on the date of distribution, the difference shall be treated as Profit or Loss on the sale of the property and shall be allocated among the Partners in accordance with the provisions of this Section 4.2. (h) Tax Credits and Similar Items. Any tax credits or similar items ----------------------------- not allocable pursuant to Section 4.2(a) through (g) shall be allocated to the Partners in proportion to their respective Percentage Interests; provided, -------- however, that at least one percent of each such item shall be allocated to the - ------- General Partner. 4.3 Modification to Preserve Underlying Economic Objectives. If, in the ------------------------------------------------------- opinion of counsel to the Partnership, there is a change in the Federal income tax law (including the Code as well as the regulations, rulings, and administrative practices thereunder) which makes it necessary or prudent to modify the allocation provisions of this Section 4 in order to preserve the underlying economic objectives of the Partners as reflected in this Agreement, the General Partner shall make the minimum modification necessary to achieve such purpose. 4.4 Withholding Taxes and Fees. The Partnership shall withhold taxes and -------------------------- similar governmental fees from distributions to, and allocations among, the Partners to the extent required by law (as determined by the General Partner in its sole discretion). Any amount so withheld by the Partnership with regard to a Partner shall be treated for purposes of this Agreement as an amount actually distributed to such Partner. An amount shall be considered withheld by the Partnership if remitted to a governmental agency without regard to whether such remittance occurs at the same time as the distribution or allocation to which it relates. To the extent operation of the foregoing provisions of this Section 4.4 would create or increase a deficit balance in a Limited Partner's Capital Account (excluding for this purpose any portion of such deficit attributable to the Partner's share of the Partnership's Minimum Gain as determined under Treasury Regulation Section 1.704-2), the amount of the deemed distribution shall instead be treated as a distribution received in violation of this Agreement and subject to the provisions of Section 3.6. 4.5 Nonallocation of Distributions to Increases In Minimum Gain. To the ----------------------------------------------------------- extend permitted under Treasury Regulation Section 1.704-2(h), distributions to Partners shall not be allocable to increases in the Partnership's Minimum Gain. In general, and except as provided in such regulation, the preceding sentence is intended to insure that reductions in a Partner's Capital Account balance resulting from distributions of money or other property to that Partner are not revered by the minimum gain chargeback provisions of Section 4.2(b)(iii). 4.6 Allocation of Liabilities. Solely for purposes of determining the ------------------------- Partners' respective shares of the nonrecourse liabilities of the Partnership within the meaning of Treasury Regulation Section 1.752-3(a)(3), each Partner's interest in Partnership Profits shall be equal to such Partner's Percentage Interest. -12- SECTION 5 --------- ADMINISTRATIVE PROVISIONS ------------------------- 5.1 Power of Limited Partners. ------------------------- (a) No Management by Limited Partners. Except as specifically --------------------------------- required under the Act or permitted under this Agreement, the Limited Partners shall not take part in the management or control of, and shall not bind or act for, the Partnership. (b) Majority-In-Interest Approval for Certain Actions. The approval ------------------------------------------------- of a Majority-In-Interest of the Limited Partners shall be required in order for the General Partner to: (i) liquidate substantially all of the Partnership's assets; or (ii) otherwise discontinue the Partnership's business. 5.2 Management by the General Partner. The General Partner shall devote --------------------------------- such time and attention, and shall diligently perform those duties, as are reasonably necessary to manage effectively the Partnership's affairs. Subject to the provisions of the Act and this Agreement, the General Partner shall have the power to perform acts necessary or appropriate for the efficient management of the Partnership including, without limitation, the right to: (a) Acquire, manage, develop, hold, lease, improve, control, operate, and sell or otherwise dispose of property, on behalf of the Partnership; (b) Borrow money on behalf of the Partnership or encumber Partnership property solely for the purpose of obtaining financing for the Partnership's business, and to extend or modify any obligations of the Partnership; (c) Employ or retain any qualified person to perform services or provide advice for the benefit of the Partnership and pay reasonable compensation therefor; (d) Compromise, arbitrate or otherwise adjust claims in favor of or against the Partnership, and commence or defend litigation with respect to the Partnership or any assets of the Partnership, at the Partnership expense; (e) Cause the Partnership to maintain, at the Partnership's expense, insurance coverage reasonably satisfactory to the General Partner with regard to any circumstance or condition which may affect the Partnership or the liability of the General Partner in its capacity as such; -13- (f) Open, conduct business regarding, draw checks or other payment orders upon, and close cash, checking, custodial or similar accounts with banks or brokers on behalf of the Partnership and pay the customary fees and charges applicable to transactions in respect of all such accounts; (g) Cause the Partnership to enter into, make and perform such contracts, agreements and other undertakings, and to do such other acts, as it may deem necessary or advisable for, or as may be incidental to, the conduct of the business of the Partnership, including, without limitation, contracts, agreements, undertakings and transactions with any Partner or with any other person or entity related to any Partner, provided, however, that transactions -------- ------- with such persons and entities for the account of the Partnership shall be on terms no less favorable to the Partnership than are generally afforded to unrelated third parties in comparable transactions; and (h) Assume and exercise all powers and responsibilities granted a general partner by the laws of the State of Louisiana. 