EXHIBIT 4.1
AGREEMENT AND PLAN OF REORGANIZATION
dated as of November 17, 1995
by and between
HOLLYWOOD PARK, INC., a Delaware corporation,
on the one hand, and
PACIFIC CASINO MANAGEMENT, INC., a California corporation,
and
DONALD KLOSTERMAN
and
EDWARD LEBARON,
Individuals,
on the other hand
TABLE OF CONTENTS
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Page
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ARTICLE I
DEFINITIONS.................................................................. 1
1.1 Definitions........................................................ 1
ARTICLE II
SALE AND PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES; MISCELLANEOUS........ 6
2.1 Sale and Purchase of Assets........................................ 6
(a) Cash and Cash Equivalents..................................... 6
(b) Accounts Receivable........................................... 6
(c) Equipment and Supplies........................................ 6
(d) Prepaid Expenses.............................................. 6
(e) Intellectual Property......................................... 6
(f) Third Party Claims............................................ 6
(g) Books and Records............................................. 7
(h) Permits, etc.................................................. 7
(i) Other Assets.................................................. 7
2.2 Assumption of Liabilities.......................................... 7
2.3 Related Agreements................................................. 7
2.4 Taking of Necessary Action; Further Action......................... 7
2.5 Intended Tax Treatment............................................. 8
ARTICLE III
PURCHASE PRICE............................................................... 8
3.1 Purchase Price..................................................... 8
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3.2 Adjustment......................................................... 9
3.3 Transfer of Rights................................................. 9
3.4 Fractional Shares.................................................. 9
3.5 Sales Tax.......................................................... 9
3.6 Change in Control.................................................. 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES............................................... 10
4.1 Representations and Warranties of PCM and the Shareholders......... 10
4.1.1 Existence and Rights............................................... 10
4.1.2 Agreements Authorized.............................................. 10
4.1.3 No Conflict........................................................ 11
4.1.4 Corporate Books.................................................... 11
4.1.5 Financial Statements............................................... 11
4.1.6 Undisclosed Liabilities............................................ 12
4.1.7 Litigation and Claims.............................................. 12
4.1.8 Absence of Changes................................................. 12
4.1.9 Title to Properties................................................ 13
4.1.10 Taxes.............................................................. 13
4.1.11 Banking............................................................ 14
4.1.12 Intellectual Property.............................................. 14
4.1.13 Insurance.......................................................... 14
4.1.14 Contracts.......................................................... 14
4.1.15 No Other Acquisition Agreement..................................... 15
4.1.16 Officers, Directors and Employees.................................. 15
4.1.17 Compliance with Laws............................................... 15
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4.1.18 Permits and Licenses............................................... 15
4.1.19 Labor Relations; Employees......................................... 16
4.1.20 No Finder's Fee.................................................... 16
4.2 Representations and Warranties of HPI.............................. 16
4.2.1 Existence and Rights............................................... 16
4.2.2 Agreements Authorized.............................................. 17
4.2.3 No Conflict........................................................ 17
4.2.4 HPI Shares......................................................... 17
4.2.5 No Finder's Fees................................................... 17
ARTICLE V
REPRESENTATION AND AGREEMENTS RESPECTING
HPI SHARES.................................................................. 18
5.1 Restrictions on Transfer........................................... 18
5.2 Transfers.......................................................... 19
5.3 Legend............................................................. 19
5.4 Registration Rights................................................ 19
5.5 HPI SEC Reports.................................................... 20
ARTICLE VI
INDEMNIFICATION.............................................................. 20
6.1 Indemnification.................................................... 20
6.2 21
6.3 Cooperation........................................................ 21
6.4 Survival and Limitations........................................... 21
ARTICLE VII
MISCELLANEOUS................................................................ 22
7.1 Public Disclosure.................................................. 22
7.2 Survival........................................................... 22
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7.3 Complete Agreement; Modifications.................................. 22
7.4 Cooperation........................................................ 22
7.5 Arbitration of Disputes............................................ 23
7.6 Notices............................................................ 23
7.7 Third-Party Benefits............................................... 24
7.8 Successors and Assigns............................................. 24
7.9 Governing Law...................................................... 24
7.10 Waivers Strictly Construed......................................... 25
7.11 Attorney's Fees.................................................... 25
7.12 Rules of Construction.............................................. 25
7.12.1 Headings........................................................... 25
7.12.2 Tense and Case..................................................... 25
7.12.3 Severability....................................................... 25
7.13 Counterparts....................................................... 25
AGREEMENT AND PLAN OF REORGANIZATION
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This AGREEMENT AND PLAN OF REORGANIZATION (the "AGREEMENT") is made and
entered into as of the _____ day of November, 1995, by and among HOLLYWOOD PARK,
INC., a Delaware corporation ("HPI" or "BUYER"), on the one hand and PACIFIC
CASINO MANAGEMENT, INC., a California corporation ("PCM" or "SELLER"), DONALD
KLOSTERMAN and EDWARD LEBARON, shareholders of PCM (the "SHAREHOLDERS") on the
other hand, with reference to the following facts:
RECITALS
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A. HPI, and PCM and the Shareholders desire to adopt a plan of
reorganization pursuant to Section 368(a)(1)(C) of the Code and the
corresponding provisions of the California Code on the terms and conditions
hereinafter set forth. The reorganization contemplates in general that HPI will
acquire all of the Assets and assume all of the Assumed Liabilities solely in
exchange for the issuance of HPI Shares to PCM, and immediately thereafter PCM
shall liquidate completely.
B. The parties desire to enter into this Agreement for the purchase by
HPI of all of the Assets and the assumption by HPI of the Assumed Liabilities in
exchange for HPI Shares as hereinafter provided.
NOW, THEREFORE, in consideration of the foregoing premises and of the
representations, warranties and agreements contained herein, the parties hereto
hereby agree as follows:
ARTICLE I
DEFINITIONS
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1.1 Definitions. The following terms, as used herein, have the
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following meanings:
"ASSETS" has the meaning set forth in Section 2.1 hereof.
"ASSUMED LIABILITIES" has the meaning set forth in Section 2.2 hereof.
"BILL OF SALE" means that certain Bill of Sale and Assignment being
executed by PCM concurrently herewith in substantially the form attached as
Exhibit A, by which PCM sells, transfers and conveys all of its right, title and
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interest in and to the Assets to HPI, or its wholly-owned direct subsidiary
designated by HPI.
"CHANGE IN CONTROL OF HPI" shall be deemed to have occurred if (i) any
"person" (as such term is used in Sections 13(d) and 14(d) of the Securities and
Exchange Act of 1934 as amended (the "Exchange Act") is or becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of HPI representing twenty percent
(20%) or more of the combined voting power of HPI's then outstanding securities
or (ii) if at any time after the date hereof and prior to the payment of the
last installment of the Purchase Price hereunder, individuals who currently
constitute the Board of Directors of HPI cease to constitute at least a majority
thereof.
"CASINO" means the Hollywood Park Casino, located at 1088 S. Prairie
Avenue, Inglewood, California, together with all furniture, fixtures, equipment,
supplies, improvements and tangible and intangible assets located therein or
associated therewith.
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"CLAIMS" means any and all liens, charges, claims, liabilities, options,
debts, security interests, secured claims, and other encumbrances of any kind or
nature whatsoever, whether or not contingent, liquidated, disputed or known.
"CALIFORNIA CODE" means the California Revenue and Taxation Code.
"CALIFORNIA CORPORATIONS CODE" means the California General Corporations
Law, as amended.
"CODE" means the Internal Revenue Code of 1986, as amended.
"DGCL" means the Delaware General Corporation Law, as amended.
"EXCLUDED LIABILITIES" has the meaning set forth in Section 2.2 hereof.
"GAAP" means generally accepted accounting principles in the United States
as in effect on the date of this Agreement.
"GAMING ACT" means the California Gaming Registration Act, Section 19801
et.seq. of the California Business and Professions Code, as amended.
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"HPI" means Hollywood Park, Inc., a Delaware corporation.
"HPI SHARES" means shares of voting Common Stock of HPI, as adjusted to
take into account any stock dividends, split-ups, recapitalizations,
combinations, exchange of shares or the like, occurring prior to any payment
date hereunder.
"INDEMNIFIED PARTY" means, with respect to any alleged Loss, the party
seeking indemnity hereunder.
"INDEMNIFYING PARTY" means, with respect to any alleged Loss, the party
from whom indemnity is being sought hereunder.
"INGLEWOOD ORDINANCE" means Ordinance 93-05 of the City of Inglewood,
California.
"INTELLECTUAL PROPERTY" means (i) all patents, trademarks, trade names,
service marks and copyrights and (ii) all registrations and applications
therefor (but excluding any of the foregoing to the extent it relates solely to
the corporate name of Seller; i.e., "PCM" and Pacific Casino Management, Inc.);
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"INTERIM BALANCE SHEET" means the unaudited balance sheet of PCM as of
August 31, 1995.
"KNOWLEDGE OF PCM," "KNOWN TO PCM" or similar formulations means the actual
knowledge of either of the Shareholders after due inquiry of Michael Palmer,
Rick Cole, or Paul Jackson. As used herein, "DUE INQUIRY" shall mean and be
limited to inquiry of each of the named persons as to the accuracy of the matter
covered which due inquiry obligation shall be conclusively satisfied by having
such persons sign a certificate in substantially the form of Exhibit B hereto on
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or before the date hereof.
"KNOWLEDGE OF SHAREHOLDER," "KNOWN TO SHAREHOLDER" or similar formulations
mean to the actual knowledge of the individual Shareholder referred to, after
due inquiry. The due inquiry obligation of each Shareholder shall be
conclusively satisfied by having the persons named in the immediately preceding
definition sign a certificate in substantially the form of Exhibit B hereto, on
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or before the date hereof.
"LAWS" means and includes all Federal, state, local and foreign statutes,
laws, rules and regulations applicable to the Shareholders or PCM; or the Casino
and any and all judgments, orders and decrees binding upon the Shareholders, PCM
or the Casino, or any of their respective properties issued by any court or
other Governmental Authority with jurisdiction over the Shareholders, PCM, the
Casino or such property, including, but not limited to, the Gaming Act and the
Inglewood Ordinance.
"LIENS" means and includes any material security interests, judgments,
liens, pledges, claims, charges, rights of first refusal, mortgages, equities,
options, restrictions or other encumbrances (whether voluntary or involuntary)
upon legal or beneficial ownership, or upon any rights, title or interests
pertaining thereto.
"LOSSES" means any and all costs and expenses (including, without
limitation, reasonable attorneys' fees and expenses and court costs incident to
any suit, action, investigation or other proceedings), damages and losses.
"MATERIAL ADVERSE EFFECT" means a material adverse effect on the business
or financial condition of PCM and the Casino, taken as a whole.
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"MATERIAL CONTRACT" means (i) any material contract or commitment arising
outside of the ordinary course of business; (ii) any contract or commitment
involving an obligation which cannot or in reasonable probability will not be
performed or terminated within three (3) months from the date hereof and
involving the payment by PCM of more than $50,000, singly; (iii) any contract or
commitment materially affecting ownership of, title to, use of, or any interest
in the Casino or in any other real estate; (iv) any profit-sharing, bonus, stock
option, pension, incentive compensation, deferred compensation, "parachute",
retirement, stock purchase, or similar plan or agreement, providing benefits to
any current or former officer or employee or any Shareholder; (v) any material
indenture, mortgage, promissory note, loan agreement or other agreement or
commitment for the borrowing of money; (vi) any material guaranty of obligations
of any other Person; (vii) any agreement with respect to the licensing of any
Intellectual Property (or any similar agreement); (viii) any material agreement
or understanding between PCM and any Shareholder or any affiliate of any
Shareholder; (ix) any collective bargaining agreement or other contract or
commitment to or with any labor unions or other employee representatives or
groups of employees; (x) any employment contract or any other contract,
agreement or commitment to or with individual employees or agents; or (xi) any
contract or commitment providing for payments based in any manner upon the
sales, purchases or profits of PCM.
"NONCOMPETITION AGREEMENTS" means those certain noncompetition agreements
by and between HPI and each of the Shareholders, being executed concurrently
herewith, in substantially the form attached hereto as Exhibit C.
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"PCM" means Pacific Casino Management, Inc., a California corporation.
"PCM FINANCIAL STATEMENTS" means the audited balance sheets of PCM as of
December 31, 1994, the related profit and loss statements and statements of cash
flow for the six (6) month period ending on such date, and unaudited balance
sheet and related profit and loss statements and statements of cash flow for the
eight (8) months ending August 31, 1995.
