Disposition & Development Agreement (8/2/95)

EXHIBIT 10.3


AMENDED AND RESTATED
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DISPOSITION AND DEVELOPMENT AGREEMENT, AGREEMENT OF
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PURCHASE AND SALE, AND LEASE WITH OPTION TO PURCHASE
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between


THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF COMPTON,
a public body, corporate and politic,


and


COMPTON ENTERTAINMENT, INC.,
a California corporation


WALNUT INDUSTRIAL PARK REDEVELOPMENT PROJECT


AMENDED AND RESTATED
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DISPOSITION AND DEVELOPMENT AGREEMENT, AGREEMENT OF
---------------------------------------------------
PURCHASE AND SALE, AND LEASE WITH OPTION TO PURCHASE
----------------------------------------------------


THIS AMENDED AND RESTATED DISPOSITION AND DEVELOPMENT AGREEMENT (this "DDA" or "Lease") is made as of this 4th day of April, 1995, by and between the COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF COMPTON, a public body corporate and politic ("Agency") and COMPTON ENTERTAINMENT, INC., a California corporation ("Redeveloper").


TABLE OF CONTENTS


Page
---- RECITALS


1. Purchase and Sale of the Convention Center Parcel 2


2. Lease of the Hotel and Other Parcels 4


3. Title and Survey 5


4. Term 7


5. Rent 9


6. Rent Reduction/Credit 9


7. Additional Consideration 11


8. Taxes 11


9. Use and Compliance with Laws 12


10. Physical Condition of the Property 14


11. Construction by Redeveloper 17


12. Certificate of Completion 21


13. Utilities and Services 23


14. Maintenance 23


15. Alterations 24


16. Destruction 24


17. Insurance and Indemnity 27


18. Condemnation 33


19. Assignment, Subletting and Encumbering 36


20. Default 39


21. Agency's Entry on Property 47


22. Notices 48


23. Interest on Past-due Obligations 48


24. Attorneys' Fees 48


Page
----


25. Estoppel Certificates 50


26. Surrender of Property 50


27. Form of Nondiscrimination and Nonsegregation Clauses; Local
Hiring and Affirmative Action 50


28. Local Contractors 52


29. Expansion parcels 52


30. Option to Purchase 54


31. Holding Over 57


32. Force Majeure; Extension of Times of Performance 57


33. Sale or Transfer by Agency 58


34. Limitation on Recourse Against Agency 58


35. Redeveloper's Representations and Warranties 58


36. Agency's Representations and Warranties 60


37. Miscellaneous 61
(a) Governing Law 61
(b) Time of Essence 61
(c) Additional Rent 61
(d) Quiet Enjoyment 61
(e) Transfer of Agency's Interest 61
(f) Waiver 61
(g) Brokers 61
(h) Headings 62
(i) Inspection Of Books and Records 62
(j) Merger 62
(k) Gender; Number 62
(l) No Joint Venture 62
(m) Exhibits 62
(n) Entire Agreement; Modification 62
(o) Joint and Several Obligations 63
(p) Severability 63
(q) Consents of Agency 63
(r) Records 63
(s) Recordation of Memorandum of Lease With Option to Purchase 63
(t) Execution in Counterparts 63


EXHIBIT 1 LEGAL DESCRIPTIONS 1


EXHIBIT 2 SITE PLAN 1


EXHIBIT 3 SCHEDULE OF PERFORMANCE 1


EXHIBIT 4 CONDITIONS OF CONSTRUCTION 1


EXHIBIT 5 SCOPE OF DEVELOPMENT 1


RECITALS


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A. The purpose of this DDA is to effectuate the Agency's Redevelopment Plan, as amended (the "Redevelopment Plan") for the Walnut Industrial Park Project Area (the "Project Area") in the City of Compton (the "City") by facilitating the development, rehabilitation and operation of all or some portion of an existing hotel structure (the "Hotel") and entertainment center (the "Entertainment Center") containing one or more restaurants and a card club (the "Card Club"), and parking (and which may contain a nightclub/sports lounge, gift shop, meeting facilities/theater, corporate business lounge, and assorted concession venues), on a parcel of real property of approximately 24.45 acres (the "Property") located within the Project Area. The Property is legally described in Exhibit 1 attached hereto, and is depicted on the Site Plan attached hereto as Exhibit 2.