5.3 Restrictions on Powers of the General Partner. The General Partner --------------------------------------------- shall not do any act in contravention of this Agreement or, subject to the provisions of Section 5.4, any act which is detrimental to the business of the Partnership. The General Partner shall have fiduciary responsibility for the safekeeping and use of all funds and assets of the Partnership. The General Partner shall not use, or permit another to use, such funds or assets in any manner except for the exclusive benefit of the Partnership. 5.4 Competing Ventures. The Limited Partners understand that the General ------------------ Partner may have other business activities which may take the major part of the General Partner's total time devoted to business matters. Accordingly, the General Partner shall not be bound to devote all of the General Partner's business time to the affairs of the Partnership, but shall devote such time and attention to the Partnership's business as may be required in order to assure that the Partnership's business is conducted in a diligent and proper manner. During the continuance of this Agreement, Boomtown and the General Partner and/or their respective affiliated entities may (i) engage in any activity whether or not in direct competition with the Partnership for such Partner's own profit and advantage without the consent of any other Partner or the Partnership, or (ii) possess an interest in any other business venture of any nature or description independently or with others. Neither the Partnership nor any Partner shall have any right by virtue of this Agreement in and to any Partner's separate business venture or to the income or profits derived therefrom. 5.5 Disclosures. Each Partner shall furnish any data with respect to ----------- itself reasonably required in connection with financing or operation of the Partnership's business. 5.6 Reimbursement to the General Partner. The General Partner shall be ------------------------------------ reimbursed for amounts paid to third parties for, or on behalf of, the Partnership -14- (including, without limitation, amounts paid in connection with the formation of the Partnership). 5.7 Compensation. Partners and affiliates of Partners shall be entitled ------------ to receive fair market value compensation (as determined by the General Partner in its reasonable discretion and in accordance with the provisions of Section 5.2(g)) for services provided to, or for the benefit of, the Partnership. 5.8 Tax Matters Partner. ------------------- (a) General. The General Partner is hereby designated the "tax ------- matters partner" of the Partnership within the meaning of Section 6231(a)(7) of the Code. Except as specifically provided in the Code and the regulations issued thereunder, the General Partner in its sole discretion shall have exclusive authority to act for or on behalf of the Partnership with regard to tax matters, including, without limitation, the authority to make (or decline to make) any available tax elections. (b) Notice of Inconsistent Treatment of Partnership Item. No Partner ---------------------------------------------------- shall file a notice with the Internal Revenue Service under Section 6222(b) of the Code in connection with such Partner's intention to treat an item on such Partner's Federal income tax return in a manner which is inconsistent with the treatment of such item on the Partnership's Federal income tax return unless such Partner has, not less than 30 days prior to the filing of such notice, provided the General Partner with a copy of the notice and thereafter in a timely manner provides such other information related thereto as the General Partner shall reasonably request. (c) Notice of Settlement Agreement. Any Limited Partner entering into ------------------------------ a settlement agreement with the Secretary of the Treasury which concerns a Partnership item shall notify the General Partner of such settlement agreement and its terms within 60 days from the date thereof. 5.9 Books, Records and Annual Financial Statements. ---------------------------------------------- (a) The Partnership shall maintain or cause to be maintained true and proper books, records, reports, and accounts in which shall be entered, on the accrual basis, all transactions of the Partnership. Such books, records, reports and accounts shall be located at the principal place of business of the Partnership and shall be available to any Partner for inspection and copying during reasonable business hours. (b) The Partnership shall cause to be delivered to each Partner within 90 days after the expiration of each Fiscal Year an annual report containing all Partnership information necessary for preparation of the Federal, state and local income tax returns of such Partner. Upon election by the General Partner or written request from a Limited Partner that is a "10-percent owner" of the Partnership within the meaning of Section 6654(d)(1)(E) of the Code, the Partnership shall make reasonable efforts (as determined by the General Partner in its sole discretion) to provide interim -15- Partnership financial information necessary for such Partner, or its constituent partners or shareholders, to compute its or their quarterly Federal estimated tax liability. SECTION 6 --------- TRANSFER OF A PARTNERSHIP INTEREST; WITHDRAWALS ----------------------------------------------- 6.1 