"PCM SHARES" means the shares of capital stock of PCM.
"PERMITS" means any and all federal, state and local governmental licenses,
consents, approvals, authorizations and permits, including, without limitation,
those required for the operation of the Casino under the Gaming Act, the
Inglewood Ordinance or otherwise, the failure of which to have would have a
Material Adverse Effect.
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"PERSON" means any individual, corporation, partnership, company,
association, trust, estate or Governmental Authority.
"PURCHASE PRICE" has the meaning set forth in Section 3.1 hereof.
"QUOTED PRICE" means the average of last reported sales price of HPI Shares
on the National Association of Securities Dealers, Inc. Automated Quotation
National Market System ("NASDAQ") or, if the HPI Shares are not listed thereon,
on such exchange as the HPI Shares may be listed or, if the HPI Shares are not
listed on any exchange, the average of the closing bid and asked prices for the
HPI Shares in the over-the-counter market, in each case for the ten (10) trading
days immediately prior to the date on which the HPI Shares are being valued, or,
in the case of the installment of the Purchase Price being paid concurrently
herewith, for the ten trading days ending on September 29, 1995. In the absence
of any such quotation, the Quoted Price shall be determined by agreement of HPI
and the Shareholders, or if such parties are unable to agree on a Quoted Price,
the Quoted Price shall be determined by a nationally recognized investment
banking firm selected by the parties.
"REGISTRATION RIGHTS AGREEMENT" means that certain registration rights
agreement by and between HPI and the Shareholders, being executed concurrently
herewith, in substantially the form attached hereto as Exhibit D.
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"RELATED AGREEMENTS" means the Bill of Sale, Registration Rights Agreement
and the Noncompetition Agreements.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHAREHOLDERS" means Donald Klosterman and Edward LeBaron, being all of the
shareholders of PCM.
"TAXES" means any and all federal, state, local, foreign and other net
income, gross income, gross receipts, sales, use, ad valorem, transfer,
franchise, profits, license, lease, service, service use, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, windfall
profits, customs, duties or other taxes, fees, assessments or charges of any
kind whatever (including without limitation, all taxes or other amounts payable
to the City of Inglewood pursuant to the Inglewood Ordinance), together with any
interest and any penalties, additions to tax or additional amounts with respect
thereto.
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"THIRD-PARTY CLAIM" means a claim brought by a third party for which
indemnification is sought pursuant to Article VI.
"TRANSFER" means any sale, transfer, assignment, hypothecation, encumbrance
or other disposition, whether voluntary or involuntary or whether by gift,
bequest or otherwise.
ARTICLE II
SALE AND PURCHASE OF ASSETS; ASSUMPTION OF LIABILITIES;
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MISCELLANEOUS
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2.1 Sale and Purchase of Assets. For the consideration and subject to
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the terms and conditions contained herein, PCM hereby sells, conveys, assigns
and delivers to HPI (or at HPI's option, a wholly-owned direct subsidiary of
HPI), and HPI hereby purchases and accepts the conveyance, assignment, and
delivery of, all of PCM's right, title, and interest in and to all of the
assets, properties and business of PCM of every kind and nature, tangible or
intangible, real or personal, fixed or contingent, (the "Assets"), including
without limitation:
(a) Cash and Cash Equivalents. All cash and cash equivalents
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of PCM on the date hereof;
(b) Accounts Receivable. All accounts and notes receivable of
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PCM of every nature whatsoever remaining unpaid as of the Closing date hereof,
including without limitation, all "markers", foreign chips, and other
receivables;
(c) Equipment and Supplies. All machinery, equipment,
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maintenance equipment, spare parts, maintenance and operating supplies,
chemicals, office supplies, leasehold improvements, furniture, fixtures,
computer hardware and software, vehicles, fuel and spare parts for such
machinery, equipment, tools and vehicles and other tangible property;
(d) Prepaid Expenses. All prepaid expenses of PCM of every
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nature whatsoever;
(e) Intellectual Property. Any and all Intellectual Property
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of PCM of every nature whatsoever, including, without limitation, the properties
listed on Schedule 4.1.12 hereto;
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(f) Third Party Claims. All claims of PCM against third
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parties relating to the Assets, including,
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without limitation, unliquidated rights under manufacturers' and vendors'
warranties;
(g) Books and Records. All books and records, files,
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documents, papers and agreements (including, without limitation, information
relating to customers, contractors, suppliers and vendors) pertaining to the
Assets or otherwise other than confidential communications between PCM and the
Shareholders and their respective legal counsel;
(h) Permits, etc. All Permits, licenses, franchises, consents
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or authorizations issued by, and all registrations and filings with, any
governmental agency in connection with the Casino, whenever issued or filed,
excepting only those which by law or by their terms are non-transferable;
(i) Other Assets. All other assets of every kind and nature,
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tangible or intangible, of PCM of every nature whatsoever, owned, used or held
for use in connection with the Casino or otherwise.
Such right, title and interest in and to the Assets shall be sold, conveyed,
assigned, and delivered by PCM to HPI by execution and delivery by PCM of the
Bill of Sale and other appropriate bills of sale and assignments, executed
concurrently herewith or hereafter, in form and substance reasonably
satisfactory to HPI.
2.2 Assumption of Liabilities. For the consideration and subject to the
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terms and conditions contained herein, HPI hereby assumes and agrees to pay all
PCM's liabilities incurred prior to the date of the Interim Balance Sheet as
reflected in the Interim Balance Sheet and all liabilities incurred thereafter
in the ordinary course of business or reflected in the schedules hereto,
including without limitation that certain Promissory Note of PCM in favor of
HPI, dated as of April 1, 1995, in the principal amount of $18,690,299.35 (the
"Assumed Liabilities"); provided, however, that HPI does not assume and shall
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not be liable for those liabilities listed on Schedule 2.2 hereto (the "Excluded
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Liabilities").
2.3 Related Agreements. Concurrently herewith, PCM has executed and
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delivered the Bill of Sale to HPI, each of the Shareholders has executed and
delivered a Noncompetition Agreement to HPI and HPI has executed and delivered
to PCM and each of the Shareholders the Registration Rights Agreement.
2.4 Taking of Necessary Action; Further Action. HPI, PCM and each of
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the Shareholders, respectively, shall take all such lawful action as may be
reasonably necessary or
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appropriate in order to effectuate the transactions contemplated by this
Agreement. If, at any time after the date hereof, any further action is
necessary or desirable to carry out the purposes of this Agreement or to vest
HPI with full right, title and possession to the Assets, the officers and
directors of such corporations are fully authorized in the name of their
respective corporations or otherwise to take, and shall take, all such lawful
and necessary action at the sole cost and expense of the party requesting such
action.
2.5 Intended Tax Treatment. The parties hereto intend that the transfer
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of the Assets, the assumption of the Assumed Liabilities and the issuance of the
HPI Shares under Section 3.1 shall collectively constitute a reorganization
within the meaning of Code section 368(a)(1)(C) as to which no gain shall be
recognized by HPI, PCM or the Shareholders. Each party hereto agrees to report
said transactions to all relevant tax authorities in a manner consistent with
such intent.
ARTICLE III
PURCHASE PRICE
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3.1 Purchase Price. The purchase price for the Assets shall be an
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aggregate Two Million Six Hundred Forty Thousand Dollars ($2,640,000) (the
"PURCHASE PRICE"), payable solely in HPI Shares valued at the Quoted Price on
the respective payment dates, payable to PCM in three installments as follows:
(a) Concurrently herewith, HPI Shares having a value (based on
the applicable Quoted Price) equal to an aggregate One Million Six Hundred
Thousand Dollars ($1,600,000);
(b) On the first anniversary date of the date hereof, HPI
Shares having a value (based on the applicable Quoted Price) equal to an
aggregate Five Hundred Forty Thousand Dollars ($540,000);
(c) On the second anniversary date of the date hereof, HPI
Shares having a value (based on the applicable Quoted Price) equal to an
aggregate Five Hundred Thousand Dollars ($500,000);
provided, however, that at any time after the date hereof HPI may elect to
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accelerate the payment of the installments described in (b) and (c) above and
issue the HPI Shares to the Shareholders prior to the dates therein set forth at
the Quoted Price at such time.
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(d) Notwithstanding the foregoing, the aggregate number of HPI
Shares payable pursuant to Sections 3.1(b) and (c) above shall not exceed the
total number of HPI Shares paid pursuant to Section 3.1(a).
(e) It being expressly understood by the parties hereto that
PCM intends to liquidate and distribute all of its assets including without
limitation the right to receive the payments described in (b) and (c), above, to
the Shareholders and HPI agrees that following PCM's dissolution and
liquidation, any further payments due hereunder shall be made directly to the
Shareholders, 50% to each such Shareholder.
3.2 Adjustment. It is understood and agreed that the Purchase Price of
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the Assets was predicated in part on the Shareholders having a capital
investment in PCM of at least $400,000 at the date hereof and on the
Shareholders not having received any compensation or distributions from PCM
except for salaries through September 30, 1995 at the annual rate of Five
Hundred Thousand Dollars ($500,000) per Shareholder and expense reimbursements.
In the event the amount of such capital investment at the date hereof is less
than Four Hundred Thousand Dollars ($400,000) or if compensation or
distributions exceeded the foregoing amount, the Purchase Price shall be reduced
dollar for dollar and the second installment thereof shall be reduced
accordingly.
3.3 Transfer of Rights. No Transfer of the rights to any payments under
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this Article III shall be permitted and any attempted Transfer shall be void and
of no effect; provided, however, that PCM may transfer any of its rights
hereunder to the Shareholders.
3.4 Fractional Shares. No fractional HPI Shares will be issued
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hereunder; any fractional share otherwise issuable hereunder will be rounded up
or down to the nearest whole share.
3.5 Sales Tax. All sales and use taxes, if any, imposed upon the
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transfer of the Assets, whether such taxes are assessed initially against HPI or
PCM, shall be borne by HPI and PCM shall have no liability for sales, use or
similar excise taxes of PCM or HPI relating to the transfer of the Assets that
have accrued prior to or after the date hereof. HPI shall indemnify and hold PCM
harmless against any loss, cost, or damage, including attorney's fees, incurred
by PCM related to HPI's failure to pay taxes as required by this Section 3.6.
3.6 Change in Control. In the event of a Change in Control of HPI at
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any time prior to the second anniversary
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date of this Agreement, HPI Shares representing the then unpaid installments of
the Purchase Price (valued at the date of such Change in Control) shall be
deposited in escrow for the account of PCM or the Shareholders, to be delivered
by the escrow holder on the respective payment dates to PCM or to HPI as the
case may be based upon the exact number of HPI Shares to be delivered on such
date based on the Quoted Price as of such payment date. The escrow holder shall
be a bank selected by PCM and reasonably satisfactory to HPI and the terms of
such escrow shall be subject to mutual agreement at the time, or barring such
agreement, by the escrow holder with due regard for the provisions of this
Agreement, including Article VI hereof. The cost of such escrow shall be borne
by HPI. HPI hereby covenants and agrees to issue additional HPI Shares to the
Shareholders if, at the time of a scheduled payment hereunder, there are
insufficient HPI Shares in the escrow to satisfy HPI's payment obligations. This
Section 3.6 is not intended to and in no way limits HPI's obligation to pay the
full amount of all payments to the Shareholders and PCM when and as required by
Section 3.1. Notwithstanding the foregoing, in the event of a merger or other
reorganization of HPI with another corporation in which HPI is not the surviving
corporation (a "Merger") the Shareholders' rights to any payments of HPI Shares
not yet due under Section 3.1, at the option of the surviving corporation, may
be converted into the right to receive freely tradeable shares of common stock
of the surviving corporation, provided that such common stock, both at the time
of the Merger and at the time of payment, is listed or traded on a nationally
recognized stock exchange or NASDAQ. In such event, the term "Quoted Price"
shall refer to the price of the Surviving Corporation's Common Stock and the
term "HPI Shares" shall mean "Surviving Corporation Shares".
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
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4.1 Representations and Warranties of PCM and the Shareholders. Each of
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PCM and each of the Shareholders, individually, hereby represents and warrants
as follows provided, however, that notwithstanding anything else contained in
the Agreement, except for those representations and warranties contained in
Sections 4.1.6, 4.1.9 and 4.1.10, the Shareholders shall make such
representations and warranties only to their respective knowledge:
4.1.1 Existence and Rights. PCM (i) is a corporation duly
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organized, validly existing and in good standing under the laws of the State of
California, (ii) has all requisite power and authority to own, lease and operate
its properties, to carry on its business as now conducted, (iii) to enter into
this Agreement, to perform its obligations
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hereunder and to carry out the transactions contemplated hereby.