B. Agency is the owner of the Property.


C. Redeveloper desires to purchase a portion of the Property and to lease the remainder of the Property for the purpose of developing and operating the Hotel and Entertainment Center thereon.


D. Agency desires to lease the Property to Redeveloper in accordance with the terms and conditions set forth hereinbelow.


E. The Property contains four elements:


1. A portion of the Property (the "Convention Center Parcel") currently improved with a convention center and parking structure, including the underlying land, all of which is subject to easements for access to, support of and parking for the Hotel Parcel.


2. A portion of the Property (the "Hotel Parcel") consisting of a parcel of air space which includes a nine (9) story hotel containing 290 guest rooms and ancillary areas such as lobbies, restaurant, kitchen, bars, commercial areas and the like.


3. A portion of the Property (the "Parking Parcels") will be improved with parking to support the Hotel and the Entertainment Center.


4. A portion of the Property consists of additional land (the "Expansion Parcels") upon which Redeveloper shall have the right to expand by construction of an additional casino or card club.


The Hotel Parcel, the Parking Parcels and the Expansion Parcels are referred to herein collectively as the "Leasehold Parcels" or the "balance of the Property."


F. This DDA consists of an agreement of purchase and sale of a portion of the Property, a lease of the balance of the Property to Redeveloper and, if Redeveloper complies with the terms thereof, an option to purchase the balance of the Property.


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G. The parties hereto are parties to that certain Disposition and Development Agreement dated as of December 10, 1992, concerning real property adjacent to the Property (the "Prior DDA"). By this DDA, the parties shall amend and restate such Disposition and Development Agreement on the terms provided herein.


H. Redeveloper has obtained a license (the "License") from the City of Compton ("City") to operate within the City of Compton a Card Club pursuant to Section 9-10 of the Compton Municipal Code, on the terms and conditions set forth in the City's Resolution No. 17,087. Such license has been extended and amended by City Resolution Nos. 17,617 and 17,831. More or less concurrently herewith, Redeveloper is applying for an amendment to the license to cover the entire Property so as to permit expansion of the Card Club.


I. Redeveloper proposes to: (i) construct improvements to complete and rehabilitate the Hotel so that it can be operated, in whole or in part, as a full service hotel lodging facility, (ii) construct improvements to the Property so that the Entertainment Center, including the Card Club, can be operated therefrom, (iii) construct additional parking needed to support the Hotel and Entertainment Center, and (iv) subject to Section 29 hereof, within fifteen (15) years after the date hereof, construct, open and operate an expansion of the Card Club facility on the Expansion Parcels and/or other portions of the Property. Construction of such improvements and operation of the Hotel and Entertainment Center from the Property, and construction of the expansion facility on the Expansion Parcels are referred to herein as the "Project."


J. The Project will assist in the elimination of blight in the Project Area, will provide additional jobs, and will substantially improve the economic and physical conditions in the Project Area in accordance with the purposes and goals of the Redevelopment Plan.


NOW THEREFORE, the parties agree as follows:


1. Purchase and Sale of the Convention Center Parcel.


(a) Redeveloper hereby agrees to purchase from Agency, and Agency agrees to sell to Redeveloper, the Convention Center Parcel, including the underlying land and parking structure, subject to easements of support and for parking for the benefit of the Hotel Parcel, on the terms and conditions set forth hereinbelow.


(b) The purchase price shall be $2,000,000 cash, payable in full at closing.


(c) Closing shall occur at such time as the contingencies set forth in Section 2(b) hereof have been satisfied, but in no case later than July 31, 1995; provided, however, if the closing has not occurred by July 31, 1995 due to the fact that the bonds described in Section 5 have not theretofore been defeased, then


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the closing date may be extended for up to 90 additional days, and if the closing has not occurred by October 31, 1995, then either party hereto may terminate this DDA if the terminating party has not defaulted hereunder. Notwithstanding the foregoing, if the sole reason that the closing has not occurred is due to the fact that the lis pendens recorded on April 10, 1995, as Instrument No. 95-496676, Official Records, Los Angeles County (the "Lis Pendens") has not been expunged, then the closing date may be extended until such time as the Lis Pendens has been expunged as an exception to title; provided, however, if the Lis Pendens is not expunged as a title exception by April 30, 1996, then either party may thereafter terminate this Agreement.