Transfers. No sale, transfer, assignment or other disposition (a --------- "Transfer") of a Partner's interest in violation of this Agreement shall be valid or effective. (a) Limited Partners -- Voluntary Transfers. The Transfer of a --------------------------------------- Limited Partner's interest in the Partnership to another person (a "Substitute Partner") shall be valid and effective if the following conditions are satisfied: (i) Execution of Documents. The Limited Partner whose interest is ---------------------- Transferred (the "Transferring Partner") and the Substitute Partner shall properly execute documents or instruments which the General Partner reasonably determines to be necessary or desirable to effect such Transfer, including written acceptance, ratification and approval of all of the terms and conditions of this Agreement and any amendments hereto. (ii) Compliance With Applicable Laws and Rules. The Transfer of ----------------------------------------- the interest shall not at the time of the Transfer and will not thereafter, to the reasonable satisfaction of the General Partner, violate any applicable law or governmental rule, including, without limitation, any Federal or state securities or gaming law or rule (based upon the presumption, for this purpose, that the business operations of the Partnership shall not be changed to accommodate the Transfer of a Limited Partner's interest in the Partnership). (iii) Tax Effects. The Transfer of the interest shall not, to the ----------- reasonable satisfaction of the General Partner, cause the Partnership to (A) terminate within the meaning of Section 708 of the Code; (B) qualify as a "publicly traded partnership" within the meaning of Section 469(k), 512(c)(2) or 7704 of the Code; or (C) be classified for Federal income tax purposes as an association taxable as a corporation. (iv) Consent of the General Partner. The prior written consent of ------------------------------ the General Partner to such Transfer shall be obtained by the Transferring Partner, the granting or denial of which shall be in the General Partner's sole discretion. Notwithstanding the preceding sentence, the General Partner shall be deemed to have consented to the Transfer of all or a portion of Skrmetta's limited partnership interest to one or more Authorized Transferees; provided, -------- however, that the General Partner shall not be deemed to have consented to any - ------- Transfer that would result in Skrmetta's limited partnership interest being held by more than four separate persons. -16- As used herein, "Authorized Transferee" means (i) any shareholder of one or more of the corporate entities, if any, of which Skrmetta is comprised, (ii) any immediate family member of such a shareholder, (iii) any of Raphael, Eric, Dennis or Barbara Skrmetta or an immediate family member thereof, or (iv) any corporation, trust or other entity wholly owned by any or all of Raphael, Eric, Dennis or Barbara Skrmetta. For purposes of the preceding sentence, the "immediate family" of an individual shall include and be limited to such individual's parents, siblings, spouse, children, grandchildren and great grandchildren. Notwithstanding the foregoing provisions of this Section 6.1(a)(iv), no person (including, without limitation, an Authorized Transferee) shall be admitted to the Partnership without the prior written consent of the General Partner, the granting or denial of which shall be in the General Partner's sole discretion. (b) Limited Partners -- Involuntary Transfers. A person may become ----------------------------------------- the assignee of all or a portion of a Limited Partner's interest in the Profits and Losses of the Partnership upon (i) the death, Bankruptcy, incapacity, or Dissolution of such Limited Partner; (ii) foreclosure against that portion of such Limited Partner's interest in the Partnership which was pledged as security for an obligation; or (iii) a transfer to such Limited Partner's spouse pursuant to a divorce decree or settlement. In the event a person becomes the assignee of an interest in the Profits and Losses of the Partnership under the preceding sentence, the General Partner shall, in its sole discretion, (i) admit such assignee to the Partnership as a Substitute Partner (provided, however, that the -------- ------- requirements of Section 6.1(a)(ii) and (iii) shall in all events be satisfied) or (ii) redeem such assignee's interest by treating such assignee as a withdrawing Limited Partner under the rules set forth in Section 6.2. (c) Transfers by the General Partner. The General Partner shall not -------------------------------- Transfer its interest in the Partnership in violation of applicable law or without the prior written consent of all the Limited Partners; provided, -------- however, that the General Partner shall not be required to obtain such consent - ------- for a Transfer which consists solely of an assignment of all or a portion of the General Partner's interest in the allocations and distributions of the Partnership. 6.2 Withdrawal of a Limited Partner. A Limited Partner shall not withdraw ------------------------------- from the Partnership without the written consent of the General Partner, the granting or denial of which shall be in the General Partner's sole discretion. A Limited Partner permitted to withdraw from the Partnership pursuant to this Section 6.2 shall receive the amount of cash and/or property (as determined in the reasonable discretion of the General Partner) that such Limited Partner would have received if, on the effective date of such withdrawal, the Partnership had been dissolved and liquidated pursuant to Section 7.3. Upon the withdrawal of a Limited Partner from the Partnership, such Limited Partner's Percentage Interest shall be allocated among the remaining Partners in proportion to the remaining Partners' respective Percentage Interests as in effect immediately prior to the withdrawal. -17- 6.3 Mandatory Transfer of a Partner's