4.1.2 Agreements Authorized. The execution, delivery and
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performance of this Agreement by PCM and of this Agreement and the Related
Agreements by the Shareholders has been duly authorized by all necessary
corporate and other action and, to the Knowledge of PCM, do not require (with
respect to PCM or the Shareholders) notice to, or the consent or approval of,
any governmental or other regulatory authority or other Person (except as
otherwise expressly set forth in any such Agreement). Each of this Agreement
and the Related Agreements has been duly executed and delivered by PCM and each
of the Shareholders and is a legal, valid and binding obligation of PCM and each
of the Shareholders enforceable against each of such parties in accordance with
its terms (except as such enforceability may be limited by applicable
bankruptcy, insolvency, moratorium, reorganization or similar laws from time to
time in effect which affect creditors' rights generally and by legal and
equitable limitations on the availability of equitable remedies). All of the
shareholders of PCM have approved this Agreement pursuant to Section 1201 of the
California Corporations Code and therefore no shareholder of PCM is entitled to
assert dissenters' rights under Section 1300 et seq. of such law.
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4.1.3 No Conflict. The execution, delivery and performance by
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each of PCM and the Shareholders of this Agreement and the Related Agreements
will not (i) conflict with or result in a breach of any provision of the
Articles of Incorporation or Bylaws of PCM, (ii) to the Knowledge of PCM, cause
a default (or give rise to any right of termination, cancellation or
acceleration or loss of a material benefit) under any Material Contract, or
result in the creation of any Lien upon any of the properties of PCM or the
Casino under any of the terms, conditions or provisions of any note, bond,
mortgage or indenture, or any other instrument, obligation or agreement to which
PCM is a party or by which PCM or any of its properties or assets may be bound
or (iii) to the Knowledge of PCM, violate any applicable Law which violation
would have a Material Adverse Effect.
4.1.4 Corporate Books. To the Knowledge of PCM, the corporate
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minute books and stock books of PCM are complete and correct in all material
respects, the meetings of directors and shareholders referred to therein were
duly called and duly held, and the signatures appearing on all documents
contained therein are the true signatures of the persons purporting to have
signed the same. Copies of the contents of such books, which have been
previously delivered to HPI, are complete and correct in all material respects
as of the date hereof. The accounting books and records of PCM
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accurately reflect in all material respects its transactions and correctly
account in all material respects for all receipts, disbursements and
expenditures.
4.1.5 Financial Statements. Except as set forth on Schedule
-------------------- --------
4.1.5, the PCM Financial Statements, correct and complete copies of which have
- -----
been previously delivered to HPI: (i) are correct and complete in all material
respects and present fairly and accurately the financial position of PCM at such
dates and the results of the operations, retained earnings and cash flows of PCM
for such periods; (ii) have been prepared in accordance with GAAP applied
consistently during such periods and with respect to prior periods; and (iii)
were prepared from and are in accordance with PCM's books and records. Except
as set forth on Schedule 4.1.5, PCM has no liabilities or guarantees, matured or
--------------
unmatured, contingent or otherwise, as of the respective dates of the PCM
Financial Statements of a type required to be reflected therein by GAAP and not
accurately reflected therein, and none have arisen since the date of the Interim
Balance Sheet, except in the ordinary course of PCM's business, consistent with
past practice.
4.1.6 Undisclosed Liabilities. Except as set forth on Schedule
----------------------- --------
4.1.6 and except for those incurred in the ordinary course of business, PCM does
- -----
not have any obligations, indebtedness or liabilities, contingent or otherwise,
which are, individually or in the aggregate, material other than those disclosed
or adequately reserved for in the Interim Balance Sheet (to the extent required
by GAAP to be disclosed on the Interim Balance Sheet).
4.1.7 Litigation and Claims. Except as set forth on Schedule
--------------------- --------
4.1.7, (i) there is no litigation, investigation, arbitration or other
- -----
proceeding (formal or informal), or third party claim, including but not limited
to, claims by customers of the Casino, pending or, to the best knowledge of PCM
and the Shareholders, threatened against or affecting PCM or its properties
which, if determined adversely would have a Material Adverse Effect. To the
Knowledge of PCM, PCM is not in default with respect to any order, writ,
injunction, decree or demand of any court or other governmental or regulatory
authority.
4.1.8 Absence of Changes. Since August 31, 1995, PCM has
------------------
conducted business in the ordinary course consistent with past practices and to
the Knowledge of PCM, except as set forth on Schedule 4.1.8, there has not been
--------------
any: (i) material adverse change (whether or not covered by insurance) in the
condition (financial or otherwise), results of operations, properties, assets,
liabilities, or businesses, of PCM, or any occurrence or event which would
reasonably be
-13-
expected to have a Material Adverse Effect; (ii) any general increase in the
aggregate compensation of employees of PCM or the Casino, or any material
increase in aggregate compensation payable to any officer, director or employee
thereof, or the entering into of any employment contract with any officer,
director of employee, or the making, forgiveness or other change in the terms of
any loan to, any officer or director of PCM; or (iii) any license, sale,
transfer, pledge, mortgage or other disposition of any material asset of PCM or
the Casino outside the ordinary course of business or inconsistent with past
practice; or (iv) any commitment by PCM to make capital expenditures for
additions to property, plant or equipment in an amount in excess of $50,000 in
the aggregate from any vendor; or (v) any change in the accounting methods,
principles or practices followed by PCM; or (vi) any agreement, commitment or
undertaking by PCM or either of the Shareholders to do any of the foregoing.
4.1.9 Title to Properties. PCM has good and marketable title to
-------------------
all properties reflected on the Interim Balance Sheet or acquired after the
Interim Balance Sheet Date (except inventory and other properties disposed of in
the ordinary course of business since the Interim Balance Sheet Date and
accounts or notes receivable paid since the Interim Balance Sheet Date), free
and clear of all Liens other than (i) Liens for current taxes not yet due and
payable or delinquent and which are not material in amount, or (ii) mechanics',
carriers', workmen's and similar Liens arising in the ordinary course of
business in respect of amounts that are not yet due and payable or are being
disputed in good faith and which are not material in amount. PCM owns no real
property.
4.1.10 Taxes. PCM has (i) properly completed and timely filed
-----
all returns for Taxes required to be filed on or before the date hereof or has
obtained extensions (without penalty or interest) of the deadline for filing;
(ii) paid or adequately reserved on the Interim Balance Sheet for all Taxes
which may be owed by it; (iii) adequately reserved for deferred Taxes; (iv) duly
withheld, collected and paid over to the proper governmental authorities all
Taxes and assessments required to have been withheld or collected and paid over
by PCM, provided that as to employee taxes, PCM's representation is limited to
its payment of such amounts as calculated by HPI, it being expressly understood
that PCM makes no representation as to the correctness of such calculations. PCM
has not been advised in writing of any deficiency claimed or proposed to be
claimed against or relating to PCM by any taxing authority which has not been
paid, settled or adequately reserved for on the Interim Balance Sheet, and there
are no matters under discussion with any taxing authority or known to PCM or the
Shareholders which might
-14-
reasonably result in the assessment of additional amounts against or relating to
PCM. There are no Liens for Taxes (other than for current Taxes not yet due and
payable) upon the assets of PCM. Complete and correct copies of all federal,
state and local income and other tax returns of or in respect of PCM for PCM's
1994 tax year have been previously delivered to HPI. PCM has never filed, or
otherwise made, a consent under Section 341(f) of the Code. PCM is not a party
to or bound by any tax indemnity, tax sharing or tax allocation agreement. PCM
has never been a member of an affiliated group of corporations, within the
meaning of Section 1504 of the Code. PCM has not agreed to make, nor is it
required to make, any adjustment under Section 481(a) of the Code by reason of a
change in accounting method or otherwise. PCM has never been a party to any
joint venture, partnership, or other arrangement or contract which could be
treated as a partnership for federal income tax purposes. Neither PCM nor any
Shareholder has granted any extension of the statute of limitations applicable
to any return or other Tax claim. PCM has not been a personal holding company
within the meaning of Section 542 of the Code since its inception. Each of PCM
and the Shareholders has maintained all required records with respect to any
liability for Taxes in all material respects. All tax returns filed by PCM are
true, correct and complete in all material respects. To the Knowledge of PCM, no
facts exist which would reasonably be expected to constitute grounds for the
assessment of any material liability for Tax by any governmental authority
against PCM.
4.1.11 Banking. Schedule 4.1.11 lists the name of each bank,
------- ---------------
savings or other financial institution in which PCM has an account or safe
deposit box, the account numbers thereof and the names of all persons authorized
to draw thereon or to have access thereto.
4.1.12 Intellectual Property. Schedule 4.1.12 identifies all
--------------------- ---------------
Intellectual Property which is used in PCM's business as presently conducted,
along with (if applicable) the registration numbers, dates of issuance and names
of the inventors or authors of such patents, marks, names and copyrights and any
other related information. To the knowledge of PCM, PCM owns, leases or
licenses all such Intellectual Property free and clear of all Claims and PCM has
not received written notice that its use of such Intellectual Property conflicts
with, infringes on, or violates any rights of others.
4.1.13 Insurance. PCM has in full force and effect the policies
---------
of fire, liability, errors and omissions and other forms of insurance listed on
Schedule 4.1.13. To the Knowledge of PCM, (i) PCM is not in default in any
- ---------------
-15-
material respect under any such policies, (ii) PCM's activities and operations
have been conducted in a manner so as to materially conform to the applicable
provisions of such policies, and (iii) PCM has not received a written notice of
cancellation or non-renewal of any such policy or has any knowledge of any
inaccuracy in any application for such policies or any predecessor policies.
4.1.14 Contracts. Schedule 4.1.14 correctly sets forth all
--------- ---------------
Material Contracts to which PCM is a party or by which PCM or its assets are
bound, including all amendments, modifications and waivers. The copies of the
Material Contracts (including all amendments, modifications and waivers)
previously delivered to HPI are complete and correct. To the Knowledge of PCM,
each of the Material Contracts (including all amendments, modifications and
waivers) (a) has been duly authorized, executed and delivered by PCM, (b)
remains in full force and effect to the extent of its terms without any
amendment, modification or waiver not reflected in the Material Contracts
previously delivered to HPI, (c) is not subject to, and neither PCM nor any of
the Shareholders has received any written notice threatening or declaring
termination as a result of any alleged uncured breach or default, and (d) is not
reasonably expected to (1) result in any material loss to PCM upon completion or
performance thereof after allowance for general and administrative selling and
distribution expenses, or (2) have a Material Adverse Effect. To the Knowledge
of PCM, PCM has performed all material obligations required to be performed by
it under each Material Contract.
4.1.15 No Other Acquisition Agreement. Neither PCM nor either of
------------------------------
the Shareholders is a party to an agreement with any other entity, concerning a
merger, consolidation, asset or stock acquisition, disposition or other similar
transaction involving PCM.
4.1.16 Officers, Directors and Employees. Schedule 4.1.16 sets
--------------------------------- ---------------
forth the names of all present officers and directors of PCM, and any employee,
consultant, distributor, agent or representative of PCM who receives more than
$50,000 per annum for services rendered to or on behalf of PCM. Except as set
forth on Schedule 4.1.16, neither of the Shareholders nor any of PCM's other
---------------
officers or directors, or any family members by blood or marriage of any of such
persons, (e.g., parents, spouse, siblings, children and in-laws) (i) owns,
----
directly or indirectly, individually or collectively, any interest in a
corporation, partnership, firm, association or sole proprietorship, which is a
competitor of PCM or has an existing contractual relationship with PCM; or (ii)
owes any material amount to, or is owed any material amount by, PCM, other than
indebtedness for
-16-
compensation earned and not yet paid in the ordinary course of business.
4.1.17 Compliance with Laws. To the Knowledge of PCM, PCM and
--------------------
each of the Shareholders has complied with all material gaming related Laws
applicable to the operation of the Casino and PCM is not in violation of any
such Law, or of any judgment, order, decree or other requirement of any court,
tribunal or governmental body, or any agency or official acting in an official
capacity related to the Casino, the violation of which would have a Material
Adverse Effect.
4.1.18 Permits and Licenses. To the Knowledge of PCM, PCM and
--------------------
each of PCM's employees, as necessary under applicable Law, have all Permits and
licenses required for the operation of the Casino as currently conducted,
including all requisite licenses and Permits under the Gaming Act and the
Inglewood Ordinance. PCM has no material existing liability (contingent or
otherwise) for failures to obtain or comply with the same or comparable Permits
for any business conducted by PCM in the past other than as disclosed in the PCM
Financial Statements or schedules hereto. Each Permit with respect to PCM is
listed on Schedule 4.1.18. To the Knowledge of PCM, each Permit is presently
---------------
valid and in full force and effect, and no proceeding is pending or threatened
to revoke, limit or negate such Permit.