(d) In addition to other matters of title, as provided in Section 3 hereof, title shall be subject to the following matters:


(i) Existing easements of access, support and for parking referred to hereinabove.


(ii) The Grant Deed pursuant to which Redeveloper or its successor in interest takes title shall contain a deed covenant in favor of Agency and City obligating the grantee, its successors and assigns to continuously and uninterruptedly operate the Hotel, Card Club and Entertainment Center (except for necessary interruptions which shall not exceed six consecutive months). If any such use becomes unfeasible or is rendered illegal (other than as the result of voluntary action on the part of Redeveloper or a successor in interest), the parties shall negotiate in good faith to substitute appropriate uses for the Property. Said covenant shall become ineffective from and after the date that is fifty years after the Rent Commencement Date (as defined below).


(iii) A deed of trust (the "deed of trust"), in favor of Agency securing Redeveloper's performance under the Lease hereinafter provided for, shall be recorded at closing; provided, however, that the foreclosure of such deed of trust shall not extinguish the Agency's obligation to deliver the sum set forth in Section 1(e) hereof upon the conditions set forth in Section 1(e).


(e) Anything in Section 1(d)(iii) hereinabove or in the Lease to the contrary notwithstanding, if, for any reason other than the exercise by Redeveloper of the option to purchase the Leasehold Parcels, as provided herein, the Lease is terminated, including a voluntary termination under Section 4(c) hereof or a termination for breach on the part of Redeveloper or any successor to Redeveloper, Agency shall be obligated to pay to Redeveloper or to its successor in interest, the original $2,000,000.00 purchase price of the Convention Center Parcel, and Redeveloper shall be obligated to reconvey the Convention Center Parcel to Agency. The failure of Redeveloper to reconvey the Convention Center Parcel to Agency shall be deemed an event of default under the deed of trust referred to in Section 1(d)(iii) hereof. Such repurchase price shall be paid over such


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period of time as shall be determined by binding negotiations of the parties during the 90 day period following the termination of the Lease. Upon the exercise of by Redeveloper of the option to purchase the Property which is subject to the Lease and the payment of the purchase price thereof, the provisions of this Section 1(e) shall be ineffective, and the deed of trust referred to in Section 1(d)(iii) shall be reconveyed. The effect of the covenants referred to in Section 1(d)(ii) and this Section 1(e) shall survive the transfer of title to the optioned property to Redeveloper or its permitted successor in interest.


(f) The purchase price shall be paid in all cash through the close of escrow. Agency will pay the cost of a CLTA policy of title insurance, any documentary transfer tax, and one half of the escrow fees. Redeveloper will pay the cost of recording, the additional premium and any expenses (including survey costs) in the event Redeveloper desires to obtain an extended coverage policy of title insurance, and the other half of the escrow fees. In connection therewith, the parties shall execute normal and necessary escrow instructions and all documents reasonably called for thereunder, so long as such instructions and documents are not inconsistent herewith.


2. Lease of the Hotel and Other Parcels.


(a) Agency hereby leases the Leasehold Parcels to Redeveloper, and Redeveloper leases the Leasehold Parcels from Agency (the "Lease"), for the term set forth in Section 8 hereof, subject to and on the terms and conditions set forth in this Lease.


(b) Notwithstanding the foregoing, this Lease, including the parties' obligations hereunder, is subject to the satisfaction or waiver of each of the following conditions on or before the Effective Date (as hereinafter defined):


(i) Agency's receipt of an opinion from bond counsel to be selected and approved by Agency that this transaction will not adversely affect the tax exempt status of any bonds or other obligations issued to finance the acquisition and/or construction of the Property or any part thereof (including any improvements thereon) to be leased or conveyed to Redeveloper. This condition is inserted for the sole benefit of Agency and may be waived or deferred by an instrument in writing signed by Agency. The parties shall use their best efforts to resolve any bond issues raised by such opinion letter;


(ii) Redeveloper's execution and delivery of the deed of trust and other security instruments and a recordable Memorandum of Lease, in substantially the form approved by Agency and Redeveloper's title insurance company;


(iii) The City of Compton's adoption of an amendment to the License providing that Hollywood Park, Inc., may be a licensee upon a change in state law allowing Hollywood Park, Inc., (or a joint


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venture of Hollywood Park, Inc., and the Redeveloper) to hold such license, and subject to Hollywood Park, Inc. (or such joint venture) qualifying as a licensee pursuant to Subsections 9-10.1 through 9-10.10, and 9-10.13, of the Compton Municipal Code, and any other applicable provisions of the Compton Municipal Code;


(iv) Agency's delivery to Redeveloper of Redeveloper's Policies of Title Insurance described in Section 6 hereof. This condition is inserted for the sole benefit of Redeveloper and may be waived, in whole or in part, or deferred by Redeveloper by an instrument in writing signed by Redeveloper.