Interest. The following provisions ------------------------------------------ shall apply to Skrmetta's Partnership interest. (a) Failure by Skrmetta to Obtain or Hold a Required License. If -------------------------------------------------------- Skrmetta (i) fails to obtain a Required License, or (ii) loses or has revoked a Required License and fails to reacquire such license within the shorter of a reasonable period of time or such period as is required by applicable law, then Skrmetta shall use its reasonable efforts to, within such aforementioned time period, sell or otherwise Transfer (in a transaction that satisfies the requirements of Section 6.1(a)) its interest in the Partnership to a person that holds all Required Licenses. If Skrmetta fails to obtain or reacquire a Required License or to sell or otherwise Transfer its Partnership interest in accordance with the terms of the preceding paragraph (including, without limitation, the time period described therein) or Skrmetta's failure to hold all Required Licenses -- materially impairs the ability of the Partnership to conduct its business (as determined by the General Partner in its reasonable discretion), then the Partnership shall have an immediate and continuing right to redeem Skrmetta's Partnership interest for fair market value on the date of redemption (as determined by agreement among the Partners or, if any Partner declares that no agreement can be reached, by arbitration in accordance with the provisions of Section 9.8). (b) Failure by the General Partner or Boomtown to Obtain or Hold a -------------------------------------------------------------- Required License. If the General Partner or Boomtown fails to obtain or - ---------------- reacquire a Required License within the shorter of a reasonable period of time or such period as is required by applicable law and the failure materially impairs the ability of the Partnership to conduct its business, then such Partner shall use its reasonable efforts to sell or otherwise Transfer its interest in the Partnership, for a price and on such other terms as are reasonably acceptable to such Partner, to a person that holds all Required Licenses. If such Partner is the General Partner, the consent of all the Limited Partners shall be required for the sale or other Transfer of its interest to occur. If a Partner required to sell or otherwise Transfer its Partnership interest under the terms of the preceding paragraph fails to effect such sale or other Transfer within the applicable time period, the Partnership shall immediately attempt to sell its business assets for a price and on such other terms as are acceptable in the reasonable discretion of the General Partner. If no such sale is effected within a reasonable period of time, the Partnership shall be dissolved and liquidated in accordance with the provisions of Section 7. SECTION 7 --------- DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP ---------------------------------------------- 7.1 Dissolving Events. The Partnership shall be dissolved upon the ----------------- occurrence of any of the following events: -18- (a) Expiration of the Partnership term; (b) Issuance of an order by a court of competent jurisdiction requiring the dissolution of the Partnership; (c) Permanent cessation of the Partnership's business; (d) Consent of the General Partner and a Majority-in-Interest of the Limited Partners to dissolve; (e) The withdrawal, retirement, Bankruptcy, Dissolution, death or incapacity of the General Partner, unless the remaining Partners elect to continue the Partnership pursuant to section 7.2; (f) Failure by the Partnership to sell its business assets in accordance with the provisions of Section 6.3(b); and (g) Any other event which results in dissolution of the Partnership under the Act. 7.2 Special Meeting to Dissolve or Continue the Partnership. Upon the ------------------------------------------------------- withdrawal, retirement, Bankruptcy, Dissolution, death or incapacity of the General Partner, the two Limited Partners having the largest Capital Account balances shall, in accordance with the provisions of the Act, notify the remaining Limited Partners of a special meeting of the Limited Partners to be held not less than 10 nor more than 60 days after the date of such event. At that meeting the Limited Partners may by unanimous vote elect to continue the business of the Partnership and agree to the appointment of a new General Partner. If the Limited Partners do not elect to continue the business of the Partnership and to appoint a new General Partner, a Liquidating Partner shall be elected by a Majority-In-Interest of the Limited Partners; the Liquidating Partner shall then cause the Partnership to be liquidated in accordance with the provisions of Section 7.3. Written consent of a Partner to continuation of the Partnership and the election of a new General Partner or to dissolution of the Partnership and the election of a Liquidating Partner shall be counted as a vote at such special meeting. 7.3 Winding Up of the Partnership. ----------------------------- (a) Upon dissolution of the Partnership, the Liquidating Partner shall promptly wind up the affairs of the Partnership in accordance with the provisions of this Section 7.3. The Partnership shall engage in no further business except as may be necessary, in the reasonable discretion of the Liquidating Partner, to preserve the value of the Partnership's assets during the period of dissolution and liquidation. -19- (b) Distributions to the Partners in liquidation may be made in cash or in kind, or partly in cash and partly in kind, as determined by the Liquidating Partner. Distributions in kind shall be valued at fair market value as reasonably determined by the Liquidating Partner and shall be subject to such conditions and restrictions as may be necessary or advisable in the reasonable discretion of the Liquidating Partner to preserve the value of the property so distributed. (c) The