4.1.19 Labor Relations; Employees. PCM currently employs a total
--------------------------
of approximately 1,000 employees (including part time employees). To the
Knowledge of PCM, PCM is not delinquent in payments to any of its employees for
any wages, salaries, commissions, benefits, bonuses or other direct or indirect
compensation for any services performed by him or her to the date hereof or
amounts required to be reimbursed to any of its employees. To the best
knowledge of PCM except as set forth on Schedule 4.1.19 (i) there are no pending
---------------
or threatened litigation by any employees with respect to PCM which, if
determined adversely, would have a Material Adverse Effect; (ii) there are no
pending or threatened administrative actions or claims with respect to PCM
including, without limitation, discrimination (whether for sex, age, race,
religion, national origin or any other reason) which, if determined adversely
would have a Material Adverse Effect; (iii) upon termination of the employment
of any employee, neither PCM nor HPI will be liable to any such terminated
employee for "severance pay," vacation pay or any other payments by reason of
anything which occurred prior to the date hereof; (iv) PCM is in material
compliance with all material federal, state and local laws and regulations
respecting labor, employment and employment practices, terms and conditions of
employment and wages and hours; (v) there is no unfair labor practice complaint
against PCM pending before
-17-
the National Labor Relations Board or any comparable state, local or foreign
agency and (vi) there is no labor strike, dispute, slowdown or stoppage actually
pending or threatened against or involving PCM. PCM is not a party to nor is it
subject to any collective bargaining agreement.
4.1.20 No Finder's Fee. Neither PCM nor either of the
---------------
Shareholders has incurred any liability to any broker, finder or agent for any
brokerage fees, finder's fees, commissions or other amounts with respect to the
transactions contemplated by this Agreement.
4.2 Representations and Warranties of HPI. HPI hereby represents and
-------------------------------------
warrants as follows:
4.2.1 Existence and Rights. HPI (i) is a corporation duly
--------------------
organized, validly existing and in good standing under the laws of the State of
Delaware and (ii) has the corporate power and authority to own, lease and
operate its properties, to carry on its business as now conducted and (iii) to
enter into this Agreement, to perform its obligations hereunder and to carry out
the transactions contemplated hereby.
4.2.2 Agreements Authorized. The execution, delivery and
---------------------
performance of this Agreement and the Related Agreements by HPI, have been duly
authorized by all necessary corporate action and do not require (with respect to
HPI) notice to, or the consent or approval of, any governmental or other
regulatory authority or other person (other than the required registration of
HPI and its officers, directors and key employees under the Gaming Act and the
Inglewood Ordinance and except as otherwise expressly set forth in any such
Agreement). This Agreement and each of the Related Agreements has been duly
executed and delivered by HPI and is a legal, valid and binding obligation of
HPI enforceable against HPI in accordance with its terms (except as such
enforceability may be limited by applicable bankruptcy, insolvency, moratorium,
reorganization or similar laws from time to time in effect which affect
creditors' rights generally and by legal and equitable limitations on the
availability of equitable remedies).
4.2.3 No Conflict. The execution, delivery and performance by
-----------
HPI of this Agreement and the Related Agreements will not (i) modify, breach or
constitute grounds for the occurrence or declaration of a default under or allow
another party a right to terminate, cancel or accelerate any obligation under
any agreement, indenture, undertaking or other instrument to which HPI is a
party or by which it or any of its assets may be bound or affected, (ii) to the
Knowledge of HPI, violate any provision of law or any regulation or any
-18-
order, judgement, or decree of any court or other agency of government to which
HPI is subject or (iii) conflict with or violate any provision of the
Certificate of Incorporation or Bylaws of HPI.
4.2.4 HPI Shares. The HPI Shares to be issued to PCM or either
----------
Shareholder hereunder, when issued in accordance with this Agreement, will be
duly and validly issued, fully paid, non-assessable and will not be issued in
violation of any preemptive rights. Upon delivery of certificates representing
the HPI Shares, title to such shares will be transferred to PCM or either
Shareholder, as the case may be, free and clear of any and all Liens (other than
Liens which may have been created by PCM or either of the Shareholders. HPI
shall take all actions as may be necessary to assure that all such HPI Shares
may be so issued without violation of any applicable law or governmental
regulation or any requirements of any securities exchange upon which such HPI
shares may be listed.
4.2.5 No Finder's Fees. Neither HPI nor any of its officers,
----------------
directors, agents or employees have incurred any liability to any broker, finder
or agent for any brokerage fees, finder's fees, commissions or other amounts
with respect to the transactions contemplated by this Agreement.
4.2.6 Reservation of Shares. HPI shall at all times reserve and
---------------------
keep available out of its authorized but unissued shares of common stock, solely
for the purpose of satisfying its payment obligations hereunder, such number and
class of Common Stock as the board of directors of HPI, in its best judgment,
believes adequate to satisfy all remaining payment obligations hereunder.
ARTICLE V
REPRESENTATION AND AGREEMENTS
-----------------------------
RESPECTING HPI SHARES
---------------------
5.1 Restrictions on Transfer. Each of PCM and the Shareholders
------------------------
acknowledge and agree that the HPI Shares issued and to be issued hereunder are
not registered under the Securities Act, as amended, or any state securities
laws and therefore, cannot be Transferred (except by PCM to each of the
Shareholders) unless such HPI Shares have been registered under the Securities
Act and such securities laws (subject to the terms and conditions of the
Registration Rights Agreement) or an exemption from such registration is
available. Any transferee of the HPI Shares other than a purchaser of such
shares after registration thereof takes subject to such restrictions. PCM and
each of the Shareholders understands that the HPI Shares to be issued hereunder
will be "restricted
-19-
securities" as that term is defined in Rule 144 promulgated under the Securities
Act; the exemption from registration under Rule 144 will not be available in any
event for at least two years from the date hereof, and even then will not be
available unless (1) a public trading market then exists for the HPI Shares, (2)
adequate information concerning HPI is then available to the public, and (3)
other terms and conditions of Rule 144 are complied with; and that any sale of
the HPI Shares may be made by the Shareholders only in accordance with such
terms and conditions. Each of PCM and the Shareholders further understands that
(i) no federal or state agency has made any finding or determination as to the
fairness of such investment nor has made any recommendation or endorsement of
the acquisition of the HPI Shares, and (ii) HPI, in exercising reasonable care
to assure that PCM and the Shareholders are acquiring the HPI Shares as an
investment, will, to the extent applicable and as described in Section 5.2, (a)
issue stop transfer instructions to its transfer agent with respect to such
securities, (b) make a notation regarding restrictions on transferability in its
records and (c) affix a legend to the certificates representing such securities
in substantially the form set forth in Section 5.3. Each of PCM and the
Shareholders have been furnished with such material and have been given access
to such information relating to HPI as they have requested and have been
afforded the opportunity to ask questions regarding HPI and the HPI Shares, all
as they have found necessary to make an informed investment decision. Each of
HPI, PCM and each Shareholder understands that following the first payment
hereunder, PCM intends to liquidate and distribute all of its assets, including
the HPI Shares received and the right to future payments, to the Shareholders.
5.2 Transfers. Subject to Section 5.1 and to the provisions of the
---------
Registration Rights Agreement, no Transfer of any HPI Shares issued to PCM
hereunder shall be permitted and any attempted Transfer shall be void and of no
effect, unless and until (i) HPI has received written notice of the proposed
Transfer, setting forth the circumstances and details thereof at least ten (10)
days prior to its effectiveness and (ii) HPI (at its option) has received from
an attorney satisfactory to HPI a written opinion in form satisfactory to HPI,
specifying the nature and circumstances of the proposed Transfer, and stating
that the proposed Transfer will not be in violation of any of the provisions of
the Securities Act or any applicable state securities laws. Notwithstanding the
foregoing, PCM may distribute the HPI Shares issued to it hereunder to the
Shareholders without restriction provided that the Shareholders will remain
bound by the provisions hereof.
-20-
5.3 Legend. Each certificate for HPI Shares issued to PCM or the
------
Shareholders hereunder and each certificate issued in exchange or upon transfer
of any thereof, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE
TRANSFER OF SUCH SECURITIES MAY NOT BE EFFECTED WITHOUT
REGISTRATION UNDER SECURITIES LAWS OR AN EXEMPTION FROM
REGISTRATION UNDER SECURITIES LAWS AND UNLESS THE HOLDER HAS
PROVIDED THE COMPANY WITH A WRITTEN LEGAL OPINION, FROM HOLDER'S
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
TRANSFER COMPLIES WITH THE SECURITIES LAWS. THE COMPANY RESERVES
THE RIGHT TO REFUSE TO TRANSFER SUCH SECURITIES UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER. A
COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE COMPANY TO THE
HOLDER HEREOF UPON WRITTEN REQUEST AND WITHOUT CHARGE."
5.4 Registration Rights. The HPI Shares issued or issuable to PCM or
-------------------
the Shareholders hereunder shall have those registration rights set forth in the
Registration Rights Agreement.
5.5 HPI SEC Reports. HPI has previously furnished to PCM and the
---------------
Shareholders complete and correct copies of HPI's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1995 and Annual Report on Form 10-K for the year
ended December 31, 1994, each as filed with the SEC. HPI represents and
warrants that as of the dates of their respective filings, such reports fairly
presented the business and financial results of operation of HPI as at and for
the periods ending as of such dates.
ARTICLE VI
INDEMNIFICATION
---------------
6.1 Indemnification. Subject to the provisions of Section 6.4 hereof,
---------------
HPI, on the one hand and each of PCM and the Shareholders, individually, on the
other, agree to indemnify and hold the other (including their officers,
directors, employees and agents) harmless from and against the full amount of
Losses (subject to the limitations set forth below) arising out of or resulting
from a breach of any representation, warranty or covenant made by the
Indemnifying Party in this Agreement. Notwithstanding the foregoing,
-21-
neither PCM nor either Shareholder shall have any obligation to indemnify HPI
(or its officers, directors, employees and agents) from and against any Losses
arising out of or resulting from any breach of any representation, warranty or
covenant contained in this Agreement (A) in the case of either Shareholder, in
excess of an aggregate ceiling for all such claims (inclusive of interest and
the costs of enforcing PCM's and the Shareholders' obligations hereunder,
including all legal fees inclusive of attorneys' fees recoverable pursuant to
Section 7.12) with respect to each Shareholder equal to the portion of the
Purchase Price not yet due to such Shareholder under Section 3.1 (it being
expressly understood that each Shareholder is entitled to 50% of the Purchase
Price and each payment made in payment thereof), (B) in the case of PCM in
excess of an aggregate ceiling for all such claims (inclusive of interest and
the costs of enforcing PCM's and the Shareholders' obligations hereunder,
including all legal fees inclusive of attorneys' fees recoverable pursuant to
Section 7.12) equal to the portion of the Purchase Price not yet due to both
Shareholders under Section 3.1, provided, however, that any payment made
-------- -------
hereunder by PCM shall reduce the aggregate ceiling of each Shareholder by an
amount equal to 50% of the amount so paid by PCM, and provided, further, that
-------- -------
PCM shall have no liabilities hereunder following its dissolution and the
liabilities of each of the Shareholders hereunder shall not be expanded by
reason of such dissolution and provided further that no liability for Losses
-------- -------
shall accrue to PCM or either of the Shareholders (i) to the extent such Losses
are incidental, exemplary or consequential damages to HPI (or its officers,
directors, employees and agents) resulting from the breach of any
representation, warranty or covenant contained herein, (ii) to the extent such
Loss results from the breach of any representation, warranty or covenant
contained herein by any other party hereto, (iii) to the extent such Loss
results from a breach of any representation, warranty or covenant contained
herein that was actually known by executive officers of HPI prior to the date
hereof and HPI nevertheless elected to consummate the transactions contemplated
hereby (regardless of whether HPI waived such breach in writing or otherwise) or
(iv) to the extent such Loss arises from or was caused by actions taken or
failed to be taken by HPI or any of its shareholders, officers, directors,
employees, agents or affiliates.
6.2 Third-Party Claims. Neither PCM nor either Shareholder shall have
------------------
any obligation to defend any action brought against HPI by a third party but any
costs of defense incurred by HPI shall be included as a "Loss" if such action is
an indemnifiable event.