If the foregoing conditions are not satisfied or waived by the time permitted for closing under Section 1(c) hereof, then this Lease may be terminated by either party on ten (10) days prior written notice to the other party, and this Lease shall thereafter be of no further force or effect.


3. Title and Survey.


(a) Within ten (10) business days following execution hereof, Agency shall deliver to Redeveloper a Preliminary Title Report issued by Old Republic Title Company. Redeveloper's fee interest in the Convention Center Parcel shall be insured by a standard form, CLTA Owners Policy of title insurance, and Redeveloper's leasehold interest in the balance of the Property shall be insured as of the Effective Date by a CLTA Policy of Leasehold Title Insurance (the "Leasehold Policy") to be purchased and paid for by Agency. The Policy shall insure Redeveloper's leasehold interest in the Leasehold Parcels free and clear of all liens, encumbrances, restrictions, and rights-of-way of record, subject only to the following permitted conditions of title ("Permitted Title Exceptions"):


(i) Agency's fee interest in the Leasehold Parcels;


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(ii) The applicable zoning, building and development regulations of any city, county, state or federal jurisdiction affecting the Property; and


(iii) Those exceptions approved by Redeveloper by May 31, 1995. If Redeveloper unconditionally disapproves any exceptions, this DDA shall thereupon terminate and shall be of no further force or effect, unless the sole disapproved exception is the Lis Pendens, in which case this DDA shall terminate if the Lis Pendens is not expunged by April 30, 1996. If Redeveloper conditionally disapproves any exceptions, then Agency shall have ten (10) business days after receipt from Redeveloper of a written specification of the title exceptions to which Redeveloper is taking objection within which to either agree to remove the exceptions to which objection was taken or to notify Redeveloper that it is unwilling or unable to do so. In the event that Agency gives notice that it is unwilling or unable to remove any exception to which objection was taken, then Redeveloper shall have ten (10) business days within which to give notice that either (A) it will accept title subject to the exceptions as to which the Agency is unwilling or unable to remove, or (B) to terminate this DDA forthwith, in which instance each of the parties shall be relieved of all further liability hereunder, provided that no such termination shall affect the License for the Card Club or any liability of Redeveloper to City in connection therewith. The failure of Agency to give notice as provided hereinabove within the ten (10) day period shall be deemed to be a notice that it is unwilling or unable to cure the title exceptions to which Redeveloper took exception, and the failure of Redeveloper to give notice within the subsequent ten (10) day period that it will either accept title subject to such matters or to terminate this DDA shall be deemed an election on the part of Redeveloper to terminate this DDA. If Agency gives notice that it intends to remove a title defect, it shall use its best efforts to complete such action within thirty (30) days thereafter, but, in any case, Agency shall proceed diligently to cause such title exceptions to be removed.


(iv) With respect to the Convention Center Parcel, those matters set forth in Section 1(d) hereof.


(v) Should a title exception which Agency is unwilling or unable to cure and which Redeveloper is unwilling to accept apply only to one or more the Expansion Parcels, then Redeveloper may elect to defer or sever the affected parcel by giving written notice thereof to Agency. In the event that the affected parcel is severed therefrom, there shall be an equitable reduction in the rental and the option price pursuant to Section 30 hereof. In the event that the parcel is merely deferred, no such adjustments shall be made until such time as Redeveloper elects to sever the particular parcel or parcels and gives notice thereof as provided herein.