Profits and Losses of the Partnership during the period of dissolution and liquidation shall be allocated among the Partners in accordance with the provisions of Section 4.2. If any property is distributed in kind, the Capital Accounts of the Partners shall be adjusted in accordance with the provisions of Section 4.2(g). (d) The assets of the Partnership (including, without limitation, proceeds from the sale or other disposition of any assets during the period of dissolution and liquidation) shall be applied as follows: (i) First, to repay any indebtedness of the Partnership, whether to third parties or the Partners, in the order of priority required by law; (ii) Next, to any reserves which the Liquidating Partner reasonably deems necessary for contingent or unforeseen liabilities or obligations of the Partnership (which reserves when they become unnecessary shall be distributed in the remaining priorities set forth in this Section 7.3(d)); and (iii) Next, to the Partners in proportion to their respective positive Capital Account balances (after taking into account all adjustments to the Partners' Capital Accounts required under Section 7.3(c)). (e) If, after allocation of all Profits and Losses of the Partnership pursuant to Section 7.3(c), the Capital Account balance of the General Partner is less than zero, the General Partner shall, prior to application and distribution of the Partnership's assets pursuant to Section 7.3(d), contribute to the capital of the Partnership sufficient cash and/or property to increase the General Partner's Capital Account balance to zero. SECTION 8 --------- LIABILITY AND INDEMNIFICATION OF THE GENERAL PARTNER ---------------------------------------------------- 8.1 Liability. Except as otherwise specifically provided in this --------- Agreement, the General Partner (and its affiliates) shall not be personally liable for the return of any contributions made to the capital of the Partnership by the Limited Partners. In the absence of fraud, gross negligence, material breach of fiduciary duty, or willful misconduct by the General Partner, the General Partner (and its affiliates) shall not be liable to the Partnership or the Limited Partners for any act or omission concerning the Partnership's business. -20- 8.2 Indemnification. In the absence of fraud, gross negligence, material --------------- breach of fiduciary duty, or willful misconduct on the part an Indemnified Person, the Partnership shall indemnify and hold each Indemnified Person harmless from and against any loss, expense, damage or injury suffered or sustained by any of them by reason of any acts, omissions, or alleged acts or omissions arising out of any activity performed on behalf of the Partnership. This indemnification shall include, but not be limited to: (i) payment of reasonable attorneys' fees and other expenses incurred in settling any claim or threatened action, or incurred in any finally-adjudicated legal proceeding, and (ii) the removal of any liens affecting the property of an Indemnified Person (which liens shall be deemed a debt of the Partnership to such Indemnified Person to be repaid in full before any distributions are made to the Partners pursuant to this Agreement). As used herein, "Indemnified Person" means the General Partner, any business entity of which the General Partner is an officer, director, partner or shareholder, or any employee or agent thereof. The total obligation of the Partnership to all Indemnified Person under this section 8.2 shall be limited to the assets of the Partnership (excluding, solely for purposes of this sentence, any obligation of the General Partner to restore a deficit balance in its Capital Account pursuant to Section 7.3(e)). SECTION 9 --------- GENERAL PROVISIONS ------------------ 9.1 Special Meetings. Subject to the provisions of the Act, the General ---------------- Partner may call a special meeting of all Partners at any reasonable time on not less than 10 nor more than 60 days written notice. 9.2 Entire Agreement. This Agreement, the Subscription Agreement between ---------------- Skrmetta and the Partnership, and the Cancellation Agreement between Skrmetta and Boomtown, both of even date herewith contain the entire understanding among the Partners and supersede any prior written or oral agreement between them respecting the Partnership. There are no representations, agreements, arrangements, or understandings, oral or written, among the Partners relating to the Partnership which are not fully expressed in this Agreement, the Subscription Agreement between Skrmetta and the Partnership, or the Cancellation Agreement between Skrmetta and Boomtown, both of even date herewith. 9.3 Amendments. ---------- (a) General. This Agreement is subject to amendment only with the ------- written consent of the General Partner and a Majority-In-Interest of the Limited Partners; provided, however, that there shall be no amendment to this Agreement -------- ------- which reduces a Limited Partner's interests in the Profits, distributions or capital of the Partnership without the consent of such Limited Partner. (b) Amendments to Comply with Gaming or Similar Laws. Notwithstanding ------------------------------------------------ the provisions of Section 9.3(a), the Partners hereby agree in advance -21- that this Agreement shall be amended as necessary to comply with the requirements of any gaming or similar law or governmental rule that regulates or otherwise pertains to the business of the Partnership. 9.4 Governing Law. All questions with respect to the interpretation of ------------- this Agreement and the rights and liabilities of the Partners shall be governed by the laws of the State of Louisiana as they are applied to contracts entered into between residents of Louisiana. 9.5 Severability. In the event any one or more of the provisions of this ------------ Agreement are determined to be invalid or unenforceable, such provision or provisions shall be deemed severable from the remainder of this Agreement and shall not cause the invalidity or unenforceability of the remainder of this Agreement. 