6.3 Cooperation. The Indemnifying Party and the Indemnified Party shall
-----------
cooperate in determining the validity
-22-
of any Third-Party Claim for any Loss for which a claim of indemnification may
be made hereunder. Each party shall also use all reasonable efforts to minimize
all Losses.
6.4 Survival and Limitations. Notwithstanding anything to the contrary
------------------------
herein, the aggregate liability of PCM and the Shareholders hereunder shall be
limited to the then unpaid portion of the Purchase Price (including any amounts
in escrow) and with respect to each Shareholder, to the then unpaid portion of
the Purchase Price due such Shareholder. Upon notice by HPI of any claim,
action or proceeding which may be subject to indemnification by PCM or the
Shareholders hereunder, HPI shall cause to be deposited in escrow certificates
for HPI Shares representing the then unpaid portion of Purchase Price to be paid
to such Shareholder or PCM, as the case may be, (valued at the date of deposit)
pending resolution of the proceeding. Should HPI Shares have been escrowed
pursuant to Section 3.6 hereof, HPI shall give notice of any Claim to such
escrow holder which shall retain the shares in escrow pending resolution of the
claim, action or proceeding. HPI shall have no recourse to PCM or the
Shareholders hereunder beyond the amount of the unpaid Purchase Price.
6.5 Insurance. The indemnities provided by this Article VI shall apply
---------
only to Losses for which the party seeking indemnification has not obtained
reimbursement through third party insurance, if any, applicable to such Losses.
6.6 Exclusive Remedy. Except in the event of fraud, intentional
----------------
misstatement or omission, the sole and exclusive remedy of HPI (including its
officers, directors, employees and agents) against PCM and the Shareholders and
the sole and exclusive remedy of PCM and the Shareholders against HPI for the
breach of any representation, warranty, covenant, condition, agreement or
obligation under this Agreement or any of the Related Agreements or any
certificate or other writing delivered pursuant hereto or thereto, or for any
other matter arising from or related to the transaction contemplated hereunder
or thereunder shall be pursuant to this Article VI (and Section 7.5) and all
other remedies to which such parties may otherwise have been entitled at law or
in equity pursuant to applicable law or otherwise, are hereby waived to the
fullest extent allowed by the law.
ARTICLE VII
MISCELLANEOUS
-------------
7.1 Public Disclosure. From and after the date hereof but subject to
-----------------
advice of HPI's counsel with respect to legal requirements or advisability
relating to public disclosure of
-23-
the terms, conditions, circumstances or existence of this Agreement, the timing
and content of any press releases or other public statements concerning such
matters may only occur with the consent of HPI. Notwithstanding the foregoing,
HPI shall be permitted to make a press release and/or other public statement and
to the extent advisable or appropriate, file a Report on Form 8-K with the SEC
(including this Agreement and the Related Agreements as exhibits to such filing)
with regard to the consummation of the transactions contemplated hereby.
7.2 Survival. The representations and warranties contained herein are
--------
material, shall be deemed to have been relied upon by the party to whom they are
made and, regardless of any investigation made by or on behalf of the party to
whom they are made or any information any of them may obtain or have, shall
survive the Closing provided, however, that the representations and warranties
-------- -------
made by PCM and the Shareholders shall terminate and be of no further force and
effect as of that date which is two years from the date hereof and thereafter no
claim may be brought based upon a breach thereof.
7.3 Complete Agreement; Modifications. This Agreement, the Schedules
---------------------------------
attached hereto, the Related Agreements, 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 agreements,
representations, warranties, statements, promises and understandings, whether
oral or written, with respect to the subject matter hereof. This Agreement may
only be amended, altered or modified by a writing signed by HPI, PCM and each of
the Shareholders.
7.4 Cooperation. Each party hereto agrees to execute any and all
-----------
further documents and writings and perform such other reasonable actions which
may be or become necessary or expedient to effectuate and carry out the
transactions contemplated hereby (which shall not include any obligation to make
payments).
7.5 Arbitration of Disputes. Any claim (regardless of the legal theory
-----------------------
involved) arising out of or relating to this Agreement, including, but not
limited to, its validity, interpretation, enforceability or breach, which is not
settled by agreement between the parties, shall be settled by arbitration in Los
Angeles, California before a board of three arbitrators, one selected by each
party, and the third to be agreed by the first two. The notice of intent to
arbitrate shall name one arbitrator, and the party receiving the notice shall
name the second arbitrator within ten (10) business days or the moving party may
select the second arbitrator. In the event that the two arbitrators cannot
agree upon a third
-24-
arbitrator within thirty (30) days, then the third arbitrator shall be selected
from the list provided by the American Arbitration Association ("AAA") with the
parties striking names in order with the party striking first to be determined
by the flip of a coin and the name not struck, if available, shall be the third
arbitrator. The parties hereby (i) consent to the in personam jurisdiction of
the Superior Court of the State of California for purposes of confirming any
such award and entering judgment thereon and (ii) agree to use all reasonable
efforts to keep all matters relating to any arbitration hereunder confidential.
In any arbitration proceedings hereunder, all testimony of witnesses shall be
taken under oath. Each party agrees that the arbitration provisions of this
Agreement are its exclusive damage remedy and expressly waives any right to seek
redress in another forum and that the results of the arbitration shall be final,
binding and not subject to judicial review. During the arbitration, each party
shall bear the fees of the arbitrator appointed by it, and the fees of the
neutral arbitrators shall be borne equally by each party; but the fees of all
arbitrators shall ultimately be borne by the losing party.
7.6 Notices. All notices or other communications provided for or
-------
permitted hereunder shall be in writing and will be delivered by personal
service, fax, telegram, telecopy or first class mail (postage prepaid) to such
address as may be designated from time to time by the relevant party, and which
will initially be as set forth below. All such notices and communications shall
be deemed to have been duly given: when delivered by hand, if personally
delivered; three (3) business days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; and when receipt
acknowledged, if faxed or telecopied; and on the next business day if timely
delivered to an air courier guaranteeing overnight delivery. No objection may
be made to the manner of delivery of any notice actually received in writing by
an authorized agent of a party. Notices will be addressed as follows or to such
other address as the party to whom the same is directed will have specified in
conformity with the foregoing:
(i) If to HPI:
Hollywood Park, Inc.
1050 S. Prairie Avenue
Inglewood, CA 90301
Attention: G. Michael Finnigan,
President/Gaming and
Entertainment Division
With a copy to:
-25-
Irell & Manella
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attention: Alvin G. Segel, Esq.
(ii) If to PCM or the Shareholders
Pacific Casino Management, Inc.
7524 Pine Ridge Lane
Fair Oaks, California 95628
Attention: Edward LeBaron and
Donald Klosterman
With a copy to:
Pillsbury, Madison & Sutro
725 South Figueroa Street, Suite 1300
Los Angeles, California 90017
Attention: Peter V. Leparulo, Esq.
7.7 Third-Party Benefits. None of the provisions of this Agreement will
--------------------
be for the benefit of, or enforceable by, any third-party beneficiary and
nothing herein shall be deemed to give any creditor of PCM or of either of the
Shareholders any greater rights against HPI or the debtor than such creditor had
prior to the date hereof and all defenses of PCM or the Shareholders shall inure
to the benefit of HPI.
7.8 Successors and Assigns. Except as otherwise provided herein to the
----------------------
contrary, this Agreement will be binding upon and inure to the benefit of the
parties, their respective successors and permitted assigns.
7.9 Governing Law. This Agreement has been negotiated and entered into
-------------
in the State of California, concerns a California business and all questions
with respect to this Agreement and the rights and liabilities of the parties
shall be governed by the laws of that state, regardless of the choice of law
provisions of California or any other jurisdiction.
7.10 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 will be effective unless expressly contained in a
writing signed by the waiving party; and (ii) no alternation, modification or
impairment will be implied by reason of any previous waiver, extension of time,
delay or omission in exercise, or other indulgence.
-26-
7.11 Attorney's Fees. Should any arbitration, claim for injunctive
---------------
relief, or other proceeding be commenced (including any proceedings in a
bankruptcy court) between the parties hereto or their representatives concerning
any provision of this Agreement or the rights and duties of any person or entity
hereunder, the party or parties prevailing in such proceeding will be entitled
to reasonable attorneys' fees and expenses of counsel and costs of arbitration
incurred by reason of such proceeding.
7.12 Rules of Construction.
---------------------
7.12.1 Headings. The Article and Section headings in this
--------
Agreement are inserted only as a matter of convenience, and in no way define,
limit, or extend or interpret the scope of this Agreement or of any particular
Article or Section.
7.12.2 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.
7.12.3 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.
7.13 Counterparts. This Agreement may be executed simultaneously in two
------------
or more counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Any signature may be
provided by facsimile signature promptly followed by delivery of manual
signatures.
-27-
IN WITNESS WHEREOF, the parties hereto have caused this Asset Purchase
Agreement to be duly executed by its authorized representative as of the day
and year first above written.
HOLLYWOOD PARK, INC.,
a Delaware corporation
By:____________________________
G. Michael Finnigan, President,
Gaming and Entertainment
Division; Executive Vice
President and Chief Financial
Officer
PACIFIC CASINO MANAGEMENT, INC.,
a California corporation
By:____________________________
Title:
SHAREHOLDERS:
DONALD KLOSTERMAN
EDWARD LEBARON
-27-
SCHEDULE 2.2
------------
EXCLUDED LIABILITIES
--------------------
None
BILL OF SALE
AND
ASSUMPTION AGREEMENT
THIS BILL OF SALE AND ASSUMPTION AGREEMENT ("BILL OF SALE") is made this
___ day of November, 1995 by PACIFIC CASINO MANAGEMENT, INC., a California
corporation ("PCM" or "Seller"), DONALD KLOSTERMAN and EDWARD LEBARON, on the
one hand, and HOLLYWOOD PARK, INC., a Delaware corporation ("HPI" or "Buyer"),
on the other hand, with reference to the following facts:
A. Pursuant to that certain Agreement and Plan Reorganization dated of
even date herewith (the "Agreement") by and among the parties hereto, Seller has
agreed to sell the Assets (as defined in the Agreement) to Buyer and Buyer has
agreed to assume the Assumed Liabilities (as defined in the Agreement).
B. The parties hereto desire to execute and deliver this Bill of Sale
pursuant to the Agreement in order to effectuate the foregoing.
C. Capitalized terms used but not defined herein have the meanings
assigned to them in the Agreement.
NOW, THEREFORE, for the consideration and subject to the terms and
conditions contained in the Agreement:
1. Sale and Purchase of Assets. PCM hereby sells, conveys, assigns and
---------------------------
delivers to HPI (or its designee) and HPI hereby purchases and accepts the
conveyance, assignment, and delivery of, all of PCM's right, title, and interest
in and to all of the assets, properties and business of PCM of every kind and
nature, tangible or intangible, real or personal, fixed or contingent, (the
"Assets"), including without limitation:
(a) Cash and Cash Equivalents. All cash and cash equivalents of PCM
-------------------------
on the date hereof;
(b) Accounts Receivable. All accounts and notes receivable of PCM of
-------------------
every nature whatsoever remaining unpaid
1
as of the date hereof, including without limitation, all "markers", foreign
chips, and other receivables;
(c) Equipment and Supplies. All machinery, equipment, maintenance
----------------------
equipment, spare parts, maintenance and operating supplies, chemicals, office
supplies, leasehold improvements, furniture, fixtures, computer hardware and
software, vehicles, fuel and spare parts for such machinery, equipment, tools
and vehicles and other tangible property;
EXHIBIT "A"
(d) Prepaid Expenses. All prepaid expenses of PCM of every nature
----------------
whatsoever;
(e) Intellectual Property. Any and all Intellectual Property of PCM
---------------------
of every nature whatsoever, including, without limitation, the properties listed
on Schedule 4.1.12 to the Agreement;
---------------
(f) Third Party Claims. All claims of PCM against third parties
------------------
relating to the Assets, including, without limitation, unliquidated rights under
manufacturers' and vendors' warranties;
(g) Books and Records. All books and records, files, documents,
-----------------
papers and agreements (including, without limitation, information relating to
customers, contractors, suppliers and vendors) pertaining to the Assets or
otherwise;
(h) Permits, etc. All Permits, licenses, franchises, consents or
------------
authorizations issued by, and all registrations and filings with, any
governmental agency in connection with the Casino, whenever issued or filed,
excepting only those which by law or by their terms are non-transferable;
(i) Other Assets. All other assets of every kind and nature,
------------
tangible or intangible, of PCM of every nature whatsoever, owned, used or held
for use in connection with the Casino or otherwise.