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(b) Redeveloper has elected to obtain an ALTA Extended Coverage Title Insurance Policy for the Convention Center Parcel and the Leasehold Parcels. Redeveloper shall cause a licensed surveyor or civil engineer to conduct a survey of the Property, to prepare from the survey a legal description satisfactory to the title company insuring Redeveloper's title, and to prepare a plot plan showing the location of any streets, easements, and rights of way over or in favor of the Property, by June 7, 1995. Redeveloper shall approve or disapprove any survey by June 15, 1995. Any survey and any premiums for endorsements or extended coverage shall be paid by Redeveloper.


4. Term.


(a) Effective Date of Agreement. This Lease shall become effective (the "Effective Date") on the close of escrow on the purchase and sale of the Convention Center Parcel. If escrow has not closed by July 31, 1995, then (subject to the extensions of time for the reasons set forth in Subsection) either party may terminate this Agreement. Redeveloper shall have the right, on five (5) days prior notice in writing, to enter into the entire Property (including both the Convention Center Parcel and the Leasehold Parcels) at any time prior to the Effective Date for the purposes of undertaking preconstruction inspection, testing and planning studies, and Redeveloper's obligation to indemnify Agency, pursuant to Section 17 hereof, shall commence on the date which is five (5) days after such notice is given (but the insurance obligations set forth in Section 17 shall not commence until the Effective Date). Redeveloper shall not commence any work of improvement or other construction prior to the Effective Date.


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(b) Term of Lease. The term of this Lease (the "Term") shall commence on the Effective Date, and shall end on the date that is fifty (50) years after the Rent Commencement Date; unless sooner terminated as provided for herein. The Rent Commencement Date shall be the earlier of (i) the date that the Card Club or Hotel open for business or (ii) the date that is two (2) years after the Effective Date. Notwithstanding the foregoing, if the rehabilitation of the Hotel and Entertainment Center has not been completed by the date set forth in the Schedule of Performance, then the Agency shall have the right to terminate this Lease upon giving Redeveloper thirty (30) days written notice, and all rights of Redeveloper hereunder or in the Property (including the Initial Improvements (as defined below)) shall thereupon cease and shall be of no further force or effect,provided however, that within such thirty (30) day notice period, Redeveloper shall have the right to exercise its option to purchase the Property, as provided in Section 30 hereof. If the Card Club has not opened for business within 5 years after the Effective Date, or if the Redeveloper has not purchased the Property by the date that is 5 years after the Effective Date, then the Agency shall have the right to bring forth a substitute developer or operator for the Card Club, and in such event the Redeveloper shall negotiate in good faith with such party for either an operating agreement or a buy-out, on reasonable and fair terms, of the Redeveloper's interest in this DDA. For the purposes hereof, a "Lease Year" shall be the period commencing on the Rent Commencement Date or any anniversary thereof and ending on the day prior to the next anniversary of the Rent Commencement Date.


(c) Redeveloper's Right to Terminate the Lease. Redeveloper shall have the right, at any time either (i) prior to issuance of any building permits for the Property, or (ii) after issuance of the Certificate of Completion as described in Section 22 hereof, to terminate this DDA; provided, however, in the event of such termination, Redeveloper shall remain liable for any accrued obligations hereunder arising prior to the date of termination, and any rights of Agency which are intended to survive the termination of this Lease shall continue in full force and effect. Redeveloper shall provide 90 days prior written notice to Agency of any election to terminate this DDA. Redeveloper shall not have the right to terminate this DDA during the period (i) from and after issuance of any building permit for the Property and (ii) prior to the issuance of the Certificate of Completion. In the event of such termination, Redeveloper shall be released of any further obligation to pay rent (other than rent accrued prior to the date of termination).


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(d) Personalty. Upon termination of the Lease for any reason other than the exercise by Redeveloper or its permitted successor in interest of the option to purchase the Property as provided herein, Redeveloper shall deliver possession of the Property (including both the Convention Center Parcel (subject to Section 1(e)) and the Leasehold Parcels) to Agency in a good and workable state of repair (ordinary wear and tear excepted), together with full inventories of furniture, fixtures and equipment of the type for which Redeveloper was entitled to Rent Reduction/Credit under Section 6 hereof, including all additions to or replacements of such items installed after the initial rehabilitation of the Property.


5. Rent. Redeveloper shall pay to Agency, without demand, prior notice, deduction, or set-off (except as provided in Section 10 hereof) base rent ("Base Rent"), in the following sums:


Lease Years 1 through 5 - $ 600,000 ...