9.6 Counterparts. This Agreement may be executed in any number of ------------ counterparts and when so executed, all of such counterparts shall constitute a single instrument binding upon all parties notwithstanding the fact that all parties are not signatory to the original or to the same counterpart. 9.7 Survival of Rights. Subject to the restrictions against unauthorized ------------------ assignment or transfer set forth in this Agreement, the provisions of this Agreement shall inure to the benefit of and be binding upon each Partner and such Partner's heirs, devises, legatees, personal representatives, successors, and assigns. 9.8 Arbitration and Attorneys' Fees. Any controversy or claim arising out ------------------------------- of or relating to this Agreement, the Partnership, or the Partners' respective rights and duties shall be settled by arbitration in the State of Nevada. Such arbitration shall be in accordance with the rules of the American Arbitration Association, and judgment upon the award may be entered in any court of competent jurisdiction. The prevailing Partner or Partners in such arbitration and any ensuing legal action shall be reimbursed by the Partner or Partners who do not prevail for their reasonable attorney's, accountant's and expert's fees and the costs of such actions. 9.9 Notices. Any notice shall be in writing and shall be deemed duly ------- given when personally delivered to the Partner to whom it is directed, or in lieu of such personal service, when deposited in the United States mail, registered or certified mail, postage prepaid, to the address set forth on Schedule A for such Partner, or to any other address of which the General Partner is notified by such Partner in writing. Notice also shall be deemed duly given when actually received by the Partner to whom it is directed via telecopy, electronic transfer, telex or telegram. 9.10 Consents. All consents, agreements and approvals provided for or -------- permitted by this Agreement shall be in writing and signed copies thereof shall be retained with the books of the Partnership. -22- 9.11 No Partition. Except as otherwise permitted by this Agreement, no ------------ Partner shall have the right, and each Partner does hereby agree that it shall not seek, to cause a partition of the Partnership's property whether by court action or otherwise. 9.12 Representation by Limited Partners. Each Limited Partner hereby ---------------------------------- represents that, with respect to its limited partnership interest in the Partnership: (i) it is acquiring or has acquired such interest for purposes of investment only, for its own account (or a trust account if such Limited Partner is a trustee), and not with a view to resell or distribute the same or any part thereof; and (ii) no other person has any interest in such limited partnership interest or in the rights of such Limited Partner under this Agreement other than a spouse having a community property or similar interest under applicable state law. Each Limited Partner also warrants to the Partnership and the other Partners that it has the business and financial knowledge and experience necessary to purchase a limited partnership interest in the Partnership in the amount of its capital contributions to the Partnership on the terms contemplated herein and that it has the ability to bear the risks of such investment (including the risk of sustaining a complete loss of all such capital contributions) without the need for the investor protections provided by the registration requirements of the Securities Act of 1933, as amended. 9.13 Valuation. If (i) the fair market value of any asset or other item of --------- property (including, without limitation, a limited partnership interest in the Partnership) is required to be determined under the terms of this Agreement or any other agreement or arrangement to which the Partnership is subject, and (ii) no standard for determining such fair market value is provided for under the applicable provision of this Agreement or such other agreement or arrangement, then the fair market value of the asset or other item of property shall be determined by the General Partner in its reasonable discretion. 9.14 Mutual Selection. Each Partner hereby specifically consents to and ---------------- endorses the selection of all other Partners admitted to the Partnership pursuant to the terms of this Agreement. -23- IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. GENERAL PARTNER: LIMITED PARTNERS: LOUISIANA GAMING ENTERPRISES, BOOMTOWN, INC., a Delaware INC., a Louisiana corporation corporation __________________________________________________________________ By: Robert F. List By: Robert F. List Title: Senior Vice-President Title: ERIC SKRMETTA ________________________________ By: Eric Skrmetta Title: Limited Partner -24- SCHEDULE A
Name and Address Capital Contribution Percentage Interest Louisiana Gaming Enterprises, Inc. 5% 700 Camp Street New Orleans, LA 70130 Boomtown, Inc. 87.5% P.O. Box 399 Verdi, NV 89439 Eric Skrmetta 7.5% 501 Destrehan Avenue Harvey, LA 70058
REGISTERED ADDRESS OF PARTNERSHIP: 2439 Manhattan Blvd., Suite 105 Harvey, LA 70058 -25-
- ------------------------------------------------------------------------------------------------------------ W. Fox McKeithen NOTICE OF CHANGE OF REGISTERED OFFICE AND/OR CHANGE OF REGISTERED AGENT Secretary of State (R.S. 12.104 & 12.236) ----------------------------------------------------------------------------------- Domestic Corporation Return to: Corporations Division (Business or Non-Profit) P.O. Box 94125 Enclose $20.00 filing fee Baton Rouge, LA 70804-3125 Make remittance payable to Phone (504) 925-4704 Secretary of State Do not send cash - ------------------------------------------------------------------------------------------------------------