2. Assumption of Liabilities. HPI hereby assumes and agrees to pay all
-------------------------
PCM's liabilities incurred prior to the date of the Interim Balance Sheet as
reflected in the Interim Balance Sheet and all liabilities incurred thereafter
in the ordinary course of business or reflected in the schedules hereto,
including without limitation that certain Promissory Note of PCM in favor of
HPI, dated as of April 1, 1995, in the principal amount of $18,690,299.35 (the
"Assumed Liabilities"); provided, however, that HPI does not assume and shall
-------- -------
not be liable for those liabilities listed on Schedule 2.2 to the Agreement (the
------------
"Excluded Liabilities").
3. Seller's Further Assurances. Each of PCM and each of the Shareholders
---------------------------
hereby covenants and agrees that upon the reasonable request of HPI, at any
time, and from time to time, after the date hereof, without further
consideration, it or he shall execute and deliver to HPI (or HPI's designee)
such further instruments of sale, conveyance, assignment, and transfer, and take
such other actions as are reasonably necessary in order to sell, convey, grant,
assign, transfer, and deliver its or his rights to the Assets to HPI (or HPI's
designee) and to assure and confirm to any other person HPI's rights thereunder,
and to permit HPI (or HPI's designee) to exercise any of the franchises, rights,
licenses, or privileges intended to be sold, conveyed, assigned, transferred,
and delivered by Seller to HPI by the Agreement or this Bill of Sale, all upon
the reasonable request of HPI and at HPI's sole cost and expense.
4. HPI's Further Assurances. HPI, for itself and its successors and
------------------------
assigns, hereby covenants and agrees that, upon the reasonable request of PCM or
the Shareholders at any time, and from time to time, after the date hereof,
without further consideration, HPI shall execute and deliver to PCM or the
Shareholders such further instruments of assumption to acknowledge its
responsibility for the Assumed Liabilities and shall take such other actions as
are reasonably necessary in order to assume or evidence the assumption of such
Assumed Liabilities and to assure and confirm to any other person such
assumption by HPI, all upon the reasonable request of PCM or the Shareholders
and at their sole cost and expense.
5. Agreement Controls. To the extent that any provision of this Bill of
------------------
Sale is inconsistent with the Agreement, the provisions of the Agreement shall
control.
6. Binding Effect. This Bill of Sale shall be binding upon and inure to
--------------
the benefit of the parties hereto and their respective successors and assigns.
7. Counterparts. This Bill of Sale may be executed in any number of
------------
counterparts, all of which together shall constitute one original.
TO HAVE AND TO HOLD all and singular, the assets and properties hereby
sold, conveyed, transferred, assigned and delivered, or intended so to be, unto
HPI, and its successor and assigns, to and for its and their own use forever.
IN WITNESS WHEREOF, the undersigned have caused this Bill of Sale to be
executed as of the date first above written.
HOLLYWOOD PARK, INC.
a Delaware corporation
By:_____________________________
G. Michael Finnigan, President,
Gaming and Entertainment
Division; Executive Vice
President and Chief Financial
Officer
PACIFIC CASINO MANAGEMENT, INC.
a California corporation
By:_____________________________
Title:__________________________
SHAREHOLDERS:
________________________________
DONALD KLOSTERMAN
________________________________
EDWARD LEBARON
NON-COMPETITION AGREEMENT
-------------------------
This Non-Competition Agreement ("Agreement") is being entered into this
_____ day of November, 1995 by and between [DONALD KLOSTERMAN] [EDWARD LEBARON]
("Shareholder"), and Hollywood Park, Inc. ("HPI") with reference to the
following facts:
A. Shareholder is a principal shareholder and key employee of Pacific
Casino Management, Inc., a California corporation ("PCM").
B. Prior to the date hereof, PCM has operated Hollywood Park Casino (the
"Casino") under a lease dated as of June 15, 1994, as amended (the "Lease"),
with PCM as Tenant and HPI as Landlord thereunder.
C. HPI and PCM have entered into that certain Agreement and Plan of
Reorganization (the "Reorganization Agreement") of even date herewith pursuant
to which HPI is purchasing substantially all of the assets of PCM for the
consideration specified in the Reorganization Agreement (the "Purchase").
D. As a key employee of PCM, Shareholder has had access to business
secrets and confidential information of PCM and the Casino, which are
proprietary to the Casino and the use of which by the Casino's competitors would
materially affect the Casino's competitive position.
E. As an inducement to HPI to enter into the Reorganization Agreement and
consummate the Purchase, and for the consideration hereinafter set forth,
Shareholder has agreed to preserve and protect the good will, business secrets
and confidential information of the Casino following the Purchase by not being
or becoming involved, for a period of time, in any business which competes with
the Casino.
NOW, THEREFORE, in view of the foregoing and for good and valuable
consideration, consisting of four hundred twenty two (422) HPI Shares receipt of
which is hereby acknowledged, Shareholder covenants and agrees with HPI as
follows:
1. COVENANT NOT TO COMPETE. For a period of five (5) years from the
------------------------
effective date of the Purchase, Shareholder will refrain from carrying on
directly or indirectly (either as a proprietor, partner, stockholder, officer,
director,
1
agent, employee, consultant, trustee, affiliate or otherwise) any card club or
other gambling establishment within a fifty (50) mile radius of the Casino.
Notwithstanding the foregoing, it shall not be a breach of the provisions of
this Covenant for Shareholder to own, as a passive investment, up to one percent
(1%) of the issued and outstanding stock of a publicly-held corporation engaged
in any of the above activities so long as Shareholder does not take an active
part in the management or direction thereof and does not act as a consultant or
in any way render services thereto.
2. PROPRIETARY INFORMATION. Shareholder shall not at any time (during or
------------------------
after the period referred to above) disclose or use, except in the pursuit of
the business of HPI or any subsidiary thereof, any proprietary information of
HPI (including proprietary information of the Casino or any subsidiary of HPI).
"Proprietary information of HPI" means all information known or intended to be
known only to employees of HPI, its subsidiaries or others in a confidential
relationship with HPI, relating to technical matters, business matters such as
the identity of suppliers or customers, or other aspects of the business of HPI
or its subsidiaries, including the Casino. Shareholder shall not remove any
documents, records or other information from the premises of HPI (including the
premises of the Casino and HPI's subsidiaries), and acknowledges that such
documents, records and other information are the exclusive property of HPI.
3. SOLICITATION OF EMPLOYEES. For a period of five (5) years from and
-------------------------
after the effective date of the Purchase, Shareholder shall not (i) directly or
indirectly induce or attempt to induce any person then engaged or employed
(whether part-time or full-time) by HPI or any affiliate or transferee of HPI,
whether as an officer, employee, consultant, adviser or independent contractor,
to leave the employ of HPI or any affiliate or transferee of HPI or to cease
providing or otherwise alter the services then provided to HPI, the affiliate or
the transferee, or (ii) in any other manner seek to engage or employ any such
person (whether or not for compensation) as an officer, employee, consultant,
adviser or independent contractor in connection with the operation of a card
club or other gambling establishment.
4. PROMOTIONAL ACTIVITIES. During the period referred to above,
----------------------
Shareholder shall use his best efforts to support, promote and encourage
patronage of the Casino and, without further payment, shall attend such
functions at the Casino as HPI shall reasonably request so long as such
attendance does not interfere with his other business or personal commitments.
EXHIBIT "C"
-----------
5. EQUITABLE RELIEF. Shareholder acknowledges that the covenants
----------------
contained herein are reasonable and necessary to protect the legitimate
interests of HPI, that HPI would not have entered into the Reorganization
Agreement in the absence of such covenants, that any breach or threatened breach
of such covenants will result in irreparable injury to HPI and that the remedy
at law for such breach or threatened breach would be inadequate. Accordingly,
Shareholder agrees that HPI shall, in addition to any other rights or remedies
which it may have, be entitled to seek such equitable and injunctive relief as
may be available from any court of competent jurisdiction to restrain
Shareholder from any breach or threatened breach of such covenants.
6. MISCELLANEOUS.
-------------
6.1 COMPLETE AGREEMENT; MODIFICATIONS. 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 agreements, representations, warranties, statements, promises and
understandings, whether oral or written, with respect to the subject matter
hereof. This Agreement may not be amended, altered or modified except by a
writing signed by the parties.
6.2 NOTICES. All notices under this Agreement will be in writing and
-------
will be delivered by personal service, facsimile, telegram, telecopy or
certified mail (postage prepaid) to such address as may be designated from time
to time by the relevant party, and which will initially be as set forth below.
Any notice sent by certified mail will be deemed to have been given three (3)
days after the date on which it is mailed. All other notices will be deemed
given when received. No objection may be made to the manner of delivery of any
notice actually received in writing by an authorized agent of a party. Notices
will be addressed as follows or to such other address as the party to whom the
same is directed will have specified in conformity with the foregoing:
(i) If to HPI:
Hollywood Park, Inc.
1050 South Prairie Avenue
Inglewood, California 90301
Attention: G. Michael Finnigan
President/Gaming and
Entertainment Division
With a copy to:
Irell & Manella
1800 Avenue of the Stars, Suite 900
Los Angeles, California 90067
Attention: Alvin G. Segel, Esq.
(ii) If to Shareholder:
[DONALD KLOSTERMAN] [EDWARD LEBARON]
Pacific Casino Management, Inc.
7524 Pine Ridge Lane
Fair Oaks, California 95628
With a copy to:
Pillsbury, Madison & Sutro
725 South Figueroa Street, Suite 1300
Los Angeles, California 90017
Attention: Peter V. Leparulo, Esq.
6.3 THIRD-PARTY BENEFITS. None of the provisions of this Agreement
--------------------
will be for the benefit of, or enforceable by, any third-party beneficiary.
6.4 SUCCESSORS AND ASSIGNS. Except as provided herein to the
----------------------
contrary, this Agreement will be binding upon and inure to the benefit of the
parties, their respective successors and permitted assigns. None of the parties
hereto may assign any of their rights or obligations under this Agreement
without the prior written consent of the other party hereto; provided, however,
that HPI may assign its rights under this Agreement in connection with a sale of
the Casino if such sale includes the goodwill associated therewith.
6.5 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.
6.6 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 will be effective unless expressly contained in a
writing signed by the waiving party; and (ii) no alteration, modification or
impairment will be implied by reason of any previous waiver, extension of time,
delay or omission in exercise, or other indulgence.
6.7 ATTORNEYS' FEES. Should any arbitration, claim for injunctive
---------------
relief, or other proceeding be commenced (including any proceedings in a
bankruptcy court) between the parties hereto or their representatives concerning
any provision of this Agreement or the rights and duties of any person or entity
hereunder, the party or parties prevailing in such proceeding will be entitled
to reasonable attorneys' fees and expenses of counsel and costs incurred by
reason of such proceeding.
6.8 ARBITRATION OF DISPUTES. Any claim (regardless of the legal
-----------------------
theory involved) arising out of or relating to this Agreement, including, but
not limited to, its validity, interpretation, enforceability or breach, which is
not settled by agreement between the parties, shall be settled by arbitration in
Los Angeles, California before a board of three arbitrators, one selected by
each party, and the third to be agreed by the first two. The notice of intent
to arbitrate shall name one arbitrator, and the party receiving the notice shall
name the second arbitrator within ten (10) business days or the moving party may
select the second arbitrator. In the event that the two arbitrators cannot
agree upon a third arbitrator within thirty (30) days, then the third arbitrator
shall be selected from the list provided by the American Arbitration Association
("AAA") with the parties striking names in order with the party striking first
to be determined by the flip of a coin and the name not struck, if available,
shall be the third arbitrator. The parties hereby (i) consent to the in
personam jurisdiction of the Superior Court of the State of California for
purposes of confirming any such award and entering judgment thereon and (ii)
agree to use all reasonable efforts to keep all matters relating to any
arbitration hereunder confidential. In any arbitration proceedings hereunder,
all testimony of witnesses shall be taken under oath. Each party agrees that
the arbitration provisions of this Agreement are its exclusive damage remedy and
expressly waives any right to seek redress in another forum and that the results
of the arbitration shall be final, binding and not subject to judicial review.
During the arbitration, each party shall bear the fees of the arbitrator
appointed by it, and the fees of the neutral arbitrators shall be borne equally
by each party; but the fees of all arbitrators shall ultimately be borne by the
losing party.
6.9 HEADINGS. The headings in this Agreement are inserted only as a
--------
matter of convenience, and in no way define, limit, or extend or interpret the
scope of this Agreement or of any particular Section.