Corporation Name LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM -------------------------------------------------------- D/B/A BOOMTOWN CASINO WESTBANK - ------------------------------ CHANGE OF LOCATION OF REGISTERED OFFICE Notice is hereby given that the Board of Directors of the above named corporation has authorized a change in the location of the corporation's registered office. The new registered office is located at: 4132 PETERS ROAD, HARVEY, LOUISIANA 70058 ------------------------------------------ ------------------------------------------ To be signed by one (1) officer or two (2) directors JASON A. RABALAIS, VICE PRESIDENT & GENERAL MANAGER CHANGE OF REGISTERED AGENT(S) Notice is hereby given that the Board of Directors of the above named corporation has authorized the change of the corporation's registered agent(s). The name(s) and address(es) of the new registered agent(s) is/are as follows: MR. JASON A. RABALAIS, 4132 PETERS ROAD, HARVEY LOUISIANA 70058 ---------------------------------------------------------------- ------------------------- President, Vice President or Secretary JASON A. RABALAIS, VICE PRESIDENT & GENERAL MANAGER AGENT AFFIDAVIT AND ACKNOWLEDGEMENT OF ACCEPTANCE I hereby acknowledge and accept the appointment of registered agent(s) for and on behalf of the above named corporation. JASON A. RABALAIS ------------------------------- ------------------------------- Registered Agent(s) Sworn to and subscribed before me this _________ day of __ , 19__ . --------------------------- Notary -26- LOUISIANA-I GAMING, A LOUISIANA PARTNERSHIP IN COMMENDAM 4132 PETERS ROAD HARVEY, LA 70058 June 4, 1996 Mr. Fox McKeithen LA Secretary of State P.O. Box 94125 Baton Rouge, LA 70004-9125 Re: Notice of Change of Registered Office Louisiana-I Gaming, a Louisiana Partnership in Commendam Dear Mr. McKeithen: Please be advised the Registered Office of Louisiana-I Gaming, a Louisiana Partnership in Commendam has been changed. The new address is: 4132 Peters Road Harvey, LA 70058 Sincerely, Louisiana-I Gaming, a Louisiana Partnership in Commendam By: Louisiana Gaming Enterprises, Inc. General Partner By:___________________________________ Robert F. List Secretary/Treasurer -27- TABLE OF CONTENTS -----------------
Page ---- SECTION 1 DEFINITIONS....................................................... 1 SECTION 2 FORMATION OF LIMITED PARTNERSHIP.................................. 4 2.1 Formation, Name and Principal Office.............................. 4 2.2 Purpose and Scope of the Partnership.............................. 4 2.3 Names and Addresses of the Partners............................... 4 2.4 Term of the Partnership........................................... 4 2.5 Required Documents................................................ 5 2.6 Title to Property................................................. 5 2.7 Required Licenses................................................. 5 SECTION 3 CAPITALIZATION OF THE PARTNERSHIP................................. 5 3.1 Initial Capital Contribution...................................... 5 3.2 Additional Capital Contributions.................................. 6 3.3 Admission of Additional Limited Partners.......................... 6 3.4 Withdrawal and Return of Capital.................................. 6 3.5 Loans to the Partnership.......................................... 6 3.6 Limitation of Liability........................................... 7 3.7 Percentage Interest............................................... 7 3.8 Interest on Capital............................................... 7 SECTION 4 DISTRIBUTIONS, PROFITS AND LOSSES................................. 8 4.1 Distributions..................................................... 8 4.2 Allocations of Partnership Profits and Losses..................... 9 4.3 Modification to Preserve Underlying Economic Objectives........................................................ 12 4.4 Withholding Taxes and Fees........................................ 12 4.5 Nonallocation of Distributions to Increases In Minimum Gain...................................................... 12 4.6 Allocation of Liabilities......................................... 12 SECTION 5 ADMINISTRATIVE PROVISIONS......................................... 13 5.1 Power of Limited Partners......................................... 13 5.2 Management by the General Partner................................. 13 5.3 Restrictions on Powers of the General Partner..................... 14 5.4 Competing Ventures................................................ 14 5.5 Disclosures....................................................... 14
Page ---- 5.6 Reimbursement to the General Partner.............................. 14 5.7 Compensation...................................................... 15 5.8 Tax Matters Partner............................................... 15 5.9 Books, Records and Annual Financial Statements.................... 15 SECTION 6 TRANSFER OF A PARTNERSHIP INTEREST; WITHDRAWALS....................................................... 16 6.1 Transfers......................................................... 16 6.2 Withdrawal of a Limited Partner................................... 17 6.3 Mandatory Transfer of a Partner's Interest........................ 18 SECTION 7 DISSOLUTION AND LIQUIDATION OF THE PARTNERSHIP....................................................... 18 7.1 Dissolving Events................................................. 18 7.2 Special Meeting to Dissolve or Continue the Partnership....................................................... 19 7.3 Winding Up of the Partnership..................................... 19 SECTION 8 LIABILITY AND INDEMNIFICATION OF THE GENERAL PARTNER................................................... 20 8.1 Liability......................................................... 20 8.2 Indemnification................................................... 21 SECTION 9 GENERAL PROVISIONS................................................ 21 9.1 Special Meetings.................................................. 21 9.2 Entire Agreement.................................................. 21 9.3 Amendments........................................................ 21 9.4 Governing Law..................................................... 22 9.5 Severability...................................................... 22 9.6 Counterparts...................................................... 22 9.7 Survival of Rights................................................ 22 9.8 Arbitration and Attorneys' Fees................................... 22 9.9 Notices........................................................... 22 9.10 Consents.......................................................... 22 9.11 No Partition...................................................... 23 9.12 Representation by Limited Partners................................ 23 9.13 Valuation......................................................... 23 9.14 Mutual Selection.................................................. 23
-ii- EX-5 23 OPINION OF IRELL & MANELLA LLP EXHIBIT 5 [Irell & Manella LLP Letterhead] October 30, 1997 Hollywood Park, Inc. Hollywood Park Operating Company 1050 South Prairie Avenue Inglewood, California 90301 Re: Series B 9-1/2% Senior Subordinated Notes Due 2007 -------------------------------------------------- Ladies and Gentlemen: We have acted as counsel to Hollywood Park, Inc. and Hollywood Park Operating Company (collectively, the "Issuers") in connection with the preparation and filing by the Companies of a Registration Statement on Form S-4 (the "Registration Statement") filed with the Securities and Exchange Commission on August 27, 1997 under the Securities Act of 1933, as amended (the "Act"), relating to the offer to exchange an aggregate principal amount of up to $125,000,000 of Series A 9-1/2% Senior Subordinated Notes due 2007 (the "Old Notes") for a like principal amount of Series B 9-1/2% Senior Subordinated Notes due 2007 (the "New Notes"). Terms defined in the Registration Statement and not otherwise defined herein are used herein with the meanings as so defined. For the purposes of rendering this opinion, we have reviewed the following documents: (a) the Registration Statement; (b) the Indenture; (c) the form of the New Notes; and (d) the form of the Old Notes. Hollywood Park, Inc. Hollywood Park Operating Company October 30, 1997 Page 2 As your counsel in connection with this registration, we have examined (in addition to the documents listed above) the proceedings taken and proposed to be taken in connection with the issuance of the New Notes. We have also reviewed such other matters and documents as we have deemed necessary or relevant as a basis for this opinion. Based on the foregoing, and on the assumptions herein set forth, and subject to the limitations, qualifications and exceptions set forth herein, we are of the opinion that: Upon completion of the proceedings being taken or which we, as your counsel, contemplate will be taken prior to the issuance of the New Notes (including, without limitation, (a) the due authorization and execution of the New Notes by the Issuers, (b) the authentication thereof by the Trustee and (c) the delivery thereof against receipt of the Old Notes surrendered in exchange therefor), the New Notes issuable upon consummation of the Exchange Offer will be duly authorized and legally issued and will constitute binding obligations of the Issuers, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors' rights and remedies generally (including without limitation preferences, equitable subordination and fraudulent conveyances), and subject, as to the binding nature of such obligations, to general principles of equity, including without limitation principles governing the availability of specific performance, injunctive relief and other equitable remedies and principles of commercial reasonableness, good faith and fair dealing (regardless of whether relief is sought in a proceeding at law or in equity). The opinion herein is limited to the laws of the State of California and the Delaware General Corporation Law. In this regard, we note that Section 11.08 of the Indenture provides that the Indenture and the New Notes. Consequently, our opinion as it relates to the binding nature of the New Notes assumes that the laws of the State of California are identical to the corresponding laws of the state of New York in all pertinent aspects, although we have not conducted any investigation with respect to that matter. Furthermore, we render no opinion with respect to said Section 11.08 (and the corresponding provision of the New Notes) or the Hollywood Park, Inc. Hollywood Park Operating Company October 30, 1997 Page 3 appropriate choice of laws with respect to the Indenture or the New Notes. This opinion is rendered solely for your benefit in connection with the transactions described above. This opinion may not be used or relied upon by any other person and may not be disclosed, quoted, filed with a governmental agency or otherwise referred to without our prior written consent. However, we hereby consent to the filing of this opinion as an exhibit to the Registration Statement and the reference to this firm under the caption "Legal Matters" in the Prospectus forming a part of the Registration Statement. Very truly yours, /s/Irell & Manella LLP Irell & Manella LLP EX-12.2 24 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)............................... $(33,402) $ 9,612 Fixed charges....................................... 20,520 8,964 Less capitalized interest........................... (1,446) 0 -------- ------- Total Earnings.................................... $(14,328) $18,576 ======== ======= Fixed charges: Capitalized interest................................ 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) 2.07 ======== =======
- -------- (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 $34.8 million for the year ended December 31, 1996. -----END PRIVACY-ENHANCED MESSAGE-----