6.10 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. Further, if the period of time, the extent of the
geographic area, or the scope of the prescribed activities covered by this
Agreement should be deemed unenforceable, then this Agreement shall be construed
to cover the maximum period of time, geographic area and scope of prescribed
activities (not to exceed the maximum time, geographic area or scope set forth
herein) as may be valid under applicable law.
6.11 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 its
effects.
6.12 COUNTERPARTS. This Agreement may be executed simultaneously in
------------
two or more counterparts, each of which will be deemed an original, but all of
which together will constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
HOLLYWOOD PARK, INC.
a Delaware corporation
By:_________________________________
G. Michael Finnigan, President,
Gaming and Entertainment Division
SHAREHOLDER:
By:_________________________________
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of this _____ day of November, 1995, by and between HOLLYWOOD PARK,
INC., a Delaware corporation (the "Company" or "HPI") on the one hand, and
Pacific Casino Management, Inc., a California corporation ("PCM"), and DONALD
KLOSTERMAN and EDWARD LEBARON ("Shareholders") on the other, with reference to
the following facts:
A. Shareholders are the sole shareholders of PCM.
B. Pursuant to that certain Agreement and Plan of Reorganization by and
among HPI, PCM and the Shareholders of even date herewith (the "Reorganization
Agreement"), HPI is purchasing substantially all of the assets of PCM in
exchange for the issuance of shares of Common Stock of HPI, which shares are not
registered under the Securities Act or any applicable state securities laws.
C. Pursuant to the Reorganization Agreement, HPI agreed to grant PCM and
the Shareholders certain registration rights with respect to the shares of HPI
Common Stock being issued pursuant thereto, as described in this Agreement.
NOW THEREFORE, the parties hereby agree as follows:
1. Definitions.
-----------
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Common Stock: The term Common Stock shall mean all shares now or
------------
hereafter authorized of any class of common stock of the Company, and any other
stock of the Company, howsoever designated, which has the right (subject always
to prior rights of any class or series of preferred shares) to participate in
the distribution of the assets and the earnings of the Company without limit as
to per share amount.
Exchange Act: The Securities Exchange Act of 1934, as amended from
------------
time to time.
Holder: PCM or a Shareholder who at a given time is (i) the
------
beneficial owner of at least twenty-five thousand (25,000) shares of Registrable
Securities, as adjusted to reflect any reverse stock split or similar reduction
in the
1
outstanding number of shares of Common Stock, or (ii) has the right to receive
any Registrable Securities pursuant to the terms of the Reorganization
Agreement.
Majority Holders: Holders of a majority of shares of the Registrable
----------------
Securities.
Person: An individual, partnership, corporation, trust or
------
unincorporated organization, or a government, or political subdivision thereof
or agency.
Prospectus: The prospectus included in any Registration Statement (as
----------
hereinafter defined), as amended or supplemented by any prospectus supplement
with respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement and by all other amendments and
supplements to the prospectus, including post-effective amendments and all
material incorporated by reference in such prospectus.
Registrable Securities: Those shares of the Company's Common Stock
----------------------
issued or to be issued to PCM or the Shareholders pursuant to the Reorganization
Agreement (plus any shares received from the Company with respect to or in
replacement of such shares by reason of splits, dividends and recapitalizations)
but excluding (i) any shares which may be sold to the public without
registration pursuant to Rule 144(k) or other comparable provision under the
Securities Act ("Rule 144"), and (ii) any shares which have ceased to be
"Restricted Securities." Shares are no longer "Restricted Securities" when (i)
they have been effectively registered under the Securities Act and disposed of
in accordance with the Registration Statement covering such shares, (ii) they
have been distributed to the public pursuant to Rule 144 under the Securities
Act (or any similar provisions then in force) or (iii) they have been otherwise
transferred and new certificate(s) or other evidence of ownership for such
shares not bearing a legend restricting transferability and not subject to any
stop transfer order has been delivered by or on behalf of the Company and no
other restriction on transfer exists.
Registration Expenses: All expenses incident to the Company's
---------------------
performance of or compliance with this Agreement, including without limitation
all registration and filing fees, fees with respect to any filings required to
be made with the National Association of Securities Dealers, fees and expenses
of compliance with state securities or blue sky laws (including reasonable fees
and disbursements of counsel for the underwriters or Selling Holders in
connection with blue sky qualifications of the Registrable Securities and
determination of the eligibility of any of the Registrable
Securities for investment under the laws of such jurisdictions as the managing
underwriters or Majority-in-interest of the Selling Holders may reasonably
request), printing expenses, messenger, telephone and delivery expenses, the
fees and expenses incurred in connection with the listing of securities to be
registered on any securities exchange (if any), fees and disbursements of
counsel for the Company, fees and disbursements of all independent certified
public accountants of the Company (excluding the expenses of the Company's
regular yearend audit but including the expenses of any special audit and "cold
comfort" letters required by such performance), securities acts liability
insurance, if any, and fees and expenses of all other Persons, including special
experts, retained by the Company, other than underwriters (except that
reasonable fees and expenses of counsel to the underwriters in connection with
state securities or blue sky matters are included).
Registration Statement: Any registration statement of the Company
----------------------
filed under the Securities Act which covers Registrable Securities pursuant to
the provisions of this Agreement, including the Prospectus, amendments and
supplements to such Registration Statement, including post-effective amendments,
all exhibits and all material incorporated by reference in such Registration
Statement.
SEC: The Securities and Exchange Commission.
---
Securities Act: The Securities Act of 1933, as amended.
--------------
Selling Holders: Holders of Registrable Securities who seek to sell
---------------
such securities under any Registration Statement. "A Majority-in-interest of
the Selling Holders" means Selling Holders who hold a majority of the shares of
the Registrable Securities being sold.
2. Registration Rights.
-------------------
2.1 Registration Upon Request. At any time after the date hereof,
-------------------------
the Majority Holders may request by written notice to the Company that the
Company effect the registration under the Securities Act of their Registrable
Securities. Such notice shall set forth (i) the number of shares of Registrable
Securities to be included; (ii) the names of the Selling Holders and the amounts
to be sold by each; and (iii) the intended method of disposition of such shares
and shall contain an undertaking by such Holders to pay all Registration
Expenses with respect to such registration (as incurred and in all events prior
to the effectiveness of such registration). Upon receipt of such request, and
so long as the registration may be accomplished through the use of a
Registration
Statement on Form S-3 or then comparable form, the Company shall use its best
efforts to prepare and file, as expeditiously as possible (but not more than 90
days from receipt of such request), a Registration Statement with the SEC under
the Securities Act with respect to all of the Registrable Securities that
Holders of such securities have requested that the Company register, and shall
use its best efforts to cause such Registration Statement to become effective.
The registration rights contemplated by this Section 2.1 may only be exercised
once during each twelve (12) month period of the term of this Agreement
commencing on the date hereof (but in no event more than twice) and only if the
Selling Holders have an actual intent to currently sell all of the Registrable
Securities included in such registration.
Notwithstanding the foregoing, in the event that registration is
demanded pursuant to this Section 2.1, and, prior to effectiveness of any
Registration Statement filed pursuant to such demand, the Company determines in
its sole judgment that the shares for which registration is requested cannot be
sold without adversely affecting the Company or its existing stockholders, the
Company 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 twenty (120) days. In addition, in the event that the Company makes
such a determination after a Registration Statement has been filed pursuant to
this Section 2.1 and has become effective, the Company shall have the option to
require the Selling Holders to refrain from selling any shares pursuant to such
Registration Statement for a period of up to one hundred twenty (120) days. If
the Company exercises any such option, the demand rights pursuant to this
Section 2.1 shall not be reduced or diminished hereby. In no event shall the
Company exercise the options set forth in this paragraph more than once during
any consecutive twelve (12) month period.
2.2 Incidental Registration.
-----------------------
(a) If at any time after the date hereof the Company
proposes to register any of its equity securities under the Securities Act
(except pursuant to a registration statement filed on Form S-8 or Form S-4 or
such other form as shall be prescribed under the Securities Act for the same
purposes), it will at each such time give written notice to the Holders as
provided in Section 11.5 hereof of its intention to do so. Within ten (10) days
after receipt by the Holders of such notice, and provided that the Holders have
an actual intent to currently sell such Registrable Securities, the Holders may
request that the Company register all or part of the Registrable Securities,
stating in such request the intended method of distribution of such securities
(the
"Designated Securities"). Upon receipt of such request, the Company shall use
its best efforts to effect the registration of the Designated Securities by
including the Designated Securities in such Registration Statement.
(b) Underwritten Offering. In the event that securities
---------------------
of the same class as the Registrable Securities are being registered by the
Company in such Registration Statement and such securities are to be distributed
in an underwritten offering, then the Designated Securities shall be included in
such underwritten offering on the same terms and conditions as the securities
being issued by the Company for distribution pursuant to such underwritten
offering (or, if the Holders choose not to participate therein, the Holders
must agree to abide by such standstill requirements as the underwriter in such
offering may reasonably impose not to exceed one hundred eighty (180) days and
not to be more onerous than imposed on other Selling Shareholders, officers or
directors of the Company); provided, however, that if the managing underwriter
-----------------
of such underwritten offering reasonably determines in good faith that the
inclusion in such underwritten offering of all the Designated Securities that
the Holders indicated were to be distributed pursuant to an underwritten
offering would adversely affect the success of such underwritten offering, then
the number of Designated Securities to be included in the registration statement
shall be reduced to the amount recommended in good faith by such managing
underwriter; provided, further, that as to the Holders such reduction shall be
-----------------
pro rata with respect to the Designated Securities with other Persons holding
contractual registration rights in such underwritten offering.
3. Hold-Back Agreement.
-------------------
Each Holder whose Registrable Securities are covered by a Registration
Statement filed pursuant hereto agrees, if requested by the managing
underwriters in an underwritten offering, not to effect any public sale or
distribution of securities of the Company of the same class as the securities
included in such Registration Statement, during the ten (10) day period prior
to, and during the ten (10) day period beginning on the closing date, of each
underwritten offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or the managing underwriters.
4. Registration Procedures.
-----------------------
In connection with the Company's registration obligations pursuant to
Section 2 hereof, the Company will use its best efforts to effect such
registration to permit the sale of such Registrable Securities in accordance
with the
intended method or methods of disposition thereof, and pursuant thereto the
Company will as expeditiously as possible:
4.1 Preparation of Registration Statement. Prepare and file with
-------------------------------------
the SEC a Registration Statement on such form as may be appropriate under the
Securities Act, and use its best efforts to cause such Registration Statement to
become effective; provided that before filing a Registration Statement or
--------
Prospectus or any amendments or supplements thereto, the Company shall furnish
to the Selling Holders and to the managing underwriter, if any, copies of all
such documents proposed to be filed, including any document incorporated by
reference in any such document;
4.2 Maintaining Effectiveness. With respect to any Registration
-------------------------
Statement filed pursuant to Section 2, prepare and file with the SEC such
amendments to the Registration Statement as may be necessary to keep such
Registration Statement effective for a period of thirty (30) days, or such
shorter period which will terminate when all Registrable Securities covered by
such Registration Statement have been sold (or otherwise become excluded from
the definition of "Registrable Securities"); and cause the Prospectus to be
supplemented by any required Prospectus Supplement, and as so supplemented to be
filed pursuant to Rule 424 under the Securities Act;
4.3 Notification. Notify the Selling Holders and the managing
------------
underwriters, if any, promptly, and (if requested by any such Person) confirm
such advice in writing, (i) when a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Registration
Statement or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC or of any other federal or state governmental
authority for amendments or supplements to the Registration Statement or related
Prospectus or for additional information, (iii) of the issuance by the SEC of
any stop order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
of any of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, and (v) of the
happening of any event which makes any statement made in the Registration
Statement, the Prospectus or any document incorporated therein by reference
untrue or which requires the making of any changes in the Registration
Statement, the Prospectus, or any document incorporated therein by reference so
that they will not contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statement therein not misleading;
4.4 Stop Orders. Make every reasonable effort to obtain the
-----------
withdrawal of any order suspending the effectiveness of a Registration Statement
or the qualification of any Registrable Securities for sale in any jurisdiction
at the earliest possible moment;
4.5 Copies of Registration Statements. Furnish to each Selling
---------------------------------
Holder and each managing underwriter, if any, at least one originally executed
copy of the Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by reference);
4.6 Prospectuses. Deliver to each Selling Holder and the
------------
underwriters, if any, as many copies of the Prospectus (including each
preliminary prospectus) and any amendment or supplement thereto as such Persons
may reasonably request so long as the Registration Statement to which such
Prospectus or any amendment or supplement thereto relates is effective; the
Company consents to the use of such Prospectus or any amendment or supplement
thereto by each of the Selling Holders and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
such Prospectus or any amendment or supplement thereto;
4.7 Blue Sky Laws. Prior to any public offering of Registrable
-------------
Securities, use its best efforts to register or qualify or cooperate with the
Selling Holders, the underwriters, if any, and their respective counsel in
connection with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such jurisdictions
within the United States as any Selling Holder or underwriter reasonably
requests, and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided that the Company will not be
--------
required to qualify generally to do business in any jurisdiction where it is not
then so qualified or to take any action which would subject it to general
service of process or taxation in any such jurisdiction where it is not then so
subject;
4.8 Delivery of Certificates. Cooperate with the Selling Holders
------------------------
and the managing underwriter, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities to be in
such denominations and registered in such
names as the managing underwriters or the Selling Holders may request at least
two (2) business days prior to any sale of Registrable Securities;
4.9 Amendments Upon Changes. Upon the occurrence of any event
-----------------------
contemplated by Section 4.3(v) above, prepare, as promptly as practicable, a
supplement or post-effective amendment to the Registration Statement or related
Prospectus or any document incorporated therein by reference, or file any other
required document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, such Prospectus will not contain
an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein not misleading; and
4.10 Listing on Exchange. Cause all Registrable Securities covered
-------------------
by the Registration Statement to be listed on each securities exchange on which
similar securities issued by the Company are then listed if requested by the
Majority-in-interest of the Selling Holders or the managing underwriter, if any.
5. Selling Holders' Obligations.
----------------------------
5.1 The Company may require each Selling Holder of Registrable
Securities as to which any registration is being effected to furnish to the
Company such information regarding the distribution of such securities and such
other information concerning the Selling Holder as is required to be included in
such Registration Statement, as the Company may from time to time reasonably
request in writing.
5.2 Each Holder of Registrable Securities agrees by execution of
this Agreement or acquisition of such Registrable Securities, as the case may
be, that, upon receipt of any written notice from the Company of the happening
of any event of the kind described in Section 4.3(v) hereof, such Holder will
forthwith discontinue disposition of Registrable Securities until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 4.9 hereof, or until it is advised in writing (the "Advice") by the
Company that the use of the Prospectus may be resumed, and has received copies
of any additional or supplemental filings which are incorporated by reference in
such Prospectus, and, if so directed by the Company such Holder will deliver to
the Company (at the Company's expense) all copies, other than permanent file
copies then in such Holder's possession, of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice. In the
event the Company shall give any such notice, the time period mentioned in
Section 4.2 hereof shall be extended by the number of days
during the period from and including the date of the giving of such notice to
and including the date when each Selling Holder shall have received the copies
of the supplemental or amended Prospectus contemplated by Section 4.9 hereof or
the Advice.
6. Registration Expenses.
---------------------
Whether or not any of the Registration Statements become effective,
the Selling Holders shall bear all Registration Expenses related to a
registration effected pursuant to Section 2.1 hereof and the Company shall bear
all Registration Expenses for registration effected pursuant to Section 2.2;
provided that in no event shall the Company be obligated to pay counsel fees of
any underwriter or Selling Holder except as to state securities or blue sky
matters.
7. Indemnification.
---------------
7.1 Indemnification by the Company. The Company agrees to
------------------------------
indemnify and hold harmless, to the full extent permitted by law, each Holder of
Registrable Securities, each Person who controls any such Holder (within the
meaning of the Securities Act or the Exchange Act) (a "controlling person"), and
each officer, director, employee and agent of each Holder and each controlling
person (the "indemnified parties") from and against all losses, claims, damages,
liabilities and expenses caused by any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
prospectus or 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 (i) the same are caused by or contained in any
information furnished in writing to the Company by such Holder expressly for use
therein, (ii) the Company has advised such Holder in writing of a Section 4.3(v)
event and such Holder has sold Registrable Securities notwithstanding such
notice prior to receipt of a supplement or amended Prospectus pursuant to
Section 4.9 herein or (iii) the same are caused by such Holder's failure, where
required, to deliver a copy of the Registration Statement or Prospectus after
the Company has furnished such Holder with a sufficient number of copies of the
same; provided, however, that the Company shall not be liable in any such case
to the extent that any such loss, claim, damage, liability or expense arises out
of or is based upon an untrue statement or alleged untrue statement or omission
or alleged omission made in any preliminary Prospectus if (i) such Holder failed
to send or deliver a copy of the Prospectus with or prior to the delivery of
written confirmation of the sale of Registrable Securities and (ii) the
Prospectus would have corrected such untrue statement or omission; and provided
further, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or expense arises out of or is
based upon an untrue statement or alleged untrue statement or omission or
alleged omission in the Prospectus, if such untrue statement or alleged untrue
statement, omission or alleged omission is corrected in an amendment or
supplement to the Prospectus and if, having previously been furnished by or on
behalf of the Company with copies of the Prospectus as so amended or
supplemented, such Holder thereafter fails to deliver such Prospectus as so
amended or supplemented, prior to or concurrently with the sale of a Registrable
Security to the Person asserting such loss, claim, damage, liability or expense
who purchased such Registrable Security which is the subject thereof from such
Holder. The Company will also indemnify underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, their officers and directors and each Person who controls such
Persons (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the Holders of Registrable Securities.
7.2 Indemnification by Holders. In connection with the
--------------------------
Registration Statements hereunder, each Holder will furnish to the Company in
writing such information and affidavits as the Company reasonably requests for
use in connection with the Registration Statement or Prospectus and agrees to
indemnify, to the full extent permitted by law, the Company, and each Person who
controls the Company (within the meaning of the Securities Act or the Exchange
Act) and each director, officer, employee and agent of each such Person from and
against any losses, claims, damages, liabilities and expenses caused by any
untrue statement of a material fact or any omission of a material fact required
to be stated in any Registration Statement or Prospectus or preliminary
prospectus or necessary to make the statements therein not misleading, to the
extent, but only to the extent, that such untrue statement or omission is
contained in any information or affidavit so furnished in writing by such Holder
to the Company specifically for inclusion in such Registration Statement or
Prospectus. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, to the same extent as provided
above with respect to information so furnished in writing by such Persons
specifically for inclusion in any Prospectus or Registration Statement.
7.3 Conduct of Indemnification Proceedings. Any Person entitled to
--------------------------------------
indemnification hereunder will (i) give prompt notice to the indemnifying party
of any claim with respect to which it seeks indemnification and (ii) permit such
indemnifying party to assume the defense of such claim with counsel reasonably
satisfactory to the indemnified party; provided, however, that any Person
entitled to indemnification hereunder shall have the right to employ separate
counsel and to participate in the defense of such claim, but the fees and
expenses of such counsel shall be at the expense of such Person unless (a) the
indemnifying party has agreed to pay such fees or expenses, or (b) the
indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person or (c) in the reasonable
judgment of any such Person and the indemnifying party, based upon advice of
their respective counsel, a conflict of interest may exist between such Person
and the indemnifying party with respect to such claims (in which case, if the
Person notifies the indemnifying party in writing that such Person elects to
employ separate counsel at the expense of the indemnifying party, the
indemnifying party shall not have the right to assume the defense of such claim
on behalf of such Person). If such defense is not assumed by the indemnifying
party, the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be unreasonably
withheld). No indemnifying party will consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation. An indemnifying party who
is not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party, a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of such additional counsel or counsels.
8. Participation in Underwritten Offerings.
---------------------------------------
No Person may participate in any underwritten registration unless such
Person (a) agrees to sell such Person's securities on the basis provided in any
underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting arrangements.
9. Rule 144.
--------
The Company covenants that it will file the reports required to be
filed by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the SEC thereunder, and it will take such further action
as may be reasonably and customarily requested by any Holder of Registrable
Securities, all to the extent required from time to time to enable such Holder
to sell Registrable Securities without registration under the Securities Act
within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC; provided, however, that
the Company shall not be required to make any independent investigations with
respect thereto. Upon the request of any Holder of Registrable Securities, the
Company will deliver to such Holder a written statement as to whether it has
complied with such information and requirements.
10. Termination.
-----------
The Holders shall have no further rights under this Agreement at any
time after the earlier of: (i) three (3) years from the date hereof; or (ii)
such time as neither Shareholder owns at least twenty-five thousand (25,000)
shares of Registrable Securities and neither PCM nor either Shareholder has any
right to receive any securities from the Company pursuant to the Reorganization
Agreement.
11. Miscellaneous.
-------------
11.1 Remedies. In the event of a breach by the Company of its
--------
obligations under this Agreement, each Holder of Registrable Securities, in
addition to being entitled to exercise all rights granted by law, including
recovery of damages, will be entitled to specific performance of its rights
under this Agreement. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of any
of the provisions of this Agreement and hereby agrees to waive the defense in
any action for specific performance that a remedy at law would be adequate.
11.2 No Inconsistent Agreements. The Company will not on or after
--------------------------
the date of this Agreement enter into any agreement with respect to its
securities which is inconsistent with the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof.
11.3 Adjustments Affecting Registrable Securities. The Company will
--------------------------------------------
not take any action, or permit any change to occur, with respect to the
Registrable Securities which would adversely affect the ability of the Holders
of Registrable Securities to include such Registrable Securities in a
registration undertaken pursuant to this Agreement.
11.4 Amendments and Waivers. The provisions of this Agreement,
----------------------
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least 66-2/3% of the number of outstanding Registrable Securities.
11.5 Notices. All notices or other communications provided for or
-------
permitted hereunder shall be in writing and will be delivered by personal
service, fax, telegram, telecopy or first class mail (postage prepaid) to such
address as may be designated from time to time by the relevant party, and which
will initially be as set forth below. All such notices and communications shall
be deemed to have been duly given: when delivered by hand, if personally
delivered; three (3) business days after being deposited in the mail, postage
prepaid, if mailed; when answered back, if telexed; and when receipt
acknowledged, if faxed or telecopied; and on the next business day if timely
delivered to an air courier guaranteeing overnight delivery. No objection may
be made to the manner of delivery of any notice actually received in writing by
an authorized agent of a party. Notices will be addressed as follows or to such
other address as the party to whom the same is directed will have specified in
conformity with the foregoing:
(i) If to the Company:
Hollywood Park, Inc.
1050 S. Prairie Avenue
Inglewood, CA 90301
Attention: G. Michael Finnigan,
President/Gaming and
Entertainment Division
With a copy to:
Irell & Manella
1800 Avenue of the Stars, Suite 900
Los Angeles, CA 90067
Attention: Alvin G. Segel, Esq.
(ii) If to the Holders:
Pacific Casino Management, Inc.
7524 Pine Ridge Lane
Fair Oaks, California 95628
Attention: Edward LeBaron and
Donald Klosterman
With a copy to:
Pillsbury, Madison & Sutro
725 South Figueroa Street, Suite 1300
Los Angeles, California 90017
Attention: Peter V. Leparulo, Esq.
11.6 Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns, heirs, beneficiaries and
personal representatives of each of the parties, including without limitation
and without the need for an express assignment, subsequent Holders of
Registrable Securities.
11.7 Counterparts. This Agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
11.8 Headings. The headings in this Agreement are for convenience
--------
of reference only and shall not limit or otherwise affect the meaning hereof.
11.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the internal laws of the State of California
regardless of the choice of law provisions of California or any other
jurisdiction.
11.10 Severability. In the event that any one or more of the
------------
provisions contained herein, or the application thereof in any circumstances, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
11.11 Entire Agreement. This Agreement is intended by the parties as
----------------
a final expression of their agreement and intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein with respect to the registration rights granted by the Company with
respect to the securities now or hereafter owned by the Shareholders. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
11.12 Attorneys' Fees. In any action or proceeding brought to
---------------
enforce any provision of this Agreement, or where any provision hereof or
thereof is validly asserted as a defense, the successful party shall be entitled
to recover reasonable attorneys' fees in addition to its costs and expenses and
any other available remedy.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
HOLLYWOOD PARK, INC.
1050 South Prairie Avenue
Inglewood, California 90301
By:____________________________
G. MICHAEL FINNIGAN
PACIFIC CASINO MANAGEMENT, INC.
2220 Avenue of the Stars
Suite 2502
Los Angeles, California 90067
By:____________________________
Its:________________________
_______________________________
DONALD KLOSTERMAN
2220 Avenue of the Stars
Suite 2502
Los Angeles, California 90067
_______________________________
EDWARD LEBARON
2220 Avenue of the Stars
Suite 2502
Los Angeles, California 90067